The nexus of institutional quality and default risk in a dual banking system: Cross-country evidence

Sharia Supervisory Board (SSB) plays an important role in implementing Islamic law in Islamic banks, including fraud prevention. This ungodly act, also known as haram, is highly forbidden in Islam, as evidenced in the holy book of Al Qur’an. Therefore, this study was conducted to provide evidence on the role of SSB attributes (number of members, expertise, cross-membership, educational level, attendance of meeting, tenure) in preventing fraud. This study used 11 Islamic banks in Indonesia as research samples that were observed during 2014–2018. Data were analyzed using the ordinary least squares (OLS) method. The research findings from this study showed that the number of members, cross-membership, education level, attendance of meetings, and SSB tenure were not proven to reduce fraud. SSB’s expertise in accounting/finance had a negative influence on financial statement fraud. The implication of the study is that SSB’s expertise helps banks to effectively carry out their duties, namely detecting financial statement fraud. SSB acts as an independent control mechanism that states that all bank activities are in line with Islamic law and also avoid financial statement fraud.

The aim of this study is to analyze the influence of the non-performing financing (NPF), financing to deposit ratio (FDR), operational efficiency ratio (OER), and firm size (SIZE) on return on assets (ROA). The object of the research is the Islamic bank in Indonesia and the Islamic bank in Malaysia for the period of 2010–2015. Another aim of this research is to determine if there are differences in the impact of FDR, NPF, OER and firm size on ROA between the Islamic bank in Indonesia and the Islamic bank in Malaysia. The findings show that not all studied independent variables affect the ROA of the Indonesian Islamic Bank and the Malaysian Islamic bank. OER has a negative and significant effect on the Indonesian Islamic Bank’s ROA, while FDR and size have a positive and significant influence on the Indonesian Islamic Bank’s ROA. In the Islamic bank of Malaysia, NPF affects ROA positively, while OER affects ROA negatively. In the Indonesian Islamic bank, independent variables that influence ROA are FDR, OER, and SIZE. In Malaysian Islamic bank, only OER influences ROA significantly. Based on the Chow test, one can conclude that there is a significant difference between the Indonesian Islamic bank and the Malaysian Islamic bank. Regarding operational costs, banks should pay more attention to validation of the costs to be incurred, so there is no need to spend unnecessary costs.

M-banking is one of the services that Islamic banking provides to its users. With M-banking, customers can more easily obtain information without queueing at the bank. This study investigates the impact of Islamic mobile banking on customers’ interests. To explore the phenomenological impact, this study used a qualitative approach by applying in-depth interviews with 15 Islamic M-banking users from various backgrounds. This study analyzed the data by data reduction, display, and conclusion. The conclusion of this study revealed some positive and negative effects on the users. The positive effect is that it saves time, especially for students and workers who are busy with their daily activities. The available features and facilities such are credit purchases and online Islamic social payments ease them in saving time. However, there are also negative consequences for users. Some customers are susceptible to data theft by irresponsible people and face difficulties in using sophisticated mobile phones that not all customers have. Inconvenience telephone and text messages on behalf of a bank insulted users of Islamic M-banking and reduced their comfort. This study recommends that Islamic banks improve the data security system to ensure customer convenience when using M-banking.