Are Islamic Banks Affected By Conventional Bank Interest Rates? The Case of Tukiye

Authors

  • Hasan KAZAK Necmettin Erbakan University, Turkye

DOI:

https://doi.org/10.53491/oikonomika.v3i2.369

Keywords:

Islamic banking, Participation Banking, Islamic Finance, Interest, Dividend, Cointegration Analysis, Causality Analysis, Turkey, Turkiye

Abstract

The purpose of this study is to reveal the empirical causal relationship between the variables that affect the profit rates distributed to deposits at participation banks. In this study, monthly data for the period 2002:M01-2022:M02 were used in order to reveal the variables affecting the profit share rates distributed to deposits by participation banks. In order to analyze the relationship between the variables, the Johansen cointegration test, impulse-response analysis were used within the framework of the VAR model, and the effect ratios of the variables were revealed with the var decomposition table. In addition, the causality relationship was discussed with the Toda-Yamamoto causality test. In the study, a model has been developed that reveals the variables that affect the change in the profit share rate of participation banks distributed to time deposits. In the analyzes made, it has been revealed that the interest rates of conventional banks are effective on the profit share rates of participation banks in accordance with the literature in the case of Turkiye. VAR Decomposition results; It shows that approximately 38.05% of the change in the profit share ratio of participation banks distributed to time deposits in the 10th period is explained by the interest rate given to 1-year maturity deposits of conventional banks operating in Turkiye.

Downloads

Download data is not yet available.

References

Alexakis, C., Izzeldin, M., Johnes, J., & Pappas, V. (2019). Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis. Economic Modelling, 79, 1–14.

Bajpai, N. (2011). Business Research Methods. Pearson. https://books.google.com.tr/books?id=wY2bSaEm8l8C

BDDK. (2021). Aylık Bankacılık Sektörü Verileri. Bankacılık Düzenleme ve Denetleme Kurumu. https://www.bddk.org.tr/BultenAylik

BDDK. (2022). Aylık Bankacılık Sektörü Verileri. BDDK Aylık Bülten. https://www.bddk.org.tr/BultenAylik

Caporale, G. M., Çatık, A. N., Helmi, M. H., Ali, F. M., & Tajik, M. (2020). The bank lending channel in the Malaysian Islamic and conventional banking system. Global Finance Journal, 45, 1–26. https://doi.org/doi.org/10.1016/j.gfj.2019.100478

Draper, N. R., & Smith, H. (1998). Applied regression analysis (Vol. 326). John Wiley & Sons.

Durbin, J., & Watson, G. S. (1950). Testing for serial correlation in least squares regression: I. Biometrika, 37(3/4), 409–428.

Durbin, J., & Watson, G. S. (1971). Testing for serial correlation in least squares regression. III. Biometrika, 58(1), 1–19.

Ercan, H., Karahanoglu, I., & Walter, G. (2021). Is Islamic Banking in Turkey really interest-free? Society and Economy, 43(4), 391–405.

Faleel, J. (2021). The Effect of Credit Risk Management on The Bank Profitability: A Comparative Study on The Islamic And Conventional Banks Across The GCCS. PalArch’s Journal of Archaeology of Egypt/Egyptology, 18(13), 842–852.

Gök, R. (2021). On the causal relationship between deposit rates in conventional banks and profitsharing rates in islamic banks in Turkey. Doğuş Üniversitesi Dergisi, 22(1), 21–37.

Gujarati, D. N. (2003). Basic Econometrics. Forth Edition. Singapura: McGraw-Hill.

Haque, M. I., Tausif, M. R., & Anis, A. (2020). Continued discussion on conventional versus Islamic banks: Combining financial ratios and efficiency. Banks and Bank Systems, 15(1), 132.

Hashim, N. N., Abdul-Rahman, A., & Amin, S. I. M. (2022). Output Efficiency and Liquidity Risk of Islamic Banks. Turkish Journal of Islamic Economics (TUJISE). https://doi.org/10.26414/A2272

IFSB. (2021). PSIFIs Data (Key Exhibits). The Islamic Financial Services Board (IFSB).

Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2–3), 231–254.

Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—With appucations to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210.

Johnston, J. (1972). Econometric Methods. New York: McGraw-Hill.

Kazak, H., & Okka, O. (2022). İslami Finans Ekonomik Kalkınma ve Sosyal Barış (1st ed.). NOBEL Akademik Yayıncılık.

Koç, İ. (2018). Interest rate risk in interest-free banks: An empirical research on Turkish participation banks. Turkish Journal of Islamic Economics, 5(1), 89–108. https://doi.org/10.26414/tujise.2018.5.1.89-107

Malim, N. A. K., & Azizan, S. (2020). The determinants of Islamic and conventional banking profitability in Asian countries. Management & Accounting Review (MAR), 19(3), 49–68.

Mushafiq, M., & Sehar, T. (2021). Reality of short-term causality of Islamic and conventional banking term deposit rates in Pakistan. Asian Journal of Economics and Banking, 5(1), 66–78. https://doi.org/10.1108/AJEB-10-2020-0072

Newey, W. K., & West, K. D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelationconsistent covariance matrix. Econometrica, 55(3), 703–708.

Nosheen, & Rashid, A. (2019). Business orientation, efficiency, and credit quality across business cycle: Islamic versus conventional banking. Are there any lessons for Europe and Baltic States? Baltic Journal of Economics, 19(1), 105–135. https://doi.org/doi.org/10.1080/1406099X.2018.1560947

Nouman, M., Hashim, M., Trifan, V. A., Spinu, A. E., Siddiqi, M. F., & Khan, F. U. (2022). Interest rate volatility and financing of Islamic banks. Plos One, 17(7), 1–21.

Nugroho, L., Nugraha, E., & Badawi, A. (2022). Intermediary strategy impact to return on asset in Covid-19 pandemics: Islamic bank vs conventional bank (Indonesia empirical cases). Business Economics and Management Research Journal, 5(3), 157–168.

Prandi, S. G., & Colecchia, D. (2021). Pricing of Islamic Banking and Conventional Banking: An Empirical Study. European Journal of Islamic Finance, 18.

Refinitiv, I. (2021). Islamic Finance Development Report 2021. Refinitiv.

Saeed, S. M., Abdeljawad, I., Hassan, M. K., & Rashid, M. (2021). Dependency of Islamic bank rates on conventional rates in a dual banking system: A trade-off between religious and economic fundamentals. International Review of Economics & Finance. https://doi.org/doi.org/10.1016/j.iref.2021.09.013

Suyyinah, A. A. (2018). The Analysis of Relationship Between Return Rate on Deposit of Islamic Bank and Conventional Bank in Indonesia. Jurnal Ekononomi & Keuangan Islam, 4(1), 22–30. https://doi.org/10.20885/JEKI.vol4.iss1.art3

Ünver, Ö., & Gamgam, H. (1996). Uygulamalı İstatistik Yöntemler (2nd ed.). Siyasal Kitabevi.

Winston, W. L., Albright, S. C., & Broadie, M. N. (1997). Practical Management Science: Spreadsheet Modeling and Applications (Issue 3. c.). Duxbury Press. https://books.google.com.tr/books?id=i3JRAAAAMAAJ

Wonnacott, T. H., & Wonnacott, R. J. (1981). Regression: A second course in statistics. Wiley New York.

Zaman, S., Rehman, A., & Ahmad, F. (2021). A Comparative Analysis of Return Rates in Islamic and Conventional Banks in Pakistan. The Proceeding, 235–244.

Downloads

Published

2022-12-31

How to Cite

KAZAK, H. (2022). Are Islamic Banks Affected By Conventional Bank Interest Rates? The Case of Tukiye. OIKONOMIKA : Jurnal Kajian Ekonomi Dan Keuangan Syariah, 3(2), 86-102. https://doi.org/10.53491/oikonomika.v3i2.369