An Assessment of Islamic Banking in Bosnia and Herzegovina – a comparative analysis using the CAMELS approach

• Authors: Rafał Komorowski , Katarzyna Kubiszewska

Title variants

Ocena bankowości islamskiej w Bośni i Hercegowinie – analiza porównawcza z użyciem podejścia CAMELS

• Languages of publication: EN

Abstracts

EN

This paper examines the phenomenon of Islamic banking in Bosnia and Herzegovina. Although almost half of the Bosnian population is recognized as Islamic, there is only one bank purely based on Sharia operating in this country. The aim of the article is to conduct a comparative analysis of the financial standing of this bank and the banking sector in this country and region. The chosen method of analysis is CAMELS, which examines an institution by taking into consideration its most crucial elements: capital, assets, management, earnings, liquidity and sensitivity to risk.

PL

W artykule przeprowadzono analizę bankowości islamskiej w Bośni i Hercegowinie. Wprawdzie aż prawie połowa ludności bośniackiej jest pochodzenia islamskiego, to tylko jeden bank funkcjonujący w tym kraju oparł swoją działalność wyłącznie na Szariacie. Celem artykułu jest przeprowadzenie analizy porównawczej sytuacji finansowej tego banku i sektora bankowego zarówno w Bośni, jak i w regionie Bałkanów Zachodnich. Wybrano metodę analizy opartą o system CAMELS, który bada instytucję, biorąc pod uwagę jej najistotniejsze elementy: jakość kapitału, jakość aktywów, zarządzanie w odniesieniu do pracowników, zyskowność, płynność oraz wrażliwość na ryzyko.

Keywords

EN

Islamic Banking; CAMEL; Bosnia and Herzegovina

PL

bankowość islamska; Bośnia i Hercegowina; bankowość islamska; Bośnia i Hercegowina

• Publisher: Uniwersytet Łódzki. Wydawnictwo Uniwersytetu Łódzkiego
• Journal: Ekonomia Międzynarodowa
• Year: 2016
• Issue: 16
• Pages: 367-387

Dates

published

2016-12-30

Contributors

author

Rafał Komorowski

• Gdańsk University of Technology, Faculty of Management and Economics, Department of Economic Analysis and Finance

