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Jurnal Ekonomi Malaysia

51 (2) 2017 15 – 22

Determinants of Islamic Bank Financing in Malaysia: An Empirical Study using Linear and Nonlinear ARDL Model
Penentu Pembiayaan Bank Islam di Malaysia: Kajian Empirikal Menggunakan Model ARDL Linear dan Bukan Linear

Faculty of Business and Economics
Universiti Malaysia Sarawak
94300 Kota Samarahan, Sarawak
MALAYSIA

akbakri@feb.unimas.my

Pusat Pengajian Ekonomi
Fakulti Ekonomi dan Pengurusan
Universiti Kebangsaan Malaysia
43600 UKM Bangi Selangor
MALAYSIA

zak1972@ukm.edu.my

Faculty of Business and Economics
Universiti Malaysia Sarawak
94300 Kota Samarahan, Sarawak
MALAYSIA

msmhafiz@feb.unimas.my

Abstract

This paper examines the dynamic relationship between the Islamic bank financing and selected macroeconomic variables in Malaysia using monthly data covering the period of January 2007 to June 2016. Utilizing both linear and non-linear ARDL method, the results show that there is no long-run relationship among the variables. The results also show no indication of both long-run and short-run asymmetric effects from industrial production index and rate of financing towards Islamic bank financing. In addition, Granger-causality test also indicates no causality running from these factors to Islamic bank financing. Therefore, we conclude that to some extent the Islamic bank financing is stable and resilient. Muslims customers continue to support the Islamic banking and are not profit-motivated by the substitution effect as Malaysia has dual banking system. The banking system which is based on profit sharing is able to cushion the Islamic financial system from interest rate and economic fluctuation thus reducing the risk of financial volatility.

Keywords

Asymmetric cointegration; Islamic bank financing; Nonlinear ARDL (NARDL)

Author’s Acknowledgement

Financial support from the Ministry of Higher Education Malaysia through Research Acculturation Collaborative Effort (RACE) Grant Scheme [Grant No: RACE/1251/2015(07)] is gratefully acknowledged.

http://dx.doi.org/10.17576/JEM-2017-5001-2
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Bibliography

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Karim, , Abdul Karim, , & Mohd Shukri, (2017). Determinants of Islamic Bank Financing in Malaysia: An Empirical Study using Linear and Nonlinear ARDL Model. Jurnal Ekonomi Malaysia, 51(2), 15–22. http://dx.doi.org/10.17576/JEM-2017-5001-2

@article{abdulkarim2017determinants,
  title={Determinants of Islamic Bank Financing in Malaysia: An Empirical Study using Linear and Nonlinear ARDL Model},
  author={Karim, Bakri and Abdul Karim, Zulkefly and Mohd Shukri, Muhammad Hafiz},
  journal={Jurnal Ekonomi Malaysia},
  volume={51},
  number={2},
  pages={15—22},
 

year={2017},
}

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