A Study on Performance Evaluation of Islamic Banks in ... · analysed the relationship between...

e-Proceedings of the Global Conference on Islamic Economics and Finance 2018

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& 25th October 2018 / Sasana Kijang, Bank Negara Malaysia, Kuala Lumpur

e-ISBN: 978-967-2122-63-0

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A Study on Performance Evaluation of Islamic Banks in

Malaysia: In The Perception of Resource Mobilization (Deposits)

DR.DHANUSKODI RENGASAMY

Accounting Department, Faculty of Business

Curtin University

CDT250, 98000 Miri Sarawak

MALAYSIA

[email protected]

DR. OLADOKUN NAFIU OLANIYI

Finance & Banking Department, Faculty of Business

Curtin University

CDT250, 98000 Miri Sarawak

MALAYSIA

[email protected]

ABSTRACT

The objectives of the study are to examine the performance of Islamic banks in Malaysia

through its resource mobilization viz. Deposit ratios and to identify any differences exists

between two periods [2011 to 2013 and 2014 to 2016] of bank operation and its performance.

This study included all 16 Islamic banks functioning in Malaysia for analysis purpose. The

resource mobilization is measured through Financial Ratio Analysis (FRA) such as Credit

deposit ratio (CDR), Investment deposit ratio (IDR) and cash to deposit ratio (CTDR). The

study is mainly based on secondary data, the data were collected from the annual reports of

all banks. The data analysis included descriptive statistics and student’s T-test to calculate

data and find difference between two periods’ operation and performance. The outcome of

the study indicates that the mean value of CDR for two different periods has been increased.

IDR implies the banks needs to concentrate investment of the deposit money. CTDR is

volatile because of changes in statutory deposit of banks with BNM. Student’s T-test pointed

out majority of the banks have no significant difference between two periods. In overall all

Islamic banks in Malaysia performance in the perception of Deposits is progress during the

study period 2011 to 2016.

Keywords: IslamicBank, Performance, Deposit Mobilization, Financial Ratio Analysis

1.0 INTRODUCTION

Islamic banking is a financial institution that complies with Islamic law (Sharia). There are

different modes of Islamic banking operations around the world. The modes of operations are

based on profit and loss sharing (Mudarabah), safe keeping of resources (Wadiah), joint

venture (Musharaka), cost plus action (Murabahah) and leasing operation (Ljar). According

mailto:[email protected]


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to Naveed (2014)the existing size of Islamic finance industry is range from $1.88 Trillion to

$2.1 Trillion. Further his expectancy of market size to be $3.4 Trillion by end of 2018. The

World Islamic Banking competitiveness report (2016)mentioned that Malaysia’s Islamic

banks occupies 15.5 per cent share in global market and 21.3 per cent in national market in

the point of banking assets. Globally Malaysia occupies second place in international

participation of banking assets next to Saudi Arabia.

Islamic banks occupy a predominant role in the growth of gross domestic product in

developing countries(Daly & Frikha, 2016). According toFasih (2012) and Huda (2012),

Islamic banking is contributing a remarkable support to farmers and SMEs and also

encourage economic growth as a whole country. Many studies have been conducted and

analysed the relationship between Islamic finance system and economic growth, all these

studies provided evidences and supportive to the study information (Johnson, 2013; Warde,

2000; Yazdan & Hossein, 2012).

1.1 Islamic Banking in Malaysia – An Overview

The origin of Islamic finance in Malaysia, as in most other countries of the world, was non-

institutional. The growth of Islamic banking in Malaysia is not a new, traces its origin back to

1963. The concept of Islamic finance had been generated while the Pilgrims Fund board or

Lembaga Tabung Haji (LTH) was established in the year 1963 in Malaysia. It was an

institution established to invest the savings of the local Muslims in productive sectors of

economy as interest free (uncontaminated by riba) who intend to perform pilgrim (Haji).

The Pilgrims’ Management and Fund Board (PMBF) was set by legal in August 1969 by

through the merger of two important institutions are the Malaysian Muslim Pilgrims Savings

Corporation and Pilgrims Affairs Department of the Government. Following the successful

operation of the Board, it put forth continual request on the government to establish an

Islamic Bank. In 1980 Bumiputra Economic Congress passed the resolution and requested the

government to countenance the PMBF to establish Islamic banks in Malaysia. The seminar

was held in one of the National Universities of Malaysia (Universiti Kebangsaan Malaysia)

on March 1981, the participants were requested the government to issue a law to allow

Islamic banks.

