DETERMINANTS OF LIQUIDITY RISK IN DUAL AND FULLY ISLAMIC BANKING SYSTEMS: EVIDENCE FROM MALAYSIA AND SUDAN

AbdulFattah AbdulGaniyy

Abstract


Abstract

The objective of this study is to compare the determinants of liquidity risk of Islamic banks in the two environments of full Islamic banking scheme and dual banking system. The researchers used samples of Islamic banks in Sudan and Malaysia to represent the two banking environment. Data sourced from Islamic Banks Information System (IBIS) provided by Islamic Research and Training Institute(IRTI) for three banks in each of the countries from 2004 and 2015 was used for the study. Using Ordinary Least Regression Analysis (OLS) and panel data analysis techniques, the authors conclude that the different environment the Islamic banks operate determines the significance of liquidity risk determinants. There are conflicting effects of bank’s specific(micro) factors including bank’s size, capital adequacy ratio as well as macroeconomic variables like GDP and Money Supply on liquidity of Islamic banks.  However, the study concludes that management efficiency proxied by deployment ratio is a common factor in the two settings. The authors recommend future study on comparison of liquidity risk management policies and structures of Islamic banks in the two environments.

Key Words: Liquidity, liquidity Risk, Full-fledged Islamic Banking Scheme, Dual

                     , Banking System, Deployment Ratio, GDP, Money Supply

      

   JEL Classification: G01, G21, G24, G28, G32

 


Keywords


Liquidity, liquidity Risk, Full-fledged Islamic Banking Scheme, Dual Banking System, Deployment Ratio, Money Supply, GDP

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