ARDL Panel Prediction on the Management of Liquidity and Profitability of Islamic Banking in Muslim Emerging Market Countries: Evidence from Indonesia, Pakistan, Bangladesh, and Turkiye

Anwar Sanusi; Andri Soemitra; Isnaini Harahap

doi:10.70716/ecoma.v4i1.473

Authors

Anwar Sanusi Program Studi Ekonomi Syariah, Fakultas Ekonomi dan Bisnis Universitas Islam Negeri Sumatra Utara, Indonesia
Andri Soemitra Program Studi Ekonomi Syariah, Fakultas Ekonomi dan Bisnis Universitas Islam Negeri Sumatra Utara, Indonesia
Isnaini Harahap Program Studi Ekonomi Syariah, Fakultas Ekonomi dan Bisnis Universitas Islam Negeri Sumatra Utara, Indonesia

DOI:

https://doi.org/10.70716/ecoma.v4i1.473

Keywords:

ARDL Panel, Macroeconomic Indicators, Liquidity, Profit

Abstract

This study aims to analyze the prediction of Return on Assets (ROA) and Liquidity (LIK) in response to changes in macroeconomic indicators, namely Inflation, Money Supply, Exchange Rate, and Gross Domestic Product, with the expectation of maintaining their stability in Muslim emerging market countries: Indonesia, Pakistan, Bangladesh, and Turkiye. Data were analyzed using a Panel ARDL model for the period 2005 to 2023. ROA Prediction results indicate that Indonesia remains strong in controlling ROA through maintaining the stability of Inflation, Money Supply, Exchange Rate, Gross Domestic Product, and Liquidity. Pakistan, Bangladesh, and Turkiye similarly demonstrate strong ROA control through Inflation, Money Supply, Gross Domestic Product, and Liquidity, except for the Exchange Rate. Liquidity Prediction results indicate that Indonesia remains strong in controlling Liquidity through maintaining the stability of Inflation, Money Supply, Exchange Rate, Gross Domestic Product, and ROA. Pakistan, Bangladesh, and Turkiye demonstrate equally strong Liquidity control through Inflation, Money Supply, Gross Domestic Product, and ROA, except for the Exchange Rate. Policy implications suggest that monetary authorities must address the impact of monetary stability and eliminate obstacles to achieving ROA and Liquidity of Islamic banks by maintaining interaction, synergy, and harmonization between monetary policies and macroeconomic variables. The study acknowledges that interpretations must be made with care and encourages further exploration of Islamic bank liquidity and profitability from a macroeconomic perspective, as a stimulus for more comprehensive analysis, noting that monetary policy is considerably responsive in controlling macroeconomic stability.

Downloads

Download data is not yet available.

References

Abidillah, A. F., Kasanah, R., & Rusgianto, S. (2022). Macroeconomic’s effect on Islamic and conventional banking profitability: Evidence from Indonesian dual-banking system. Jurnal Ekonomi & Keuangan Islam, 1-16. https://doi.org/10.20885/jeki.vol8.iss1.art1

Alim, W., Ali, A., & Metla, M. R. (2022). The effect of liquidity risk management on financial performance of commercial banks in Pakistan. MPRA Paper No. 112482. https://mpra.ub.uni-muenchen.de/112482/

Ayub, R., Alhabshi, S. M., & Othman, A. H. A. (2023). Managing liquidity and profitability: A study of the impact of Basel III regulations on Islamic banks in Pakistan. International Journal of Islamic Economics and Finance Research, 6(2 December), 69-83.

Bakhouche, A., El Ghak, T., & Alshiab, M. (2022). Does Islamicity matter for the stability of Islamic banks in dual banking systems?. Heliyon, 8(4). https://doi.org/10.1016/j.heliyon.2022.e09245

Bangladesh Bank. (2023). Banking Sector Performance Reports. https://www.bb.org.bd/en/index.php

Bank Indonesia. (2023). Bank Indonesia: Central bank of the Republic of Indonesia. https://www.bi.go.id/id/default.aspx

Central Bank of Türkiye. (2023). Central Bank of the Republic of Türkiye. https://www.tcmb.gov.tr

Chapra, M. U. (2000). Islamic monetary system (I. Abidin B., Trans.). Gema Insani.

