Assessment of liquidity management in Islamic banking industry

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)

Abstract

PurposeThe purpose of this paper is to assess liquidity risk management (LRM) practices in Indonesian Islamic banking industry during the period 2000-2007. Design/methodology/approachThe paper constructs the LRM index (100 scale) which is composed of individual index of asset side; liability side; LRM policies; and the overall LRM index. FindingsThe index produces a “good” grade for the liquidity management practices in the Indonesian Islamic banking industry, represented by three Islamic banks which capture 82 percent of the total market share of the industry. However, the breakdown of the index of every Islamic bank suggests various achievements. Research limitations/implicationsIt is found that the practices of LRM are not optimal yet based on some considerations explained in this paper. Further progressive actions have to be taken by the regulators and all industry's players to improve the LRM practices. Originality/valueTo the best of the author's knowledge, this is the first paper trying to assess how good the LRM in Indonesian Islamic banking is.

Original languageEnglish
Pages (from-to)147-167
Number of pages21
JournalInternational Journal of Islamic and Middle Eastern Finance and Management
Volume3
Issue number2
DOIs
Publication statusPublished - 22 Jun 2010

Keywords

  • Banking
  • Banks
  • Indonesia
  • Islam
  • Liquid assets
  • Liquidity
  • Risk management

Fingerprint Dive into the research topics of 'Assessment of liquidity management in Islamic banking industry'. Together they form a unique fingerprint.

Cite this