Factors Determine Islamic Banking Performance in Malaysia: a multiple Regression Approach

Key Words: Islamic Banking, Regression, Performance, Results, Variables. 

Nowadays, Islamic banks have increased their popularity among customers. Bank 

Negara Malaysia (BNM) indicates that total financing from Islamic banks is increasing 

significantly every year. In 2006, total financing to the market from Islamic banks was 

amounted to RM 78.5 billion while total deposit in Islamic banks was RM 99 billion. 

Both figures soared more than 100% in 2010. In 2010, the total financing amount was 

RM 162 billion and total deposit amount was RM 217 billion.  Islamic banks held 12% 

market share for deposit in 2006. The market share increased to 19% in 2010.  

For the financing market share, Islamic banks held 13% of overall share in 2006 

and then in 2010, the percentage has increased to 18.4%. There was no difference in 

terms of the number of the deposit and financing because of asset and liability 

                                                           

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Author: Muhamad Abduh, working as Assistant Professor at IIUM Institute of Islamic 

Banking and  Finance, Malaysia. 

Aizat Alias, IIUM Institute of Islamic Banking and Finance, Malaysia 

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Journal of Islamic Banking and Finance Jan.- March. 2014 

45

 

 

management. Total banks’ assets in 2004 were worth RM 761.2 billion. The figure 

increased to RM 1.48 trillion in 2010. Domestic banks held substantial number of market 

share which amounted to 75.7% (RM576.5 billion in 2004. The market share for 

domestic banks slightly increased in 2010 where they held 77.5% (RM 1.15 trillion) of 

the share. 

Furthermore, Islamic banks had RM131 billion assets in total in 2006. The figure 

increased more than 150% in 2010 where the total assets were RM 334.9 billion. Market 

share for Islamic banks in total assets stood at 12.8% in 2006 and increased to 22.5% in 

2010. From the figures, it shows that Islamic banks have increased their performance 

every year and become more popular among the customers than they were before. 

Departed from these facts, the objective of this study is to examine factors determine 

Islamic banking performance in Malaysia by comparing between foreign Islamic banks 

and local Islamic banks, for the period of 2006 to 2010.