Islamic Financial Services Board. (2023). Islamic Financial Services Board. https://www.ifsb.org/

ISRA. (2015). Islamic financial system: Principles & operations. PT RajaGrafindo Persada.

Jazmiyanti, N., Cahyono, E. F., & Kassim, S. H. (2024). Is There a Relationship Between Islamic Banking Liquidity and Inflation? Empirical Evidence from Indonesia. Ekonomi Islam Indonesia, 6(1).

Juhro, S., Syarifuddin, F., & Sakti, A. (2020). Islamic monetary economics: An introduction. PT RajaGrafindo Persada.

Karim, A. (2016). Islamic bank: Fiqh and financial analysis. PT RajaGrafindo Persada.

Khan, S., Khalid, W., Shah, N. H., Zahra, A., & Khan, M. B. (2023). Unveiling the dynamics of bank liquidity: Exploring the impact of bank specific and macroeconomic factors in Pakistani commercial banks. Pakistan Economic Review, 6(2), 101-125.

Lalon, R. M., Afroz, A., & Khan, T. (2023). Impact of bank liquidity and macroeconomic determinants on profitability of commercial banks in Bangladesh. International Journal of Economics and Financial Issues, 13(6), 177-186. https://doi.org/10.32479/ijefi.15228

Mankiw, G. (2003). Macroeconomics 5th edition, Worth Publishes, USA. Measurement Systems. Business Process Management Journal, 11(2), 109-122.

Rusiadi, R., Novalina, A., Effendi, B., & Hutasoit, A. N. (2022). ARDL PANEL MODEL OF INTERNATIONAL FINANCIAL SYSTEM AND MONETARY POLICY OF ASIA PASIIFIC ECONOMIC COOPERATION. In Proceeding of The International Conference on Economics and Business 1(1), 83-92. https://doi.org/10.55606/iceb.v1i2.185

Salh, S. A. (2025). Islamic Banking Industry of Turkey: Challenges and Opportunities. JL Pol'y & Globalization, 14, 9.

Sangjaya, B., Noviarita, H., & Hilal, S. (2022). Pengaruh makro ekonomi terhadap profitabilitas perbankan syariah di masa pandemi COVID-19. Derivatif: Jurnal Manajemen, 16(2), 323-331. https://doi.org/10.24127/jm.v16i2.1117

Shaown, J. I., & Sultana, Y. (2017). Islamic banking in Bangladesh: Challenges and prospects. AIUB Journal of Business and Economics, 14(1), 153-174.

Simorangkir, I., & Suseno. (2004). Exchange rate system and policy (Central Banking Series No. 12). Center for Central Banking Education and Studies, Bank Indonesia.

Soemitra, A. (2017). Bank & lembaga keuangan syariah. Prenada Media.

State Bank of Pakistan. (2023). Annual Reports. https://www.sbp.org.pk

Tomak, S. (2024). Factors Affecting Bank Profitability in Türkiye. International Journal of Business and Economic Studies, 6(4), 214-226. https://doi.org/10.54821/uiecd.1536978

Widarjono, A. (2018). Estimating profitability of Islamic banking in Indonesia. Jurnal Keuangan dan Perbankan, 22(3), 568-579. https://doi.org/10.26905/jkdp.v22i3.2197

World Bank. (2023). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators

Zahid, M. (2023). Islamic Banking in Pakistan: Legal Framework, Challenges and Growth Prospects. Journal of Asian Development Studies, 12(2), 17-28. https://doi.org/10.62345/jads.2023.12.2.2