author

Katarzyna Kubiszewska

References

• ADIB (2015), ADIB, [Online] Available at: http://www.adib.ae [accessed on: 11/11/2015].
• Agić Z. (2012), Comparison of bank success in Bosnia And Herzegovina and countries in the region in 2012. Available at: http://dx.doi.org/10.7251/akt1321142s.
• Alfaro L., Chanda A., Kalemli-Ozcan S., Sayek S. (2003), FDI Spillovers, Financial Markets and Economic Development, IMF Working Paper, Working Paper No. 03/186: pp. 1–33. Available at: http://dx.doi.org/10.5089/9781451859485.001.
• Arestis, P. Panicos, D. (1997), Financial development and economic growth: Assessing the evidence. The Economic Journal 107 (442), pp. 783–799.
• Ariss R.T. (2010), Competitive conditions in Islamic and conventional banking: A global perspective, “Review of Financial Economics”, Vol. 19, pp. 101–108. Available at: http://dx.doi.org/10.1016/j.rfe.2010.03.002.
• Ashfaq A., Kashif-ur-Rehman, Iqbal Saif M. (2010), Islamic Banking Experience of Pakistan: Comparison between Islamic and Conventional Banks, “International Journal of Business and management”, Vol. 5, No. 2. Available at: http://dx.doi.org/10.5539/ijbm.v5n2p137.
• Awan A.G. (2009), Comparison of Islamic And Conventional Banking In Pakistan, Proceedings 2nd CBRC, Lahore, Pakistan.
• Babic-Hodovic V., Tesche J. (2006), FDI and the Banking Sector in B&H and the Region, International Management Development Association Proceedings, pp. 1–7.
• Babić-Hodović, V., Mehić, E., Agić, E. (2009), Influence of Quantitative and Qualitative Factors of Banking Sector Development on Economic Growth in South East European Countries, Interdisciplinary Management Research, Vol. 5, pp. 683–693.
• Barker D., Holdsworth D. (1993), The Causes of Bank Failures in the 1980s. Research Paper No. 9325.
• Barr R.S., Killgo K.A., Siems T.S., Zimmel S. (2002), Evaluating the productive efficiency and performance of US commercial banks, Managerial Finance, Vol. 28 Issue: 8, pp. 3–25
• Bauer P.W., Berger A.N. (1998), Ferrier G.D., Humphrey D.B. Consistency conditions for regulatory analysis of financial institutions: A comparison of frontier efficiency methods, “Journal of Economics and Business”, Vol. 50.
• BBI (2015a), Bosnia Bank International.About Us, Available at: http://www.bbi.ba/en/static/about-us [accessed on: 11/11/2015].
• BBI (2015b), Bosnia Bank International. Bank Founders, Available at: http://www.bbi.ba/en/static/bank-founders [accessed on: 11/11/2015].
• Beck T., Demirgüç-Kunt A., Merrouche O. (2013), Islamic vs. Conventional Banking: Business Model, Efficiency and Stability, “Journal of Banking & Finance”, Vol. 37 Issue 2, pp. 433–447. Available at: http://dx.doi.org/10.1016/j.jbankfin.2012.09.016.
• Beng S.C., Ming-Hua L. (2006), Islamic banking: Interest-free or interest-based?, Pacific-Basin Finance Journal 17, pp. 125–144. Available at: http://dx.doi.org/10.2139/ssrn.868567.
• Bley, J.; Kuehn, K. (2004), Conventional Versus Islamic Finance: Student Knowledge and Perception in the United Arab Emirates, “International Journal of Islamic Financial Services” 5 (4), pp. 17–30.
• Bourkhis K., Sami Nabi M. (2013), Islamic and conventional banks’ soundness during the 2007–2008 financial crisis, “Review of Financial Economics”, Vol. 22, Issue 2, pp. 68–77. Available at: http://dx.doi.org/10.1016/j.rfe.2013.01.001.
• Cargill, T.F. (1989), CAMEL Ratings and the CD Market,Journal of Financial Services Research 3 (4), pp. 347–358.
• Casu B., Girardone C., Molyneux P. (2006), Introduction to Banking, Prentice Hall, FT, England: Pearsons Education.
• CBBH Annual Report (2010), Central Bank of Bosnia and Herzegovina, Annual Report.
• Cevik S., Charap J. (2011), The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey, IMF Working Paper WP/11/156. Available at: http://dx.doi.org/10.5089/9781455293704.001.
• Chapra U.M. (1992), Islam and the Economic Challenge, Leicester, UK: The Islamic Foundation.
