Determinants of Islamic Banking Deposit: Empirical Evidence from Indonesia

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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: deposit; Islamic banking; financial crisis; Indonesia.

Citation:

Abduh, M. (2015). Determinants of Islamic Banking Deposit: Empirical Evidence from Indonesia. Middle East Journal of Management, Vol. 2 No. 3, pp. 240-251.

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