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Jurnal Ekonomi Malaysia

49 (1) 2015 3 – 14

Market Concentration of Malaysia’s Islamic Banking Industry
Penumpuan Pasaran Industri Perbankan Islam di Malaysia

Pusat Pengajian ekonomi,
Fakulti ekonomi dan Pengurusan,
Universiti Kebangsaan Malaysia,
43600 Bangi, Selangor,
MALAYSIA.

nafisah@ukm.edu.my

Islamic Research and Training Institute,
Islamic Development Bank
P.O. Box 9201,
Jeddah 21413
KINGDOM OF SAUDI ARABIA

AgIsmail@isdb.org

Jabatan Perakaunan dan Kewangan,
Fakulti ekonomi dan Pengurusan
Universiti Putra Malaysia,
43400 Serdang, Selangor.
MALAYSIA

junaina2012@gmail.com

Jabatan ekonomi, Fakulti ekonomi dan Pengurusan,
Universiti Putra Malaysia,
43400 Serdang, Selangor
MALAYSIA

suhai_jalil@yahoo.com

Jabatan ekonomi, Fakulti ekonomi dan Pengurusan,
Universiti Putra Malaysia,
43400 Serdang, Selangor
MALAYSIA

lehnoor@gmail.com

Abstract

The aim of this paper is to evaluate the nature and changes of market concentration in the Malaysia’s Islamic banking due to the restructuring of Islamic banking industry within the liberalization wave in the banking market. A total of 17 Islamic banks operating over the period of 2000-2010 had been considered. The structural approach framework was used to evaluate the nature and changes of market concentration in the Islamic banking industry in Malaysia. Under this approach, various market concentration indexes has been calculated from year to year basis as proposed by the industrial organizational field. Findings herein supported the structure-conduct-performance (SCP) paradigm where different concentration ratios have decreased over the study’s period where this is reflected in the greater degree of competition in the Malaysia’s Islamic banking industry. This study found an evidence that structural changes in the Islamic banking market has changed the market structure of the respective market from moderately concentrated to low concentrated market; whereby supporting the existence of competitive environment in the Malaysian Islamic banking market. Present study contributed to new knowledge in banking market concentration particularly for Islamic banking industry in the emerging economies such as Malaysia. Many past studies studying this issue had extensively examined the conventional banking system, but only several studies were on Islamic banking market. Hence, this study may enrich the existing literature on this issue, particularly for the Islamic banking industry. Policy recommendation from the findings; first, Malaysian Islamic banking industry needs a contestable market environment as to enable them to achieve better profit and efficient operation. Second, concentration ratios from this study can be used to identify the optimal number of banking firms in the Islamic banking industry.

Keywords

competition; concentration measures; Islamic banking industry; market structure

Author’s Acknowledgement

The first author would like to thank Universiti Kebangsaan Malaysia for funding this research under Geran Galakan Penyelidikan, (Research Code: GGP-2014-003).

http://dx.doi.org/10.17576/JEM-2015-4901-01
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Mohammed, , ismail, , Muhammad, , Abdul Jalil, , & Mohd Noor, (2015). Market Concentration of Malaysia’s Islamic Banking Industry. Jurnal Ekonomi Malaysia, 49(1), 3–14. http://dx.doi.org/10.17576/JEM-2015-4901-01

@article{mohammed2015market,
  title={Market Concentration of Malaysia’s Islamic Banking Industry},
  author={Mohammed, Nafisah and ismail, abdul and Muhammad, Junaina and Abdul Jalil, Suhaila and Mohd Noor, Zaleha},
  journal={Jurnal Ekonomi Malaysia},
  volume={49},
  number={1},
  pages={3—14},
 

year={2015},
}

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