Development are now operating in more than 83

Development of Islamic Banking in Indonesia


In the past decade increasing attention
has been given to Islamic banking system, one major reason of this growing
popularity of Islamic banking system was the resilience of Islamic banking as
witnessed during global financial crises (GFC). Despite the financial turmoil
in 2008, that crippled most of the Western institutions, Islamic banks
continued to grow in size and distinction. Asian Banker Research states that
the world?s 100 largest wholly Islamic banks, ranked by assets, held more than
$580 billion in assets in 2008, a 66% increase from the $350 billion they held
in the previous year, which clearly depicts that Islamic banks came out of this
crises quite unscathed as opposed to its conventional counterparts.

            The Global Islamic Finance Report (2014) 1 estimated the
size of the global Islamic financial services industry at $1.813 trillion at
the end of 2013 with an estimated annual growth of more than 15% per annum.
Presently, Islamic banking growth rate is 50% faster than overall banking
sector in several core markets and Islamic banks are now operating in more than
83 countries around the world which includes Muslim countries i.e Bahrain, UAE,
Saudi Arabia, Malaysia, Brunei and Pakistan etc. and non-Muslim countries like
USA, UK, Canada, Switzerland, Australia, South Africa and others.

 Existing literature lacks the comprehensive
research on examining the financing portfolio of whole Islamic banking industry. This study will bridge this gap
by discussing different macro-level factors that influence the lending
decisions of Islamic Banks, so that it contributes to the researchers? and
policy makers? notion.

 It is evident from the
literature that numerous studies have focused on determinants of conventional
bank lending while neglecting determinants of Islamic banks financing. There
are macroeconomic factors that influence the Islamic bank credits. Thus, in
this study we include macroeconomic factors- conventional banks? interest rate,
GDP growth rate, inflation and exchange rate, in order to study the impact of
these variables on Islamic bank lending in 48 countries having established
Islamic banking setup for the period from 2004 to 2013.WU1 

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