Determinant of financing growth : Evidence from Malaysian Islamic Banks

The Islamic banking system in Malaysia has experienced substantial growth over the past three decades, establishing itself as a key and competitive player in the country's financial services sector in alignment with Malaysia's overall development. Yet, Malaysia’s Islamic banks have a pattern of inconsistent financing growth, with significant fluctuations over the years. This issue has received considerable debate among scholars. Therefore, this study examine the determinant of 16 Malaysian Islamic banks financing growth between 2015 and 2022. The obtained data was analyzed using STATA software. Among the factors discussed in this study are based on internal factors consisting of bank size (SIZE), non-performing financing (NPF), and capital ratio (CAP). For the external factors consist of overnight policy rate (OPR), gross domestic product rate, and also inflation (INF). Analytical techniques such as Descriptive Statistics, Correlation Matrix, Diagnostic Test, Panel Data Test and Multiple Regression Analysis has been employed in this study. The results of the study found that the external factors SIZE and CAP have a significant effect in influencing the financing growth of Islamic banks in Malaysia. While NPF, OPR, GDP and INF do not have a significant effect on financing growth. This study will contribute a better understanding of the factors influencing the growth of funding in Malaysian Islamic banks, and the study will provides empirical information on the factors that influence this growth