• Chong B.S., Liu M.H. (2009), Islamic banking: Interest-free or interest-based?, Pacific-Basin Finance Journal, No. 17.
• Cole R.A., Gunther J. (1998), Predicting Bank Failures, A Comparison of On-And Off-Site Monitoring Systems, “Journal of Financial Services Research”, 13(2).
• Christopoulos A., Mylonakis J., Diktapanidis P. (2011), Could Lehman Brothers’ Collapse Be Anticipated? An Examination Using CAMELS Rating System, “International Business Research”, Vol. 4, No. 2, pp. 11–19.
• Dubai Islamic Bank, 2015. Dubai Islamic Bank, [online] available at: http://dib.ae/ [accessed on: 11/11/2015].
• Efendić V. (2011), Efficiency of the Banking Sector Of Bosnia – Herzegovina with Special Reference to Relative Efficiency of the Existing Islamic Bank, 8th International Conference on Islamic Economics and Finance, Doha – Qatar, 18th–20th December 2011.
• Ergun U., Djedovic I. (2011), Islamic Banking with a Closer Look at Bosnia and Herzegovina: Knowledge, Perceptions and Decisive Factors for Choosing Islamic Banking, 8th International Conference on Islamic Economics and Finance, Doha – Qatar, 18th–20th December 2011.
• Göksu A., Becic A. (2012), Awareness of Islamic Banking in Bosnia and Herzegovina, International Research Journal of Finance and Economics, Issue 100, pp. 26–39.
• Hamid M.A., Azmi S.M. (2011), The Performance Of Banking During 2000–2009: Bank Islam Malaysia Berhad And Conventional Banking In Malaysia, “International Journal of Economics and Management Sciences”, Vol. 1, No. 1, pp. 09–19.
• Hasan M., Dridi J. (2010), The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study, IMF WP/10/2010. Available at: http://dx.doi.org/10.5089/9781455205318.001
• IFN Islamic Finance News (2014), IFN Country Analysis – Bosnia, [online] available at: www.islamicfinancenews.com/ifn-country-analysis-bosnia?page=1 [accessed on: 8/10/2014].
• Ika S.R., Norhayati A. (2011), A Comparative Study Of Financial Performance Of Islamic Banks And Conventional Banks In Indonesia, “International Journal of Business and Social Science”, Vol. 2, No. 15, pp. 199–2017.
• International Monetary Fund (2015), IMD eLibrary Data, [online] available at: http://elibrary-data.imf.org/ [accessed on: 11/11/2015].
• Islamic Development Bank (2015), Islamic Development Bank, [online] available at: http://www.isdb.org [accessed on: 11/11/2015].
• Iquibal Z. (1997) Islamic Financial Systems, Finance & Development, pp. 42–45, https://www.imf.org/external/pubs/ft/fandd/1997/06/pdf/iqbal.pdf.
• Iqbal M. (2001), Islamic And Conventional Banking In The Nineties: A Comparative Study, “Islamic Economic Studies”, Vol. 8, No. 2.
• Jaffar M., Manarvi I. (2011), Performance comparison of Islamic and Conventional banks in Pakistan, “Global Journal of Management And Business Research”, Vol. 11, Issue 1.
• Johnes J., Izzeldin M., Pappas V. (2014), A comparison of performance of Islamic and conventional banks 2004–2009, “Journal of Economic Behavior & Organization” 103, pp. S93–S107. Available at:http://dx.doi.org/10.2139/ssrn.2071615.
• Kabir A., Dey S. (2012) Performance Analysis through CAMEL Rating: A Comparative Study of Selected Private Commercial Banks in Bangladesh, “Journal of Politics & Governance”, Vol. 1, No. 2/3.
• Kearney A.T., Korea LLC (2012), The Future of Islamic Banking, Seoul: A.T. Kearney, Inc.
• Khan M., Mirakhor A., (1989), The Financial System and Monetary Policy in an Islamic Economy, Journal of King Abdulaziz University: Islamic Economics, Vol. 1, pp. 39–57. Available at: http://dx.doi.org/10.4197/islec.1-1.2.
• Klepić D. (2009), Islamic Banking – Bosnia and Herzegovina, Trade and Investment Officer, British Embassy Sarajevo.
• Komorowski R., Kubiszewska K., (2014), The UK’s banking system as financial hub for Islamic banking, International Journal of Behavioural Accounting and Finance 4(3), pp. 245–258.
