Multi-level analysis of success factors in islamic banking with a structural-interpretive and recursive approach

Subject Areas : Islamic finance

Jalal Yousefi ¹ ( Department of Finance and Accounting, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran. )
Parviz Saeedi ² ( Department of Finance and Accounting, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran. )
Maryam Bokharaeian Khorasani ³ ( Department of Finance, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran. )
Jamadoordi Gorganli Davaji ⁴ ( Department of Finance, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran. )

Received: 2023-08-16 Accepted : 2024-06-04 Published : 2024-06-04

Keywords: Islamic banking, Recursive model, Structural-interpretive model,

Abstract :

Purpose: The main objective of this study is to present a multi-level analysis of success factors in Islamic banking using a structural-interpretive and recursive approach. This research is considered an applied study in terms of its purpose. Methodology: This study employs a mixed-method research approach. Data collection tools include expert questionnaires, with the statistical population comprising banking domain experts. Purposive sampling was used to select sample individuals, and Excel software was utilized for data analysis. Subsequently, the Islamic banking model was categorized using structural-interpretive modeling. In this study, factors were classified into six levels. Finally, the structural-interpretive model was tested in the form of a quantitative recursive model. Findings: Based on the research findings, the relationships between variables showed positive path coefficients. The t-statistics of the relationships were reported to be statistically significant at the 95% confidence level. Examination of the path coefficients of the interrelationships between variables at horizontal levels indicated that the interrelationships were reported in a matrix form and were statistically significant. To test the equilibrium hypothesis in recursive models, the stability index results were presented. The stability index value was reported to be 0.412, which is less than 1. Therefore, the equilibrium hypothesis is confirmed. The model's chi-square ratio to degrees of freedom is equal to 2.373, which is appropriate. The fit indices are all above 90% and suitable. The RMSEA index is equal to 0.034, which is appropriate. The parsimonious indices PRATIO, PCFI, and PNFI are also suitable. In conclusion, it can be stated that the model achieved a good fit. Originality/Value: The results of this research can be effective in reviewing and modifying the guidelines and frameworks of conventional (interest-based) banking. Additionally, it can improve the quality of implementing Islamic banking methods and techniques, resulting in more reliable information, and ultimately better addressing the perspectives of stakeholders and users.

References:

Abdollahi Poor, M. S., Botshekan, M. H., & Sargolzaei, M. (2020). Assessment of the Effect of CAMELS Indicators on Risk-Adjusted Return on Capital (RAROC) in the Banks listed in Iran's Stock Market. Financial Management Perspective, 10(32), 57-80. [In Persian]

Aghaie, S., Aghaie, G., & Parsafar, A. (2023). Survey of Legal, Supervisory and Policy Requirements for Implementing Compliance Risk Management in Islamic Banking. Quarterly Studies in Banking Management and Islamic Banking, 8(19), 81-104. [In Persian]

Alzghoul, M. O. (2015). Performance analysis of Conventional banks Vs. Islamic banks in Jordan (Doctoral dissertation, Eastern Mediterranean University (EMU)-Doğu Akdeniz Üniversitesi (DAÜ)).

Antonio, M. S., Sanrego, Y. D., & Taufiq, M. (2012). An analysis of Islamic banking performance: Maqashid index implementation in Indonesia and Jordania. Journal of Islamic Finance, 1(8), 12–29.

Asadollahi, S. Y., Matin, S., Yosofinejad, M. (2023). The effect of dividend policy on the financial stability of Iranian banks. Advances in Finance and Investment, 4(2), 189-212. [In Persian]

Azadeh, S., Aslizadeh, A., & Khakzar Afruei M. (2022). Dynamic analysis of the performance of the iranian banking system in uncertainty condition. Advances in Finance and Investment, 8(3), 31-60. [In Persian]

Bashatweh, A. D., & Ahmed, E. Y. (2020). Financial Performance Evaluation of the commercial banks in Jordan: Based on the CAMELS Framework. International Journal of Advanced Science and Technology, 29(5), 985-994.

Bastan, M., Bagheri Mazrae, M., & Ahmadvand, A. (2016). Dynamics of banking soundness based on CAMELS rating system. In The 34th International Conference of the System Dynamics Society.

Belkhir, M., Grira, J., Hassan, M. K., & Soumaré, I. (2019). Islamic banks and political risk: International evidence. The Quarterly Review of Economics and Finance, 74, 39–55.

Fadoua, J., & Brahim, D. (2020). Financial stability of Islamic and conventional banks of the MENA region: post and pre-crisis of CAMELS framework. International Journal of Islamic Banking and Finance Research, 4(2), 38-48.

Hawaldar, I. T., Rahiman, H. U., Rajesha, T. M., & Kumar, N. K. R. (2017). A comparison of financial performance of Islamic and conventional banks in Bahrain. American Scientific Research Journal for Engineering, Technology, and Sciences (ASRJETS), 33(1), 100-110.