Macroeconomics fluctuations and its impact on musharaka financing

Faizul Mubarok, Abdul Hamid, Mohammad Nur Rianto Al Arif

Abstract


This study aims to analyze the effect of the movement of macroeconomic variables on financing using the musharaka contract on Islamic banks. This study consists of sharia commercial banks and sharia business units using monthly data from January 2004 to December 2019. This study uses Vector Error Correction Model (VECM) to answer the research objectives. All variables tested have an influence on financing using the musharaka contract. Financing using the musharaka contract responds negatively to movements in the exchange rate and interest rates while inflation responds positively and negatively. Islamic banking needs to prepare more reserve funds in the face of such movements before achieving stability. The musharaka contract financing itself dominates the forecasting then followed by interest rates, inflation, and exchange rates. Therefore, Islamic banking needs to prepare a reserve fund in the face of these shocks before achieving stability.

JEL Classification: E31, E43, E52, G32

 

How to Cite:

Mubarok, F., Hamid, A., & Al Arif, M. N. R. (2020). Macroeconomics fluctuations and its impact on musharaka financing. Jurnal Keuangan dan Perbankan, 24(2), 164-174.

DOIhttps://doi.org/10.26905/jkdp.v24i2.4061


Keywords


Exchange rates; Interest rates; Inflation; Musharaka; Vector Error Correction Model

References


Aysan, A. F., Disli, M., & Ozturk, H. (2018). Bank lending channel in a dual banking system: Why are Islamic banks so responsive? World Economy, 41(3), 674–698. https://doi.org/10.1111/twec.12507

Azmat, S., Skully, M., & Brown, K. (2015). Can Islamic banking ever become Islamic? Pacific Basin Finance Journal, 34, 253–272. https://doi.org/10.1016/j.pacfin.2015.03.001

Bahloul, S., Mroua, M., & Naifar, N. (2017). The impact of macroeconomic and conventional stock market variables on Islamic index returns under regime switching. Borsa Istanbul Review, 17(1), 62–74. https://doi.org/10.1016/j.bir.2016.09.003

Chien, Y. L., Lustig, H., & Naknoi, K. (2019). Why are exchange rates so smooth? A household finance explanation. Journal of Monetary Economics, 1–16. https://doi.org/10.1016/j.jmoneco.2019.02.003

Hamza, H., & Saadaoui, Z. (2018). Monetary transmission through the debt financing channel of islamic banks: Does PSIA play a role? Research in International Business and Finance, 45(3), 557–570. https://doi.org/10.1016/j.ribaf.2017.09.004

Hassan, M. K., Khan, A., & Paltrinieri, A. (2019). Liquidity risk, credit risk, and stability in Islamic and conventional banks. Research in International Business and Finance, 48, 17–31. https://doi.org/10.1016/j.ribaf.2018.10.006

Hossain, A. A. (2016). Inflationary shocks and real output growth in nine Muslim-majority countries: Implications for Islamic banking and finance. Journal of Asian Economics, 45, 56–73. https://doi.org/10.1016/j.asieco.2016.06.004

Kasri, R. A., & Kassim, S. H. (2009). Empirical determinants of saving in the Islamic banks: Evidence from Indonesia. Journal of King Abdulaziz University, Islamic Economics, 22(2), 181–201. https://doi.org/10.2139/ssrn.1685226

Kassim, S. H., Shabri, M., Majid, A., & Yusof, R. M. (2009). Impact of monetary policy shocks on the conventional and Islamic banks in a dual banking system: Evidence from Malaysia. Journal of Economic Cooperation and Development, 30(1), 41–58.

Khan, M., & Mirakhor, A. (1989). The financial system and monetary policy in an Islamic economy. Journal of King Abdulaziz University-Islamic Economics, 3(1), 85–93. https://doi.org/10.4197/islec.3-1.5

Lassoued, M. (2018). Comparative study on credit risk in Islamic banking institutions: The case of Malaysia. Quarterly Review of Economics and Finance, 70, 267–278. https://doi.org/10.1016/j.qref.2018.05.009

Léon, F., & Weill, L. (2018). Islamic banking development and access to credit. Pacific Basin Finance Journal, 52(7), 54–69. https://doi.org/10.1016/j.pacfin.2017.04.010

Lin, S., Shi, K., & Ye, H. (2018). Exchange rate volatility and trade: The role of credit constraints. Review of Economic Dynamics, 30, 203–222. https://doi.org/10.1016/j.red.2018.05.002

Magud, N. E., & Vesperoni, E. R. (2015). Exchange rate flexibility and credit during capital inflow reversals: Purgatory . . . not paradise. Journal of International Money and Finance, 55, 88–110. https://doi.org/10.1016/j.jimonfin.2015.02.010