The government appointed Steering Committee of Islamic Bank to study the operations of

Faisal Islamic Bank of Sudan and Faisal Islamic Bank of Egypt on 30 July 1981. The national

steering committee comprises three technical committees were religious committee, legal

committee and banking operation committee. The steering committee submitted its report on

5 July 1982 to the government and it was accepted. After all the Malaysian Islamic system

started with Islamic Banking Act (IBA) that came in to effect on April 1983. The first Islamic

Bank in Malaysia was incorporated as a limited company under the Companies Act 1965, the

Bank Islam Malaysia Berhad (BIMB) began its operation on 1 March 1983. In the year 1989

the Banking and Financial Institutions Act of 1989 (BAFIA) was established and it provides

tools for liquidity requirements and channels for investment. Another remarkable instant in

Malaysian Islamic Banking system denotes BIMB was listed on the main board of the Kuala

Lumpur stock exchange on 17 January 1992.

In the year 1993 the commercial banks and merchant banks in Malaysia were allowed to offer

Islamic products and services to the people through Islamic Banking system (IBS). In 1996


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Amendments were incorporated in BAFIA to allow all conventional banks to offer sharia

compliance products to their customers through Islamic window. Followed with conventional

bank operations the Central Bank of Malaysia set up National Sharia Advisory Council

(NSAC) on 1 May 1997 to dealt Islamic banking and Takaful issues. In the year 1999 Bank

Negara Malaysia (BNM) introduced the new concept which the banks had Islamic Banking

subsidiary and it operated under Islamic window could convert and set up as full-fledged

Islamic banks. The second Islamic Bank in Malaysia was established on 1 October 1999 in

the name of Bank Muamalad Malaysia Berhad.

On 2004 the Central bank of Malaysia brought forward liberalization policy on Islamic

banking to allow three full-fledged foreign Islamic banks to set up in Malaysia (AFB, Al-

Rajhi, and KFH). Islamic Financial Policy 2004 contributed continuously further

strengthening the fundamental essential for progressive Islamic banking industry. BNM

understand the importance of Islamic banking in Malaysia to set up International Centre for

Education in Islamic Finance (INCEIF), it is a dedicated University was established in 2006,

it provides trained, skilled and certified personnel to Malaysian Islamic Finance industry.

The Malaysia International Islamic Financial Centre (MIFC) was launched in 2006 based on

Kuala Lumpur, Malaysia.it is an initiative of financial market regulators and relevant

government agencies to developing Malaysia’s Islamic finance market. In 2013 Islamic

Financial Services Act 2013 (IFSA) passed by Parliament, enacted to safeguard financial

stability as well as to statutorily monitor and enforce Shariah compliance. According to BNM

website, there are 16 Islamic banks functioning in Malaysia. The name and year of

establishment is provided in table 1. The serial number against each bank is used for analysis

purposes instead of using individual bank name.

Table 1: List of Islamic Banks in Malaysia

SN Name of the Bank Ownership Year of

Establishment

1 Affin Islamic Bank Berhad L 2006

2 Al Rajhi Banking & Investment Corporation

(Malaysia) Berhad F 2006

3 Alliance Islamic Bank Berhad L 2007

4 AmBank Islamic Berhad L 2006

5 Asian Finance Bank Berhad F 2005

6 Bank Islam Malaysia Berhad L 1983

7 Bank Muamalat Malaysia Berhad L 1999

8 CIMB Islamic Bank Berhad L 2005

9 HSBC Amanah Malaysia Berhad F 2007


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10 Hong Leong Islamic Bank Berhad L 2005

11 Kuwait Finance House (Malaysia) Berhad F 2005

12 Maybank Islamic Berhad L 2008

13 OCBC Al-Amin Bank Berhad F 2008

14 Public Islamic Bank Berhad L 1993

15 RHB Islamic Bank Berhad L 2005

16 Standard Chartered Saadiq Berhad F 2008

Source: Bank Negara Malaysia [http://www.bnm.gov.my/?ch=li&cat=islamic&type=IB&lang=en]

1.2 Objectives of study

The main objective of the study is to examine the performance of Islamic Banks in Malaysia

through its deposits related ratios. The specific objectives of the study are as follows.

