last few years have seen a remarkable growth in the Islamic banking industry
due to the religious principles and the wealth held by Muslims. In particular,
the annual growth rate of its assets is significantly higher than conventional
counterparts. Additionally, it is worth noting that the Islamic banking system
is based on ethical and religious principles which differs from the conventional banking system, namely the
prohibition of interest “Riba”, “Gharar” excessive uncertainty and gambling
“Maiser”, the profit loss sharing, the necessity of a tangible asset and the
prohibition of investing money in some activities which are harmful to society.
These principles encourage people to make efforts to earn money, share the
profits, bear the potential losses, give great importance to the growth of the
economy and exclude any form of cheating, bribery, procrastination, speculation
and exploitation. The practical application of these principles permits the
emergence of some financial products actually used by the Islamic banking which
can satisfy the preferences and the financial needs of investors and clients.
Risks in the bank are considered as a probability of
loss caused by independent or dependent vulnerabilities, which develop
gradually and might even reach the crisis. Jerome P.M.P Thijs (2011) defines
the banking risk as an “uncertain future
events that could influence the achievement of the bank’s objectives, including
strategic, operational, financial and compliance objectives.” Theoretically
speaking, the nature of risks in Islamic banking differs from the conventional
one due to the profit loss sharing principle and the necessity of a tangible
asset. Therefore, the Islamic banks are facing not only the common risks to the
entire banking sector, but also the specific risks inherent to its character. Particularly,
the shortage of liquidity may quickly turn into solvency problems nearly in all
banks. Liquidity Risk appears from the nature of banking activities which is
taking deposits ordinary on shorter maturity and transforms this last for
providing financing on medium and longer maturity, therefore banks may be
unable to repay short-term debts whereas their assets are on long term
(mismatch maturity). Also the lack of confidence between banks and bank with
central bank may cause various problems like the difficulty of access to intra
bank market or central bank funding. Moreover, liquidity risk appears from the
internal factors like instability of funding sources.
Several researchers have focused on the specific
causes of liquidity in Islamic banks, Salman Sayed Ali (2004), Mohamed Helmy
(2013) and Sabri Mohamed (2014) are some examples. Hence, it is essential for
banks to manage their liquidity for reducing the potential loss of various
problems like bankruptcies and huge economic losses.
The main objective of this article is to investigate
the specific and macroeconomic factors that influence liquidity in Islamic and
conventional banks. Also, it aims to analyze the evolution of the liquidity
position within the Islamic banking compared to the conventional one.
This paper is organized as follows: section 1 presents
the literature review concerning the comparative study in the liquidity
situation and the liquidity determinants of Islamic and conventional banks.
Section 2 presents the data, the research methodology and the hypotheses.
Section 3 analyses the research findings of the liquidity risk determinants. Finally,
a conclusion is drawn to provide principal results and to make suggestions for