Title: Determinants of Islamic banking deposit: empirical evidence from Indonesia

Authors: Muhamad Abduh

Addresses: IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia, 205 A, JalanDamansara, 50480, Kuala Lumpur, Malaysia

Abstract: This paper is aimed at examining factors that influence the level of deposit in Indonesia Islamic banking. Data were collected from December 2000 to January 2011 which includes total deposit, interest rate, Islamic deposit rate, inflation, income and financial crisis. Cointegration test and impulse response functions are employed to examine the long run and short run relationship among the variables. The results show that crisis has no significant impact on the volatility of Islamic banking deposits which suggests good connection between Islamic banks with the real economic activities. It is also revealed that customers have a strong believe towards the resilience of Islamic banks against financial crisis which is reflected by the absence of excessive money withdrawal during the crisis. Nonetheless, the result indicated that both interest rate and income constitute the main criteria for customers with regard to their deposit and withdrawal behaviour in Islamic banks.

Keywords: bank deposits; Islamic banking; financial crisis; Indonesia; Islamic finance; interest rate; deposit rate; inflation; income; volatility; withdrawal behaviour.

DOI: 10.1504/MEJM.2015.072462

Middle East Journal of Management, 2015 Vol.2 No.3, pp.240 - 251

Received: 30 Dec 2014
Accepted: 08 Jan 2015
Published online: 14 Oct 2015 *

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