1. To examine the performance of Islamic banks in Malaysia through its resource

mobilization (Deposits).

2. To identify whether any difference exists between banks years of operation and its

resource mobilization performance

1.3 Chapter Arrangements

Present research is organized in to five sections, section one comprises introduction of the

study, Islamic banks in Malaysia – an overview and objectives of the study. Section two

contains various literatures related to variables of the study, section three includes

information about research methodology, section four and five focuses result and analysis

and summary &conclusionsof study respectively.

2.0 LITERATURE REVIEW

The most important aspect of the research is review of literature. The research has to begin

where others have left and as such, survey of related literature is an essential of stage in the

planning of the study. In this section an attempt is made to review the literature in connection

with bank performance through deposits and related ratios. The purpose of measuring bank

performance is to understand how well the bank is performing. Banks performance is

measured through various methods. One of the techniques of measuring is FRA. Bank

deposits constitutes the main source of funds for bank and it contributes important role in the

bank performance. Therefore many studies applied deposit related ratios as performance

measures.

2.1 Literature review – Outside Malaysia research

Many studies conducted the performance of banks through ratio analysis, a study conducted

by (Muthumeena & Jeyakumaran, 2017)applied ratio analysis for assessing profitability,


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liquidity and non-performing assets of urban co-operative banks in India. The study applied

one of the deposit ratio (C/D ratio (credit- deposit ratio) for measure the performance.

Another study byDaly and Frikha (2017) confirmed that increase size of Islamic banks and

customers’ deposits are the important determinants of bank performance. Sahota and Dhiman

(2017), analyses performance of scheduled commercial banks in India by Camel model

approach, which applied one of the ratios liquid assets to total deposits.

Ferrouhi (2017)study identifies the determinants of bank performances in a developing

country as an evidence Morocco, it identifies deposits and deposit interest rates are one of the

measures of long term performance of Moroccan commercial banks.Sukmana and Febriyati

(2016), conducted a financial performance of Islamic banks and conventional banks in

Indonesia and applied few deposit related ratios are loan deposit ratio and financing deposit

ratio. Bank deposit and deposit ratios are important tools for bank performance specifically

Islamic banks. Rashid and Jabeen (2016) analyzing determinants of performance for

conventional bank versus Islamic banks in Pakistan, specifically the study analyse the

operating efficiency of Islamic banks through deposits.

Agustin (2016),prepared a research study on the financial performance of Islamic banking

unit in Indonesia through panel data analysis, it also shows deposits play a significant role in

explaining the performance.Bilal, Durrah, and Atiya (2016) steered a comparative study on

performance of Islamic banks and conventional banks evidence from Oman employed

financial ratio analysis including credit to deposit ratio. The present study includes various

literature related to performance of banks with deposit related ratios in different countries, the

following section focuses few literatures associated to Malaysia based research.

2.2 Literature Review – Malaysia research

Foong (2016)study analyses the efficiency of full-fledged Islamic banks and Islamic

subsidiaries of conventional banks in Malaysia using stochastic production Frontier (SFA)

model, it revealed that the Malaysian banking industry has grown very fast in terms of assets,

deposits and financing base. Another study conducted byRozzani and Rahman (2013)

identifies the determinants of bank performance in the case of conventional and Islamic

banks in Malaysia applied CAMELS rating measures, it includes two financial measures are

related to deposits of the banks are net loans/deposits and short term funding and liquid

assets/deposits and short term funding.Ab-Rahim, Kadri, and Ismail (2013)study analyses

efficiency performance of Malaysian Islamic banks, data envelopment analysis is employed,

the study focused on cost efficiency and technical efficiency.

Hamid and Azmi (2011)research paper examined the performance of Bank Islam and

conventional banking in Malaysia. The study applied financial ratio as measure for

performance, for measuring the performance under commitment to economy and Muslim

community, it applied a ratio i.e. Government bond investment ratio, over the total deposit

has been considered for calculations.Mokhtar, AlHabshi, and Abdullah (2006) study applied

SFA technique to identify the efficiency of Malaysian Islamic banks. This study used various

ratios related to deposit of banks.

