Based on conventional law, seek to Based on Islamic law (Sharia), seek to Model maximize profits subject to maximize profits subject to Profit-Loss differential interest rates. Sharing (PLS) System. Bearing risks when involved in any Shifting risk when involved or transaction. expected. Guarantee only current account Risk a Guarantee all its deposits. deposits, with other deposits invested Focus on the credit-worthiness of via multilayer Mudarabah system as part clients. of the PLS system. Focus on the viability of projects. Interest on borrowings made Based on Sharia-compliant rules and Money and from any market. regulations for any transaction. liquidity Sale of debts. Large restrictions on the sale of debts. Source: Ahmad and Hassan (2007). a For more details, Van Greuning & Iqbal (2008). Fig. 1a: -scores, 2005:q1–2011:q4 (Natural logarithms, LZ) Fig. 1b: Total assets (Bank size), 2005:q1–2011:q4 (Natural logarithms, LA) Credit-assets 2005:q1–2011:q4 Fig. 1c:
Model Based on conventional law, seek to maximize profits subject to differential interest rates. Based on Islamic law (Sharia), seek to maximize profits subject to Profit-Loss Sharing (PLS) System. Risk a Shifting risk when involved or expected. Guarantee all its deposits. Focus on the credit-worthiness of clients. Bearing risks when involved in any transaction. Guarantee only current account deposits, with other deposits invested via multilayer Mudarabah system as part of the PLS system. Focus on the viability of projects. Money and liquidity Interest on borrowings made from any market. Sale of debts. Based on Sharia-compliant rules and regulations for any transaction. Large restrictions on the sale of debts. Source: Ahmad and Hassan (2007). a For more details, Van Greuning & Iqbal (2008). Fig. 1a: -scores, 2005:q1–2011:q4 (Natural logarithms, LZ) Fig. 1b: Total assets (Bank size), 2005:q1–2011:q4 (Natural logarithms, LA) Fig. 1c: Credit-assets 2005:q1–2011:q4
Paper_251_Time_Series_Analysis_of_fin_stability.docx