INDONESIA - ARTICLES - Deposit behaviour in Indonesia Islamic banking : do crisis and fatwa matter?

Deposit behaviour in Indonesia Islamic banking : 

do crisis and fatwa matter?
In: Indonesia Islamic Banking Research Forum 2011, 16-17 December, 2011, Padjajaran University, Bandung.
Abduh, Muhamad and Sukmana, Raditya (2011)

Abstract -This paper attempts to examine factors that influence deposit behaviour of bank depositors in Indonesia Islamic banking. Several explanatory variables are tested namely interest rate, Islamic deposit rate, inflation, income as well as financial crisis. Cointegration test and impulse response functions are utilized to examine the long run and short run relationship among the variables. The period of analysis is from December 2000 to January 2011 (122 number of observation-monthly data). The results show that crisis has no significant impact on the volatility of Islamic banks deposits. This suggests that the Islamic banks’ expansion towards the real economic activities by partnership contracts is one of the best practices. It depicts also that depositors have a strong believe towards the resilience of Islamic banks against financial crisis and thus, they did not withdraw their money excessively during the crisis. However, it is also found that interest rate and income are still dominating the people’s decision to deposit their funds in Islamic banks which in turns, indicating the effectiveness of the anti-riba campaign in Indonesia is still low and thus, the strategy of educating the people need to be redesigned.  (source)

INDONESIA - ARTICLES - Islamic Banking Service Quality and Withdrawal Risk: The Indonesian Experience

Islamic Banking Service Quality and Withdrawal Risk: 

The Indonesian Experience

Muhamad Abduh

International Islamic University of Malaysia (IIUM)

International Journal of Excellence in Islamic Banking and Finance, Vol. 1, No. 2, pp. 1-15, 2011

Abstract:
This paper aims first to evaluate the service quality of Islamic banking and second to explore the withdrawal behavior of Islamic banking depositors based on their evaluation towards its service quality in the context of Indonesia. A total of 276 Islamic banking customers in Jakarta, Indonesia, were involved through a direct survey. Factor analysis was carried out to uncover the key dimensions of Indonesian Islamic banking service quality. Next, we use central tendency measurement to extract the information of depositors’ withdrawal behavior towards those dimensions. Afterwards, the importance and performance analysis (IPA) was employed to evaluate the level of Indonesian Islamic banking service quality. The exploratory factor analysis uncovered five key dimensions of Indonesian Islamic banking service quality, including reliability, bank-customer relationship, tangibles, Shari`ah issues, and rates and charges. Shari`ah and tangible are the first and second most influence factors for depositors to withdraw their funds from Islamic bank. However, despite their high level of importance, Shari`ah and tangible were always perceived poor in performance while others were largely modest. Within this kind of situation, withdrawal risk is, therefore, should be the most potential risk to be anticipated. (download link)