After studying various literatures from different sources, it is understand that there are studies

related to Islamic bank performance and efficiency, most of the studies adopted FRA and


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T-test for measuring the performance. In particular many studies implemented deposit related

ratios for measuring the performance. But there is no much studies to apply only deposits as a

performance measures. Further no many studies considers all Islamic banks for the analysis.

The present research concentrates only deposit related ratios for all Islamic banks in

Malaysia.

2.3 Variables of the Study – Islamic Bank Deposits

The annual reports of Islamic banks in Malaysia shows deposits in the liability side of the

balance sheet. The Islamic bank deposits are mainly classified in to two sections are deposits

from customers and deposits and placements of banks and other financial institutions. Before

discussing the financial statement information, it is necessary to understand meaning of the

term Mudharaba, it is an investment or entrepreneurial contract. In worldwide, the concept

Mudharaba means accept customers funds and enter in to investment and share profits (if

any), on the same time if any loss, the customer will borne that capital losses.

Before Islamic Financial Services Act 2013 (IFSA) the financial statements of Islamic Banks

in Malaysia shows the deposits from customers are classified in to Non-Mudharabah funds

and Mudharabah funds. Non-Mudharabah funds includes demand deposits, savings deposits,

negotiable Islamic debt certificates and commodity Murabahah. The Mudharabah funds

includes demand deposits, savings deposits, general investment deposits and special

investment deposits. According to Islamic Bankers Resource Centre’s article posted on

January 2, 2015 stated that after IFSA 2013 the Mudharaba is classified as investments,

instead of investments that behaves like a deposit. Further it stated that there is no difference

between before and after IFSA 2013, the clause where the capital investment of the

Mudharaba is open to potential losses has always been applicable. Only for the classification

of Mudharaba as investment post June 2015, the treatment on how a Mudharaba investment

is processes, managed and executed now changes.

After Islamic Financial Services Act 2013 (IFSA) the financial statements of Islamic Banks

in Malaysia shows the deposits from customers are classified in to savings deposits –

Wadiah, Demand deposits – Wadiah and Commodity Murabahah, Term deposits –

commodity Murabahah and Wadiah Corporate deposits, Specific investment account –

Murabahah and General investment account – Mudharabah.


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The details of deposits information presented in financial statement of Islamic Banks in

Malaysia is summarized in figure 1

Figure1. Islamic Bank Deposits in Malaysia – Classification before and after IFSA 2013

The present research applies various ratios related to Islamic bank deposits, for the

calculation of ratios, the study considered deposits, itmeans deposits from customer, banks

and other financial institutions. The deposit related ratios are as follows.

2.3.1 Credit Deposit Ratio (CDR)

This is commonly used to assess the bank’s liquidity performance by dividing the banks

financing and advances divided by total deposits. The ratio has been expressed in percentage.

If the ratio is too high means the banks not have enough liquidity funds to meet unforeseen

requirements, conversely the ratio is too low means the banks may not be earning as much it

could be. As per prudence and tradition the ideal percentage of this ratio is between 80% and

90%. For the calculation purpose credit includes financing, advances and other loans in the

balance sheet.

Deposits

Deposits from

Customers

Deposits and placements

of Banks andother

Financial Institutions

NON –

MUDHARABAH

FUNDS

a. Demand Deposits

b. Savings Deposits

c. Negotiable Islamic

Debt Certificate

d .Commodity

Murabahah

MUDHARABAH

FUNDS

a. Demand Deposits

b. Savings Deposits

c. General

Investment

Deposits

d. Special investment

Deposits

NON –

MUDHARABAH

FUNDS

a. Licensed Islamic

Banks

b. Licensed Banks

c. Licensed Investment

Banks

d. Bank Negara

Malaysia

MUDHARABAH

FUNDS

a.Licensed Islamic

Banks

b. Licensed Banks

c. Other Financial

Institutions

Deposits

Deposits from

Customers

Deposits and placements

of Banks andother

Financial Institutions

SAVINGS

DEPOSITS

Wadiah

DEMAND

DEPOSITS

Wadiah

Commodity

Murabahah

TERM DEPOSITS

Commodity

Murabahah

Wadiah

Corporate

Deposits

SPECIFIC

INVESTMENT

ACCOUNT

Murabahah

GENERAL

INVESTMENT

ACCOUNT

Mudharabah

NON –

MUDHARABAH

FUNDS

a. Licensed Islamic

Banks

b. Licensed Banks

c. Licensed

Investment

Banks

d. Bank Negara

Malaysia

MUDHARABAH

FUNDS

a.Licensed Islamic

Banks

b. Licensed Banks

c. Other Financial

Institutions

Before 30 June 2015

After 30 June 2015


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2.3.2 Investment Deposit Ratio (IDR)

