Microeconomic factors affecting mudharabah deposits at Islamic banks in Malaysia / Muhammad Najib Hassan

This study attempts to determine the factors affecting determinants of Islamic savings in Islamic banking. The objective of this research is to examine the Islamic saving determinants in Malaysia and the factors affecting saving in the Islamic banks in Malaysia. The hypothesis that were applied in this research are if people prefer to making saving in Islamic banking, what are the determinants of saving and do the variables give impact on the savings rate. Next, the variables that were used in this research are Mudharabah deposits/savings for dependent variables, meanwhile the independent variables are money supply, base lending rate, conventional deposit rate, consumer price index and industrial production index growth. The findings underline the significant role of the independent variables in deciding the amount of deposits in Islamic banks. In fact higher Islamic deposits are associated substantially with higher return rates and lower interest rates. In addition, the study shows that there is a displacement of commercial risk between Islamic and conventional banks, so that the depositors of Islamic banks move their funds to conventional banks when the rate of return offered by Islamic banks is considerably lower than their counterparty's interest rate. The results of this analysis have significant consequences for the activities of risk assessment at Islamic banks in Malaysia.