Risk-sharing deposits in islamic banks: do interest rates have any influence on them Report as inadecuate




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Abstract

It has been proven time and again, that Islamic banking performance tends to imitate that ofconventional banks, especially since Islamic banks seem to be vulnerable to the same type ofrisks, whether it is because of monetary policy actions leading to changes in interest rates orother macroeconomic variables. We would like to take a closer look at this verdict and see if ittruly holds true if we separate risk-based instruments of financing in Islamic banks and analyzetheir performance specifically. Our focus is on analyzing the level of impact of interest rates onrisk-based deposits in Islamic banks. We use dynamic panel techniques in the form of differenceGMM to come to the conclusion that separating risk-based from relatively fixed-rate instrumentsof financing can provide us with very different results. Our findings suggest that interest rates donot play a significant role in determining the level of deposits that are risk-based in nature and donot depend on a given and guaranteed rate of return. Based on this finding, we see that risk-baseddeposits and financing can prove to be the antidote that not only Islamic banks but the wholefinancial industry can think of, to deal with the detrimental effects of an interest-based system.



Item Type: MPRA Paper -

Original Title: Risk-sharing deposits in islamic banks: do interest rates have any influence on them?-

English Title: Risk-sharing deposits in islamic banks: do interest rates have any influence on them?-

Language: English-

Keywords: risk-based deposits, Islamic banks, interest rates, dynamic GMM-

Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial EconometricsG - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages-





Author: Tariq, Anam

Source: https://mpra.ub.uni-muenchen.de/71680/



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