Mahdi, I. B. S., & Abbes, M. B. (2018). Relationship between capital, risk, and liquidity : A comparative study between Islamic and conventional banks in MENA region. Research in International Business and Finance, 45, 588–596. https://doi.org/10.1016/j.ribaf.2017.07.113

Meslier, C., Risfandy, T., & Tarazi, A. (2017). Dual market competition and deposit rate setting in Islamic and conventional banks. Economic Modelling, 63, 318–333. https://doi.org/10.1016/j.econmod.2017.02.013

Miah, M. D., & Uddin, H. (2017). Efficiency and stability: A comparative study between Islamic and conventional banks in GCC countries. Future Business Journal, 3(2), 172–185. https://doi.org/10.1016/j.fbj.2017.11.001

Mushtaq, S., & Siddiqui, D. A. (2017). Effect of interest rate on bank deposits : Evidence from Islamic and non-Islamic economies. Future Business Journal, 3(1), 1–8. https://doi.org/10.1016/j.fbj.2017.01.002

Naqvi, B., Rizvi, S. K. A., Uqaili, H. A., & Chaudhry, S. M. (2018). What enables Islamic banks to contribute in global financial reintermediation? Pacific-Basin Finance Journal, 52, 5–25. https://doi.org/10.1016/j.pacfin.2017.12.001

Ostadi, H., & Sarlak, A. (2014). Effective factors on the absorption of bank deposits in order to increase the relative share of Isfahan Sepah Bank. International Journal of Academic Research in Economics and Management Sciences, 3(4), 139–149. https://doi.org/10.6007/ijarems/v3-i4/1112

Otoritas Jasa Keuangan. (2019). Statistik Perbankan Syariah. https://doi.org/10.1017/CBO9781107415324.004

Paltrinieri, A., Dreassi, A., Rossi, S., & Khan, A. (2019). Risk-adjusted profitability and stability of Islamic and conventional banks: Does revenue diversification matter? Global Finance Journal, 1–42. https://doi.org/10.1016/j.molliq.2019.111474

Rashid, A., & Jabeen, S. (2016). Analyzing performance determinants: Conventional versus Islamic banks in Pakistan. Borsa Istanbul Review, 16(2), 92–107. https://doi.org/10.1016/j.bir.2016.03.002

Rifai, S. A., Susanti, H., & Setyaningrum, A. (2017). Analisis pengaruh kurs rupiah, laju inflasi, jumlah uang beredar, dan pertumbuhan ekspor terhadap total pembiayaan perbankan Syariah dengan dana pihak ketiga sebagai variabel moderating. MUQTASID Jurnal Ekonomi dan Perbankan Syariah, 8(1), 18. https://doi.org/10.18326/muqtasid.v8i1.18-39

Sakti, M. R. P., & Harun, Y. (2013). Relationship between Islamic stock prices and macroeconomic variables: Evidence from Jakarta Stock Exchange Islamic Index. Global Review of Islamic Economics and Business, 1(1), 71–84. https://doi.org/10.14421/grieb.2013.011-06

Shibani, O., & De Fuentes, C. (2017). Differences and similarities between corporate governance principles in Islamic banks and conventional banks. Research in International Business and Finance, 42, 1005–1010. https://doi.org/10.1016/j.ribaf.2017.07.036

Sukmana, R., & Ibrahim, M. H. (2017). How Islamic are Islamic banks? A non-linear assessment of Islamic rate – conventional rate relations. Economic Modelling, 64, 443–448. https://doi.org/10.1016/j.econmod.2017.02.025

Trad, N., Trabelsi, M. A., & Goux, J. F. (2017). Risk and profitability of Islamic banks: A religious deception or an alternative solution? European Research on Management and Business Economics, 23(1), 40–45. https://doi.org/10.1016/j.iedeen.2016.09.001

Zeev, N. B. (2019). Global credit supply shocks and exchange rate regimes. Journal of International Economics, 116, 1–32. https://doi.org/10.1016/j.jinteco.2018.10.002


Full Text: PDF

Refbacks

  • There are currently no refbacks.




rsz_8th_ifma rsz_6th_perbanas_conference rsz_the_6th_indonesian_finance_association_international_conference


Journal of Finance and Banking

Diploma Program of Banking and Finance
Faculty of Economics and Business University of Merdeka Malang

Mailing Address:

2nd-floor Banking and  Finance Building, Terusan Raya Dieng Street No.57 Malang, 65146, East Java, Indonesia
Phone/WhatsApp: +628123321664; Fax. +62 341 580511
Email:
jkpunmermlg@yahoo.com


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.