• Lederer G., Contemporary Islam In East Europe, NATO Research Fellowships Programme, 1997–1999 (1999), Camberley: Conflict Studies Research Centre available at: http://www.nato.int/acad/fellow/97-99/lederer.pdf.
• Manshor Amat Taap Siong Choy Chong Mukesh Kumar Tat Kee Fong (2011), Measuring service quality of conventional and Islamic banks: a comparative analysis, “International Journal of Quality & Reliability Management”, Vol. 28, Issue 8, pp. 822–840. Available at: http://dx.doi.org/10.1108/02656711111162505 .
• Mills P.S., Presley J.R. (1999), Islamic finance: Theory and practice, Macmillan, London.
• Mohamad S., Taufiq H., Bader M.K.I. (2014), Efficiency of Conventional versus Islamic Banks: International Evidence using the Stochastic Frontier Approach (SFA), Journal of Islamic Economics, Banking and Finance, pp. 107–130.
• Moin M.S. (2008), Performance of Islamic Banking and Conventional Banking in Pakistan: A Comparative Study, University of Skovde, http://his.diva-portal.org/smash/get/diva2:113713/FULLTEXT01.
• Nuhanović A. (2014), Specific Risk Management Islamic Banking With Special Reference To Bosnia And Herzegovina, “Journal of Applied Economics and Business”, Vol. 2, Issue 2, pp. 39–50.
• Observatory of Economic Complexity (2015), Observatory of Economic Complexity, [online] available at: http://atlas.media.mit.edu/en/ [accessed on: 8/11/2015].
• Olson D., Taisier A. Zoubi (2008), Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region, The International Journal of Accounting, Vol. 43 Issue 1, pp. 45–65. Available at: http://dx.doi.org/10.1016/j.intacc.2008.01.003.
• Safiullah Md. (2010), Superiority of Conventional Banks & Islamic Banks of Bangladesh: A Comparative Study, “International Journal of Economics and Finance”, Vol. 2, No. 3. Available at: http://dx.doi.org/10.5539/ijef.v2n3p199.
• Sarker A. (2005),CAMEL Rating System in the Context of Islamic Banking: A Proposed ‘S’ for Shariah Framework, “Journal of Islamic Economics and Finance”, Vol. 1, No.1, 2005.
• Shamsher M., Taufiq H., Bader M.K. (2007), Efficiency of Conventional versus Islamic Banks: International Evidence using the Stochastic Frontier Approach (SFA), “Journal of Islamic Economics, Banking and Finance”.
• Siti R.I., Norhayati A. (2011), A Comparative Study Of Financial Performance Of Islamic Banks And Conventional Banks In Indonesia, “International Journal of Business and Social Science”, Vol. 2, No. 15.
• Sudin H., Wan Nursofiza Wan A. (2008), Determinants of Islamic and conventional deposits in the Malaysian banking system, Managerial Finance, Vol. 34, Issue 9 pp. 618 – 643. Available at: http://dx.doi.org/10.1108/03074350810890976.
• Thomson Reuters Zawya (2015), Thomson Reuters Zawya, [online] Available at: https://www.zawya.com/islamic-finance/ [accessed on: 8/11/2015].
• Torbat, A. E. (2005). Impacts of the US trade and financial sanctions on Iran, The World Economy 28 (3), pp. 407–434.
• Trading Economics (2015), Trading Economics, [online] Available at: http://www.tradingeconomics.com/ [accessed on: 8 11 2015].
• UK Trade & Investment (2014), UK Excellence in Islamic Finance, London: Business is Great Britain.
• Usman A., Khan M.K. (2012),Evaluating the Financial Performance of Islamic and Conventional Banks of Pakistan: A Comparative Analysis, International Journal of Business and Social Science, Vol. 3, No. 7.
• Warde, I. (2000), Islamic finance in the global economy, Edinburgh: University Press.
• The World Bank (2015), The World Date Bank’s Databank, [online] Available at: http://data.worldbank.org/country/bosnia-and-herzegovina [accessed on: 8/11/2015].
• Zulkifli, H. (2010), Islamic banking and finance in Bosnia and Herzegovina, [online] Available at: https://zulkiflihasan.wordpress.com/2010/09/29/islamicbanking-and-finance-in-bosnia-and-herzegovina/ [accessed on: 8/11/2015].

Identifiers

DOI

10.18778/2082-4440.16.05