THE INDONESIAN ISLAMIC BANKING Theory and Practices

Transcription

1 Rifki Ismal, PhD THE INDONESIAN ISLAMIC BANKING Theory and Practices ^ d publishing

2 TABLE OF CONTENT FOREWORDS..., vii TABLE OF CONTENT xi LIST OF FIGURES,.. '. xvii LIST OF TABLES... '. xxi Chapter 1 The Indonesian Islamic Banking: Some Lessons to be Learned 1 Background 1 The Indonesian Islamic Banking Industry i Challenges of the Industry... '. 9 Recommendations... ; '. 11 Conclusion ;.. 12 References 13 Chapter 2 Understanding Characteristics of Depositors to Develop the Indonesian Islamic Banking Industry 15 Introduction, 15 Studies on the Output of Empirical Surveys 16 An Integrated Program to Develop the Industry ; 29 Conclusion 32 References 33 Chapter 3 Liquidity Risk Management in Banks: The Conventional Perspective 35 Introduction Liquidity Risk in Banking Institutions 35 Process of Liquidity Risk Management ; 39 Asset-Liability Imbalance and Maturity Mismatch Risks 43 Techniques to Mitigate Liquidity Risk ; 45 Financial Instruments as Sources of Banks Liquidity 49 Conclusion,. 52 References ; xi

3 Chapter 4 Liquidity Risk Management in Banks: The Sharia Perspective 55 Introduction 55 Liquidity Risk Issues in Islamic Banking 55 Sharia Issues in Liquidity Risk Management...59 Approaches to Manage Liquidity Risk Based on Sharia Techniques to Mitigate Liquidity Risk based on Sharia 69 Conclusion 75 References 76 Chapter 5 Islamic Banking Characteristics, Economic Conditions and Liquidity Risk Problem 79 Introduction 79 Supporting Factors of Development 79 Characteristics of the Industry in Relation to Liquidity Problems 81 Investment Behavior of Depositors and Economic Conditions 85 Ideas for Improvements '.; 90 Conclusion 91 Reference.- : 92 Chapter 6 Performance of the Islamic Banking Industry 95 Introduction 95. Background of the Indonesian Islamic Banking Industry...: 96 Organizational Approach to Managing Liquidity Liquidity Risk Management Related to the Liability Side 102 Liquidity Risk Management Related to the Asset Side..; 109 Liquidity Ratios and Gap Analysis 117 Instruments to Manage the Demand for Liquidity 121 Conclusion '..; References ; 128 Chapter 7 Growth of the Islamic Banking Industry 131 Introduction 131 Islamic Banking Industry and Its Development Programs 132 Literature Reviews 133 xii

4 Construction and Output of the Models 138 Analysis of Quantitative Output and Strategic Policy Recommendations Conclusion...: 146 References 147 Chapter 8 Liquidity Management Index of the Islamic Banking Industry 149 Introduction 149 Liquidity Risk Problem in Sharia Perspective 149 Construction of Liquidity Risk Management Index 150 Assessing the Indonesian Islamic Banking Industry 152 Overall Assessments on the Islamic Banking Industry Conclusion 157 References 158 Chapter 9 An Empirical Survey on Liquidity Risk Management 165 Introduction 165 Depositors Understanding of Islamic Banking 166 Investment Behavior of Depositors...; 167 Liquidity Behavior of Depositors 173 Risk Management Committee in Islamic Banks 182 Islamic Bankig Liquidity Risk Management 182 Sources of Liquidity Risk Problem and Liquid Instruments 190 Conclusion 192 References Chapter 10 Islamic Banking Dynamic Model of Indonesia (ISLAMI) 195 Introduction 195 Framework of ISLAMI.195 Asset Liability Balance Models ; 197 Liquidity Reserves Model 203 Model of Islamic Monetary Operation 208 Econometric Analysis 214 Interpretation of the Models 228 Long Run Causality and Dynamic Responses of Variables 231 Findings and Recommendations 243 xlil

5 xiv Conclusion 245 References 246 Chapter 11 Strengthening and Improving Liquidity Management in Islamic Banks 249 Introduction 249 Organizational Structures 250 Integrated Output of the Previous Chapters 251 Discussion of the Depositors' Side 252 Discussion of the Islamic Banking Side ; 256 Liquidity Problem and Islamic Liquid Instruments 257 Proposed Program to Manage Liquidity Risk 258 Conclusion 263 References 264 Chapter 12 Demand and Supply of Liquidity in Islamic Banks 265 Introduction 265 Short-Term Demand for Liquidity... : Short-Term Suppliers of Liquidity Historical Performance of the Short-Term Liquidity Management 270 Future Performance of Short-Term Liquidity Management 272 Findings and Suggestions 281 Conclusion...: 283 References : 284 Chapter 13 An Empirical Survey on Depositors Withdrawal Behavior 287 Introduction 287 Potential Problems of Withdrawals Risk in Islamic Banks. 288 Depositors Behavior in Withdrawing Funds 289 Empirical Survey on Deposit Withdrawals Behavior : 293 Policy Recommendations 301 Conclusion and Areas for Future Research 301 References.., 303 Chapter 14 Depositors Withdrawal Behavior: An Econometric Model 305 Introduction 305

6 Flow of Funds in Islamic Banking 306 Model of the Liability Side in the Competitive Banking Sector 307 Econometric Analysis 309 Findings from Models and Suggestions 316 Limitation of the Models 318 Conclusion 318 References 319 Chapter 15 Formulating Withdrawal Risk and Bankruptcy Risk 321 Introduction 321 Characteristics of Islamic Banking Industry ; 322 Assumptions and Risk Formulas 323 Withdrawal Risk Scenarios 324 Bankruptcy Scenarios 326 Sound and Failure of Islamic Banks 327 Revenue-Sharing Equilibrium Ratio ; 328 Conclusion.331 References 332 Chapter 16 An Efficient Portfolio Frontier of the Islamic Financing Instruments Introduction 335 The Most Favorite Islamic Financing Instruments 335 Risk-Return Portfolio Theory 336 Efficient Portfolio Theory 338 Risk-Return Analysis of Islamic Financing Instrument 339 An Efficient Portfolio Financing Frontier 348 Conclusion 349 References.;. 350 Chapter 17 Volatility of the Returns arid Expected Losses of Islamic Bank Financing Introduction 353 Islamic Financing Instruments 354 Value at Risk Approach 355 Value at Risk (VaR) Analysis for the Indonesian Islamic Banks 357 xv

7 Value at Risk Result 361 Recommendations. 364 Conclusion 364 References 366 Chapter 18 Moral Hazard Problem in Murabahah Financing 367 Introduction 367 Murabahah Financing 368 Moral Hazard in Murabahah Financing 370 Minimizing Moral Hazard in Murabahah Financing 374 Conclusion 376 References.". 377 Chapter 19 Central Bank Islamic Monetary Instruments: A Theoretical Approach 379 Introduction 379 General Assumptions Islamic Monetary Instruments Utility of Islamic Monetary Instrument ; 391 Conclusion 393 References 394 Chapter 20 Islamic Gracious Monetary Instruments: A Theoretical Approach 397 Background 397 General Assumption 398 The Islamic Gracious Monetary Instruments 400 Utility of the Islamic Gracious Monetary Instruments 414 Conclusion : 416 References 417 GLOSSARY 418 CURRICULUM VITAE 421 xvi