This ratio is applicable to assess the bank performance specifically liquidity performance. In

point of view Islamic banks the term investment includes securities purchased under resale

agreement, deposits and placement with other financial institutions, financial assets held-for-

trading, derivative financial assets, financial assets available-for-sale and financial assets

held-to-maturity. The ratio indicates absolute investment in relation to absolute growth in

deposits.

2.3.3 Cash-to- Deposit Ratio (CTDR)

The ratio indicates how much bank lends money to the customers out of the deposits it has

mobilized. It identifies how much of bank core funds are being used for lending. For

computation of ratio cash includes cash and short term funds and statutory deposits with

BNM.

Financing, Advances and other loans

Credit Deposit Ratio = -------------------------------------------- X 100 ------ (1)

Deposits, placements from customers,

Banks and other financial institutions

Financial Investment

Investment Deposit Ratio = -------------------------------------------- X 100 ------ (2)

(IDR) Deposits, placements from customers


Cash

Cash-to- Deposit Ratio = -------------------------------------------- X 100 ------ (3)

(CTDR) Deposits, placements from customers



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2.4 Conceptual Framework Model

Figure 2 Conceptual Frame work

2.5 Research Hypothesis

Based on literature and research objectives the following null hypothesis has been generated.

HO1. There is no significant difference between 2011- 2013 and 2014 - 2016 credit deposit

ratio and financial performance for Islamic banks in Malaysia.

HO2. There is no significant difference between 2011- 2013 and 2014 - 2016 investment

deposit ratio and financial performance for Islamic banks in Malaysia.

HO3. There is no significant difference between 2011- 2013 and 2014 - 2016 cash-to- deposit

ratio and financial performance for Islamic banks in Malaysia.

3.0 RESEARCH METHODOLOGY

The present study examines the performance of Islamic banks in Malaysia through its deposit

mobilization for the period of 2011 to 2016. The study applied financial ratio analysis (FRA),

the ratios are associated with deposit mobilization of banks. FRA is a useful management tool

to measure the performance and help to compare past year performance. Previously a study

conducted by Islam (2014)applied FRA for measuring the performance of National Bank

limited in Bangladesh for the period of 2018 to 2013. For analysis purpose, various financial

ratios related to deposits of the banks are taken. There are 16 Islamic banks functioning in

Malaysia, the study considered all banks for analysis. The data has been collected from

annual reports of all 16 banks, the study collected six years annual reports for each bank,

therefore it comes around 96 (16 banks and 6 years) annual reports for the study. The tool for

the analysis is FRA method and for the hypothesis test the study applied student’s T- test.

The purpose of applying this technique is to determine if two sets of data are significantly

different from each other. The T-test was introduced by William Sealy Gosset in 1908, he

was working in Guinness brewery in Dublin Ireland, he denoted this test as student’s T-test.

The study is based on secondary data, the data was collected from annual reports of all banks.

The data analysis includes descriptive statistics (Mean, minimum, maximum, and standard

Investment Deposit Ratio

(IDR)

Credit Deposit Ratio

(CDR)

Cash-to-Deposit Ratio

(CTDR)

Performance of Banks

D

E

P

O

S

I

T

R

A

T

I

O

S


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deviations) and student’s T-test to calculate data and find difference between two periods of

2011 to 2013 and 2014 to 2016.

To examine the performance of all Islamic banks in Malaysia through deposits related ratios

is the main objective of the study. The indicators are selected to study are Credit Deposit ratio

(CDR), Investment Deposit ratio (IDR), and Cash-to- Deposit ratio (CTDR). Most of the

previous studies analyses performance of selected Islamic banks through all ratios but the

present research mainly focuses deposit related ratios for all Islamic banks functioning in

Malaysia for the period of six years from 2011 to 2016.

