Bacha, Obiyathulla I. (2004): Dual Banking Systems and Interest Rate Risk for Islamic Banks. Published in: The Journal of Accounting, Commerce & Finance – Islamic Perspective , Vol. 8, No. 1 (December 2004): pp. 1-42.
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In introducing Islamic banking in Malaysia, the basic strategy was to replicate the products/ services offered by conventional banks. The successful implementation of such a strategy has meant that Malaysia today has a truly dual banking system. Islamic banks in Malaysia not only have product similarity with conventional banks but share the same overall economic environment and a common customer base.
The ability of non Muslim customers/depositors to switch between the two banking systems, means that deposit / financing rates have to be similar – else give rise to arbitrage flows. The implication is that, though Islamic banks operate on interest free principles, the economic environment in a dual banking system inevitably exposes them to the problems of conventional banks; in particular interest rate risk. Using monthly data over the 10 year period 1994 – 2003, the paper argues that, paradoxical as it may seem, Islamic banks operating within a dual banking system may also be subject to interest rate risk.
|Item Type:||MPRA Paper|
|Original Title:||Dual Banking Systems and Interest Rate Risk for Islamic Banks|
|Keywords:||Dual Banking Systems; Interest Rate Risk; Islamic Banks|
|Subjects:||Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion
G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Obiyathulla/ I Bacha|
|Date Deposited:||15. Jan 2009 15:28|
|Last Modified:||11. Feb 2013 21:20|
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