Browse by Author "Moutaz Abojeib"
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- PublicationBank competition and stability in dual-banking systemsMoutaz Abojeib (CIAWM, 2016)
Numerous attempts have been made to discover the effect of competition on banking stability, before and after the recent global financial crisis. Despite the rich theoretical and empirical literature on the topic, two contradictory views are observed; the competition-fragility view and the competition stability view. On one hand, the former view argues that higher competition leads to more pressure on profits and hence induces banks' management to take higher risk strategies. On the other, the supporters of the competition-stability hypothesis argue that banks in more competitive markets tend to charge lower rates, which reduces the entrepreneurs' cost of borrowing and increases the success rate of entrepreneurs' investments. Consequently, banks will face lower credit risk on their loan portfolio in more competitive markets, which should lead to more stability.
- PublicationCompetition - stability relationship in dual banking systems Islamic vs. conventional banksMoutaz Abojeib; Mansor H. Ibrahim; Mohamed Ariff Abdul Kareem (INCEIF, 2017)
Numerous attempts have been made to study the impact of competition on banking-stability before and after the recent global financial crisis. In the rich theoretical and empirical literature on the topic, two contradictory views have surfaced, i.e. the competition-fragility view and the competition-stability view. This thesis provides empirical evidence of a nonlinear relationship between competition and stability that explains, at least partially, the conflicting results of previous theoretical and empirical studies. Furthermore, while the existing literature focuses on conventional banking, this thesis investigates both Islamic and conventional banks in dual banking systems and explores whether or not bank types affect the competition-stability relationship. Using GMM technique on panel data covering the dual-banking countries that have significant share of Islamic banking for the period from 2004 until 2014, this thesis finds that the relationship between market power and stability is nonlinear for both Islamic and conventional banks, albeit with a marginal difference between them. The impact of market power is initially positive "supporting the charter value theory," but it turns to be negative as soon as banks' market power exceeds a certain limit, probably because the negative impact of the "too-important-to-fail" moral hazard overcomes the initial positive impact.
- PublicationCompetition-stability relationship in dual banking systems: evidence from efficiency-adjusted market powerMudeer Ahmed Khattak; Omar Alaeddin; Moutaz Abojeib (World Scientific Publishing Company, 2022)
This research attempts to explore the impact of banking competition on financial stability employing more precise measure of market power. It was found that Islamic banks are less stable and are enjoying lower market power. The analysis shows that higher market competition makes the banking sector vulnerable to defaults, supporting the "competition-fragility view". This research finds no difference in the relationship for Islamic banks indicates that Islamic banks might be involved in traditional banking activities as conventional banks. The results are consistent and robust to different estimation approaches and subsamples. This research carries regulatory and policy implications.
- PublicationThe effectiveness of the bank lending channel: the role of banks' market power and business modelOmar Alaeddin; Moutaz Abojeib; Choudhary Wajahat Naeem Azmi; Mhd Osama Alchaar; Kinan Salim (University of Finance and Management in Warsaw, 2019)
This paper examines the effectiveness of the bank lending channel in a dual banking system in Malaysia, where both conventional and Islamic banks operate alongside each other. It also investigates the impact of bank competition on lending channels in financial systems. Using panel data from both Islamic and conventional banks in Malaysia, our findings indicate the ineffectiveness of the bank lending channel. Further, the empirical results suggest that the impact of monetary policy on bank lending does not depend on bank competition. In other words, the effectiveness of the lending transmission channel does not depend on the market power of the individual banks. Furthermore, the effectiveness of the lending channel appears to be independent of whether the bank is Islamic or conventional. This result is probably explained by the fact that the vast majority of Islamic banks in Malaysia are subsidiaries of conventional banks. Policymakers therefore do not need to differentiate between conventional and Islamic banks in regard to the effectiveness of the bank lending channel.
- PublicationIslamic fintech in Malaysia: Reality & outlookMoutaz Abojeib; Kinan Salim; Baharom Abdul Hamid (INCEIF, 2020)
The interest in developing Islamic fintech in Malaysia and the efforts in achieving it are constantly on the rise. Several startups have launched Shariah-compliant fintech solutions. Shariah advisory boards at regulatory and industry levels have discussed various Shariah issues related to fintech. Resolutions and exposure drafts have been issued or modified by regulators to cover a wide range of Islamic fintech activities. Some government agencies have established dedicated departments to support fintech and the Islamic digital economy. Universities and training centres have started offering specialized courses and programmes to provide the requisite human capital, while research centres have invested in substantial efforts to push the industry forward by conducting extensive research and providing consultancy services. This report documents a representative sample of such efforts.
- PublicationShari'ah analysis of zakat on sukukMezbah Uddin Ahmed; Moutaz Abojeib; Mahadi Ahmad; Mezbah Uddin Ahmed (International Shari'ah Research Academy for Islamic Finance (ISRA), 2021)
Sukuk in its contemporary form as a financial instrument has gained prominence only over the last one to two decades. Like a share, a sukuk is defined as an instrument representing undivided ownership over the underlying assets. Naturally, the question arises whether sukuk are subject to the same zakat rulings as shares. Accordingly, this research has identified the similarities between shares and Sukuk. The zakat rulings applicable to shares are also identified, and the research has made an attempt to apply those rulings in the context of sukuk. However, the research has identified the peculiarities of sukuk as it is currently practiced in the global market and provided fresh insights on how these may impact the applicability of zakat to sukuk. While the research includes theoretical Shari'ah analysis and discussion on various relevant zakat matters, it also reviews today's practices. Accordingly, relevant Shari'ah standards and requirements of various jurisdictions are identified, and several sukuk prospect uses are examined in relation to zakat calculation and disclosures. By this the research aims at enabling a coherent understanding of the theory and practice.
- PublicationStructural changes, competition and bank stability in Malaysia's dual banking systemMoutaz Abojeib; Lau Wee Yeap; Kinan Salim; Mansor H. Ibrahim (Elsevier B.V., 2019)
This paper assesses Malaysia's competition landscape and its risk implications subsequent to conventional banking consolidation and Islamic banking penetration in the aftermath of the 1997/1998 Asian financial crisis. Employing a panel sample of conventional and Islamic commercial banks, it arrives at the following conclusions. First, the consolidation exercise, which has led to a significant reduction in the number of domestic commercial banks, has not stifled banking competition. Second, the paper provides empirical support for the competition-stability relationship, particularly for the conventional banking sector. Islamic banking sector risk appears to be neutral to market competition or market power, although there is limited evidence that it increases with overall market concentration. Finally, the analysis uncovers the risk-increasing effect of the Islamic banking market structure on the conventional banking sector. By contrast, conventional banking market concentration tends to reduce the credit risk of Islamic banks.
- PublicationStructural changes, competition and bank stability in Malaysia's dual banking systemMoutaz Abojeib (INCEIF, 2017)
Malaysia is well acknowledged to be a frontrunner in the dual-banking system, referring to the co-existence of the Islamic banking system and conventional banking system. Propelled by the aim to establish Malaysia as an international hub of Islamic finance and the need to have a stronger and more resilient banking sector in the aftermath of the 1997/1998 Asian financial banking sector consolidation initiative witnessed mergers and acquisitions of the then existing banks resulting in substantial reduction in the number of conventional commercial banks in the market. The number of conventional commercial banks declined from 35 in 1998 to 22 in 2009 and then, with new additions of foreign banks, increased to 27 at the end of 2016.
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