According to BNM website there are sixteen Islamic banks functioning in Malaysia, from this

6 of them are foreign ownership and the remaining 10 are locally owned Islamic banks. The

data analysis was made by deposit ratios and also study period is classified in to two divisions

are 2011 to 2013 and 2014 to 2016, with the help of two divisions to find out any differences

between the period of operation and performance. Further the study applied student’s t-test

for testing hypotheses and to determine the ratio effective difference in two periods. For

calculation of differences denote as μd for 2011-2013 ratio minus 2014-2016 ratio ((μ1 –

μ2).(μ1 – μ2). On the basis of data the following hypothesis has been tested.

Here, μ1and μ2 denotes mean value of ratios for 2011-2013 and 2014-2016 respectively and

μd is the difference between two period values. The decision rule for hypothesis testing is

based on the P value. If P-value ≤ α (α = 0.05), reject the null hypothesis. If P-value > α (α =

0.05), do not reject the null hypothesis.

4.0 EMPIRICAL RESULTS

In this section an attempt is made to evaluate the performance of Islamic banks in Malaysia

during the study period. The activities are tested with tools like mean, SD, and student’s t-

test.

4.1 Credit deposit ratio (CDR)

Credit deposit ratio, is the ratio of how much a bank lends out of the deposits it has mobilized

from the public. The descriptive information of CDR for all Islamic banks in Malaysia is

presented in table 2.

Table 2: Credit deposit ratio

2011 - 2013 2014 - 2016 Overall

Mean SD Mean SD Max Min

Bank 1 50.07 10.21 71.89 17.7 92.3 38.46

Bank 2 73.44 5.696 79.64 3.09 82.5 69.54

Bank 3 73.54 2.537 77.57 1.76 79 70.65

Bank 4 83.34 3.548 87.21 4.01 91.8 79.24

Bank 5 60.25 10.95 72.07 1.99 74.1 48.02

Bank 6 57.12 4.78 75.87 3.88 78.7 51.86

Bank 7 50.35 6.39 68.87 2.93 44.3 72.25

Bank 8 73.15 4.104 83.66 3.07 86.8 70.48

2011 - 2013 2014 - 2016 Overall


Bank 9 78.73 5.175 92.1 16.3 110 72.76

Bank 10 59.98 9.842 78.68 2.44 81.4 49.32

Bank 11 76.6 9.317 79.76 3.71 84.5 66.31

Bank 12 74.14 1.329 85.71 5.81 89.9 72.88

Bank 13 68.54 5.321 72.67 2.3 74.7 62.78

Bank 14 73.54 2.947 77.93 4.68 83.1 70.65

Bank 15 68.84 6.69 84.05 7.7 92.9 61.12

Bank 16 62.46 7.127 89.66 24.5 117 55.21


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The table 2 reveals that the mean value of the first period to next period has been increased

for all banks, for example Bank 1 mean value was 50.07 in 2011-2013 and 2014-2016 was

71.89 which shows quit well perform, it has been interpret as Malaysian Islamic banks have

more reliance on lending resources through their deposits. During the study periods all banks

mean value has been increased from one period of study to another period of study. Therefore

Malaysian Islamic banks CDR ratio is progressive.

4.2 Investment Deposit ratio (IDR)

This ratio explains the absolute growth in investment relation to absolute growth in deposits

of the bank. If this ratio is high it indicates the banks are high level of liquidity, if it is high

liquid the customers are happy to invest in the form of deposits to the bank. A detailed mean

value and SD for two periods of this ratio is presented in table 3.If the mean value for two

periods increased which indicates bank is more liquid as well as bank use their deposits in

investment. It is observed that all Malaysian Islamic banks IDR (except Bank 2, 4, 5, 7 and

14) has been decreased from the first period to next period. Therefore the required banks

improve the investment deposit ratio.

Table 3 Investment Deposit Ratio

4.3 Cash-to- Deposit ratio (CTDR)

The ratio indicates how much of a bank’s core funds are used for the purpose of lending, this

is main and core activity of the bank. Further this ratio helps customers can be sure the

withdrawal of the money from their deposits. Mean value, standard deviation for two

different periods are presented in table 4.

