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Monetary Policy Transmission Mechanism: Exploring the Role of Islamic Versus Conventional Banks

Thesis Info

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Author

Shah, Muhammad Abdul Rehman

Program

PhD

Institute

International Islamic University

City

Islamabad

Province

Islamabad.

Country

Pakistan

Thesis Completing Year

2019

Thesis Completion Status

Completed

Subject

Law & Legislation

Language

English

Link

http://prr.hec.gov.pk/jspui/bitstream/123456789/11583/1/Muhammad%20Abdul%20Rehman%20Shah_Islamic%20Banking%20%26%20Fin_2019_IIU_PRR.pdf

Added

2021-02-17 19:49:13

Modified

2024-03-24 20:25:49

ARI ID

1676724874166

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The transmission of monetary policy has recently received increased attention, especially with respect to the efficiency of banks’ credit channel. Yet, we know less about the relative role of Islamic banking in monetary policy transmission mechanism. This study therefore empirically examines the impact of monetary policy on the credit supply of Islamic versus conventional banks using an unbalanced panel dataset over the period 2005-2016 for Pakistan and Malaysia. To mitigate the problem of endogeneity, the robust two-step system-Generalize Method of Moments (GMM) estimator is applied. While estimating the effects of three alternative measures of monetary policy on banks’ credit supply, several bank-specific variables are included in the specification as control variables. By estimating the baseline models for each country, we provide strong evidence on the existence of credit cannel of monetary policy in Pakistan and Malaysia. The results from the extended model indicate that Islamic banks respond less to monetary policy as compared to their conventional counterparts.Further, the baseline models are extended on basis of size and liquidity to investigate the credit channel of monetary policy transmission mechanism. We have examined that the monetary policy indicators affected the small-sized banks more as compared to the large-sized banks in Pakistan and Malaysia. The same empirical evidence is found consistent in examining the interacted dummies of the small-sized Islamic banks versus the large-sized Islamic banks and the small-sized conventional banks versus the large-sized conventional banks. Furthermore, we have examined that the credit supply of the less-liquid banks is more respondent to monetary policy measure as compared to the more-liquid banks in Pakistan and Malaysia. The same empirical evidence is found consistent in examining the interacted dummies of the less-liquid Islamic banks versus the more-liquid Islamic banks and the less-liquid conventional banks versus the more-liquid conventional banks. At last, we have compared the effectiveness of credit channel between Pakistan and Malaysia. We analysed the coefficient values ofinteracted terms with monetary policy measure of all estimated models and found that credit channel through all types of banks is more respondent in Malaysian market as compared to that of Pakistan. x The relatively less response of Islamic banks to monetary policy may make it difficult for the central bank to achieve the desired objectives of the monetary policy. Our findings suggest that for an effective monetary policy, there is a vital need to consider the nature of Islamic banking while devising the monetary policy instruments to manage credit supply in the economy. Further, the results imply that the central banks; SBP and BNM need to revisit the monetary policy transmission through credit channel for Islamic banks, especially in economies with a dual (Islamic and conventional) banking system. Otherwise, there will appear monetary policy puzzles nullifying the objectives of policy. Similarly, the unique contractual and motivational features of Islamic financial institutions (IFIs) provide a justification to devise a set of Islamic financial instruments to absorb and inject the money through open market operations and other instruments in same industry. We are afraid that lack of adequate monetary instruments will lead to high intermediation cost and persistent inflationary pressures. Similarly, this study has drawn the intention of future researchers to know about theoretical background of Islamic versus conventional baking models and contractual obligations in legal matrix. Overall, Pakistan needs to get benefit from successful experience of Malaysia, especially in developing Islamic financial market and improving institutions quality that will make it able to transmit the monetary policy through credit channel efficiently.

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افسوس ہے کہ خانقاہ مجیبیہ پھلواری شریف پٹنہ کے سجادہ نشین مولانا سید شاہ رضوان اﷲ قادری مجیبی ۳۱؍ دسمبر ۲۰۰۳؁ء کو وفات پاگئے، اِنا ﷲ وَاِنا اِلیہ رَاجِعونْ۔
ابھی عمر کی جس منزل میں وہ تھے، یہ جانے کے دن نہیں ہوتے لیکن مشیت الٰہی میں کس کا دخل؟ موت کا تو وقت مقرر ہے، فَاِذَا جَآءَ اجلُھُمْ لَا یستَأخِرُونْ سَاعۃ وَّلَا یستَقْدِمُوْنَ۔[الاعراف:۳۴]
خانقاہ مجیبیہ کا علمی و روحانی فیض مدت دراز سے جاری ہے، شاہ صاحب اس کی قدیم روایات اور اپنے عالی مقام اسلاف کی خصوصیات اور خوبیوں کے حامل تھے اور خود بھی ایک صاحب فیض عالم اور ذاکر و شاغل بزرگ تھے، ان کی ذات سے ہزاروں طالبین و سالکین فیض یاب ہورہے تھے مگر اب تزکیہ و اصلاح اور ارشاد کا یہ سرچشمہ بند ہوگیا۔
ان کو تقویٰ و اخلاص، صوم و صلوٰۃ کی پابندی، سادگی و درویشی اور خوش مزاجی و خوش خلقی ورثے میں ملی تھی، راقم کو دو تین بار ان کی خدمت میں حاضری اور ان کی پاکیزہ سیرت اور مطہر زندگی کے جلوے دیکھنے کا اتفاق ہوا، ہر بار نہایت خندہ پیشانی سے ملے اور لطف و کرم سے پیش آئے، اﷲ تعالیٰ ان کے درجات بلند کرے اور پس ماندگان کو صبر جمیل عطا کرے، آمین۔
(ضیاء الدین اصلاحی، فروری ۲۰۰۴ء)

الغرر في العقود, دراسة فقهية مقارنة بين المذاهب الأربعة

Islam is a way of life and it does not allow betray of any kind to anyone especially in trade and business. Islam does not allow to buy or sell any type of commodity by any means in which there is a chance of betray, and along with it Islam also does not allow jugglery, betting, selling of item before purchasing and selling a commodity without having a possession. In Islamic Jurisprudence these conditional trade is known asGhararIt is then divided in two types of which the first type is prohibited by all school of thoughts and the other type is allowed by some school of thoughts

Comparative Efficacy of Different Fractions of Yeast Sludge and Toxin Binders Against Detoxification of Aflatoxins in Broiler

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