Market concentration of Malaysia's islamic banking industry

Nafisah Mohammed, Abd. Ghafar Ismail, Junaina Muhammad, Suhaila Abdul Jalil, Zaleha Mohd Noor

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

The aim of this paper is to evaluate the nature and changes of market concentration in the Malaysia's Islamic banking due to the restructuring of Islamic banking industry within the liberalization wave in the banking market. A total of 17 Islamic banks operating over the period of 2000-2010 had been considered. The structural approach framework was used to evaluate the nature and changes of market concentration in the Islamic banking industry in Malaysia. Under this approach, various market concentration indexes has been calculated from year to year basis as proposed by the industrial organizational field. Findings herein supported the structure-conduct-performance (SCP) paradigm where different concentration ratios have decreased over the study's period where this is reflected in the greater degree of competition in the Malaysia's Islamic banking industry. This study found an evidence that structural changes in the Islamic banking market has changed the market structure of the respective market from moderately concentrated to low concentrated market; whereby supporting the existence of competitive environment in the Malaysian Islamic banking market. Present study contributed to new knowledge in banking market concentration particularly for Islamic banking industry in the emerging economies such as Malaysia. Many past studies studying this issue had extensively examined the conventional banking system, but only several studies were on Islamic banking market. Hence, this study may enrich the existing literature on this issue, particularly for the Islamic banking industry. Policy recommendation from the findings; first, Malaysian Islamic banking industry needs a contestable market environment as to enable them to achieve better profit and efficient operation. Second, concentration ratios from this study can be used to identify the optimal number of banking firms in the Islamic banking industry.

Original languageEnglish
Pages (from-to)3-14
Number of pages12
JournalJurnal Ekonomi Malaysia
Volume49
Issue number1
DOIs
Publication statusPublished - 2015

Fingerprint

Banking industry
Market concentration
Malaysia
Islamic banking
Banking
Nature
Concentration ratio
Degree of competition
Islamic financial institutions
Paradigm
Emerging economies
Banking system
Structural change
Market structure
Profit
Liberalization
Concentration index
Competitive environment
Organizational field
Market environment

Keywords

  • Competition
  • Concentration measures
  • Islamic banking industry
  • Market structure

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)

Cite this

Market concentration of Malaysia's islamic banking industry. / Mohammed, Nafisah; Ismail, Abd. Ghafar; Muhammad, Junaina; Jalil, Suhaila Abdul; Noor, Zaleha Mohd.

In: Jurnal Ekonomi Malaysia, Vol. 49, No. 1, 2015, p. 3-14.

Research output: Contribution to journalArticle

Mohammed, Nafisah ; Ismail, Abd. Ghafar ; Muhammad, Junaina ; Jalil, Suhaila Abdul ; Noor, Zaleha Mohd. / Market concentration of Malaysia's islamic banking industry. In: Jurnal Ekonomi Malaysia. 2015 ; Vol. 49, No. 1. pp. 3-14.
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