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The Determinants of Credit Risk: An Evidence from ASEAN and GCC Islamic Banks

Department of Finance, Faculty of Business and Management, Universiti Teknologi MARA, Segamat 85000, Johor, Malaysia
Department of Economics, Finance & Marketing, La Trobe Business School, La Trobe University, Melbourne, VIC 3086, Australia
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2020, 13(5), 89;
Received: 24 December 2019 / Revised: 27 April 2020 / Accepted: 29 April 2020 / Published: 6 May 2020
(This article belongs to the Special Issue Islamic Finance)
In less than a decade, the Islamic Banking (IB) industry has become an essential part of the global financial system. During the last ten years, the IB industry has witnessed changes in economic conditions and proved to be resilient during the periods of financial crisis. This paper aims to examine the important issues related to credit risk in selected Islamic banks in nine countries from Association of South East Asian Nations (ASEAN) and Gulf Cooperation Council (GCC) regions. It employs the generalized least squares panel data regression, to estimate the ratio of non-performance financing to total financing as dependent variables and bank specific variables (BSV) to determine the credit risk. It uses 12 years of unbalanced panel data from 40 different Islamic banks. The overall findings show that financing quality has a significant positive effect on credit risk. It is observed that the larger IBs owned more assets with lower credit risk compared to smaller banks. The bank’s age is also an important factor influencing the credit risk level. Moreover, regulatory capital significantly reduces the credit risk exposure adherence to the minimum regulatory capital requirements which help IBs to manage their credit risk exposures. It was also observed that IBs were not affected by the global financial crisis due to less credit risk compared to the conventional banks. View Full-Text
Keywords: credit risk; Islamic Bank; financial crisis credit risk; Islamic Bank; financial crisis
MDPI and ACS Style

Misman, F.N.; Bhatti, M.I. The Determinants of Credit Risk: An Evidence from ASEAN and GCC Islamic Banks. J. Risk Financial Manag. 2020, 13, 89.

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