Degree
Master of Science in Islamic Banking & Finance
Department
Department of Finance
Faculty/ School
School of Business Studies (SBS)
Date of Submission
Spring 2024
Supervisor
Dr. Irum Saba, Associate Professor, Department of Finance
Committee Member 1
Dr. Irum Saba, Associate Professor, Department of Finance
Keywords
Funding Liquidity, Risk Management, Risk-taking, Islamic Banking, Liquidity Creation, Risk Weighted Assets
Abstract
Researchers have widely investigated the influence of funding liquidity changing the attitude of banks towards their risk tolerance, however, there is paucity of literature on regarding the behavior of Islamic banks which are much different from the conventional interest-based banking system. Often, Islamic banks have been characterized as institutions having excess liquidity and lack/shortage of Shariah compliant instruments to invest the excess liquidity as against the conventional banks who can invest in treasury bills/Government Bonds with repurchase options (REPO). To test the hypothesis, whether Islamic banks behave differently from conventional banks, we applied the data analysis techniques on the panel data of Pakistani banks during the years 2007-2022. We did not find funding liquidity having any direct and significant differences in the risk-taking behavior of Islamic and conventional banks. However, we found differences in the levels of the risk proxy variables of Islamic and conventional banks and also the differences in the control variables which clearly indicate that the impact of the funding liquidity and other bank specific and macroeconomic variables may not be the same due to differences in the financing approach, products, processes and ideology between the Islamic and conventional banks. Our study is expected to add to the existing literature with its findings may have implications for government, market participants and regulators in Pakistan and also the countries where there is dual banking system to measure and assess the potential behavior of risk impacting the credit risk assessment and provisioning, financial soundness and liquidity provisions separately and differently for the two systems and review the supervisory policies accordingly.
Document Type
Restricted Access
Submission Type
Research Project
Recommended Citation
Qazi, S. (2024). Comparative Study on the Impact of Funding Liquidity on the Risk-taking behaviour of Islamic and Conventional Banks in Pakistan (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/etd-ms-ibf/54
FInal Projec Presentation
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