Table 4 Cash-to-Deposit Ratio (CTDR)

2011 - 2013 2014 - 2016 Overall


Bank 1 23.57 2.39 13.46 0.12 25.75 13.39

Bank 2 16.62 3.57 28.07 2.1 30.04 12.54

Bank 3 31.45 3.99 21.6 4.69 35.97 17.06

Bank 4 17.95 5.7 19.64 2.45 22.91 11.73

Bank 5 24.67 4.01 37.31 2.29 39.44 22.13

Bank 6 43.13 6.9 24.46 2.94 49.48 21.74

Bank 7 32.68 5.12 33.53 2.55 36.68 26.91

Bank 8 16.39 5.09 15 0.84 22.03 12.14

2011 - 2013 2014 - 2016 Overall


Bank 9 11.39 3.87 43.17 31.3 78.48 6.931

Bank 10 33.14 3.22 24.81 5.76 35.78 19.15

Bank 11 21.47 2.68 16.33 2.4 24.44 14.35

Bank 12 10.76 2.59 6.572 0.48 12.77 6.018

Bank 13 32.55 8.84 23.33 0.53 37.72 22.34

Bank 14 12.51 1.3 23.55 1.94 25.77 11.41

Bank 15 23.29 5.36 19.17 2.95 27.2 17.18

Bank 16 7.871 9.14 6.334 3.73 18.34 1.537

2011 - 2013 2014 - 2016 Overall


Bank 1 34.81 5.83 26.76 4.64 41.22 21.76

Bank 2 16.62 3.57 28.07 2.1 30.04 12.54

Bank 3 31.45 3.99 21.6 4.69 35.97 17.06

Bank 4 19.91 7.38 15.2 1.68 28.35 13.32

Bank 5 36.93 15.9 14.17 1.38 54.17 12.6

Bank 6 12.14 3.8 10.57 0.42 15.68 8.125

Bank 7 29.55 9.84 9.007 0.44 40.4 8.522

Bank 8 18.79 3.07 15.48 2.06 21.91 14.28

2011 - 2013 2014 - 2016 Overall


Bank 9 21.98 4.89 23.73 14.5 37.5 8.532

Bank 10 18.15 12.6 9.718 1.12 32.31 8.35

Bank 11 24.93 3.32 23.99 4.83 29.57 21.18

Bank 12 17.56 0.93 11.89 3.65 18.33 8.737

Bank 13 9.516 5.01 13.58 2.72 16.69 3.858

Bank 14 16.77 10.2 9.037 3.63 24.64 4.843

Bank 15 20.76 7.91 16.2 5.73 29.89 10.57

Bank 16 37.34 15.3 20.11 6.15 55.01 16


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Table 4 shows that the cash deposit ratio for two different period is fluctuate. The main

reason for the fluctuation of the ratio is based on the statutory deposits with BNM is volatile.

Bank 2, 9, 13 have more cash assets from its deposits as compared to all other Islamic Banks

for the period 2011-2013 to 2014 – 2016.

4.4 Hypothesis Testing

The performance of Malaysian Islamic banks on the basis of deposit mobilization for the

period 2011 – 2013 is statistically differ from that of 2014 – 2016. Student’s t-test is

employed for all 16 Islamic banks in Malaysia and applied three ratios. An attempt is made to

find out the student’s t-test result of all Islamic banks in Malaysia are presented in table 5.

The result of this analysis shows that student’s t-test score, p value and hypothesis decisions

for each bank with all three ratios are provided. According to student’s t- test if p value ≤ α (α

= 0.05), in this case reject the constructed null hypothesis. In vice versa If p-value > α (α =

0.05), do not reject the constructed null hypothesis. CDR is calculated for all 16 Islamic

banks in Malaysia, banks 1, 4, 5, 9, 11, 12, 13, 14 and 16 p value is 0.053, 0.112, 0.126,

0.196, 0.346, 0.053, 0.201, 0.130 and 0.074 are greater than one tailed at α = 0.05, so do not

reject null hypothesis. The other Islamic banks 2, 3, 6, 7, 8, 10 and 15 P value is 0.045, 0.014,

0.001, 0.007, 0.007, 0.026 and 0.031 are less than one tailed at α = 0.05, so the null

hypothesis is rejected. Majority of the banks have no significance difference between two

periods of CDR and performance.


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Table 5: Student’s t-test result of all Islamic banks in Malaysia

BANK

1

Student's

T-test

Score

P -

Value

Decision

CDR -2.809 0.053 Accept

IDR 7.366 0.018 Reject

CTDR 2.483 0.066 Accept

BANK

2

Student's

T-test

Score

P -

Value

Decision

CDR -3.104 0.045 Reject

IDR 10.369 0.005 Reject


BANK

3

Student'

s T-test

Score

P –

Value Decision

CDR -5.760 0.014 Reject


CTDR -2.641 0.059 Accept

BAN

K 4

Student's

T-test

Score

P –

Valu

e

Decision

CDR -1.737 0.112 Accept

IDR -0.361 0.376 Accept


BANK

5

Student's

T-test

Score

P -

Value Decision

CDR -1.589 0.126 Accept

IDR -9.012 0.006 Reject


BANK

6

Student's

T-test

Score

P -

Value Decision

CDR -29.854 0.001 Reject



BAN

K 7

Student'

s T-test

Score

P -

Valu

e

Decision

CDR -8.182 0.007 Reject

IDR -0.200 0.430 Accept

CTDR 3.694 0.033 Reject

BANK

8

Student's

T-test

Score

P –

Value

Decision

CDR -8.543 0.007 Reject

IDR 0.408 0.361 Accept


BANK

9

Student's

T-test

Score

P -

Value Decision

CDR -1.085 0.196 Accept

IDR -0.342 0.382 Accept


SCDR 0.962 0.219 Accept

BANK

10

Student'

s T-test

Score

P -

Valu

e

Decision

CDR -4.194 0.026 Reject



BANK

11

Student's

T-test

Score

P –

Value

Decision

CDR -0.457 0.346 Accept



BANK

12

Student's

T-test

Score

P -

Valu

e

Decisio

n

CDR -2.823 0.053 Accept



BANK

13

Student'

s T-test

Score

P -

Valu

e Decision

CDR -1.055 0.201 Accept



BANK

14

Student's

T-test

Score

P -

Valu

e Decision

CDR -1.558 0.130 Accept

IDR -6.180 0.013 Reject


BANK

15

Student's

T-test

Score

P -

Value Decision

CDR -3.808 0.031 Reject



BANK

16

Student'

s T-test

Score

P -

Valu

e

Decisio

n

CDR -2.311 0.074 Accept




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In the case of IDR eight Malaysian Islamic banks have P value is more than α value are Bank

4, 7, 8, 9, 10, 13, 15 and 16 and the null hypothesis is not rejected. The remaining other

Islamic banks P value less than α value therefore the hypothesis is rejected. The analysis

reveals that there is significance difference between two study periods on IDR of Malaysian

Islamic banks. CTDR of Malaysian Islamic banks for two periods, all banks except Bank 7

have P value is more than one tailed at α = 0.05, so the null hypothesis is not rejected. This

ratio indicates that there is no significant difference between two classes of study period.

5.0 SUMMARY AND CONCLUSIONS OF THE STUDY

The study mainly focus on to examine the performance of Islamic banks in Malaysia through

its resource mobilization viz. Deposit ratios and to identify any difference exists between two

periods of bank operation and its performance. The study reveals that in overall the cash

deposit ratios mean value has been increased for the two study periods for all the Islamic

Banks, therefore it is concluded that Malaysian Islamic banks performance in the view of

CDR is good and progressive. As per the result of IDR for Malaysian Islamic banks during

the study period has been increased except few banks, even though those banks mean value

for two different period is not have much difference, in this view of analysis it is concluded

that the Malaysian Islamic banks performance in the view of IDR is progressive. Cash-to-

deposit for the study period is volatile for the reason it is based on cash deposit with BNM,

during the study period CTDR is fluctuated and there is no much difference between two

periods, therefore it is concluded that the CTDR is also appropriate.

In overall all Islamic banks in Malaysia performance in the perception of Deposits is progress

during the study period 2011 to 2016. In view of hypothesis testing, there is no significant

difference between 2011-2013 and 2014-2016 of CDR, IDR and CTDR and performance for

Islamic banks in Malaysia.


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http://www.ey.com/Publication/vwLUAssets/ey-world-islamic-banking-competitiveness-report-2016/$FILE/ey-world-islamic-banking-competitiveness-report-2016.pdf



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