In increase from the $350 billion they held

In the past decade increasing attention
has been given to Islamic banking system, one major reason of this growing
popularity of Islamic banking system was the resilience of Islamic banking as
witnessed during global financial crises (GFC). Despite the financial turmoil
in 2008, that crippled most of the Western institutions, Islamic banks
continued to grow in size and distinction. Asian Banker Research states that
the world?s 100 largest wholly Islamic banks, ranked by assets, held more than
$580 billion in assets in 2008, a 66% increase from the $350 billion they held
in the previous year, which clearly depicts that Islamic banks came out of this
crises quite unscathed as opposed to its conventional counterparts.

            The Global Islamic Finance Report (2014) 1 estimated the
size of the global Islamic financial services industry at $1.813 trillion at
the end of 2013 with an estimated annual growth of more than 15% per annum.
Presently, Islamic banking growth rate is 50% faster than overall banking
sector in several core markets and Islamic banks are now operating in more than
83 countries around the world which includes Muslim countries i.e Bahrain, UAE,
Saudi Arabia, Malaysia, Brunei and Pakistan etc. and non-Muslim countries like
USA, UK, Canada, Switzerland, Australia, South Africa and others.

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 Existing literature lacks the comprehensive
research on examining the financing portfolio of whole Islamic banking industry. This study will bridge this gap
by discussing different macro-level factors that influence the lending
decisions of Islamic Banks, so that it contributes to the researchers? and
policy makers? notion.

 It is evident from the
literature that numerous studies have focused on determinants of conventional
bank lending while neglecting determinants of Islamic banks financing. There
are macroeconomic factors that influence the Islamic bank credits. Thus, in
this study we include macroeconomic factors- conventional banks? interest rate,
GDP growth rate, inflation and exchange rate, in order to study the impact of
these variables on Islamic bank lending in 48 countries having established
Islamic banking setup for the period from 2004 to 2013.WU1 

 

Islamic financial institution in Indonesia first
emerged in early 1980s pioneered by Baitut Tamwil-Salman in Bandung and Koperasi
Ridho Gusti in Jakarta. Based on the urgency of the society that need
Islamic banking products and services, the first Islamic bank was established
in 1992 (Bank Muamalat Indonesia) and the government introduced dual banking
system. Following the establishment of Islamic bank, Islamic insurance or
Takaful was established in 1994. The government commitment to develop Islamic
financial system started to take shape since 1998, where Islamic banking was
given the opportunity to expand and develop widely by allowing conventional
banks to open Islamic branch, separate from the parent bank, to offer full
range of Islamic products and services.

Bank Indonesia, subsequently, laid out the blue print
of Islamic banking development which comprises of four stages. The first stage
(2002-2004) is to set up foundation for development, the second stage
(2005-2009) is to strengthen industry structure, the third step (2010-2012) is
to meet international standard of service and quality, and the fourth stage
(2013-2015) is toward the integration of Islamic financial institutions. In
current second stage, bank Indonesia has set up the objective to reach 5%
market share by the end of 2008. To accommodate the new market share objective,
in early 2006, Bank Indonesia launched Office Channeling allowing Islamic banks
to open counter of Islamic services in its parent conventional bank offices.

With these strategies, Islamic banking in Indonesia has developed
to be one of the most Shariah compliance systems in a country with dual
financial system. The development of Islamic banking has a great impact in the
development of other sectors based on Shariah principles, such
as, Takaful, Islamic equity market, Islamic bond, Islamic unit trust, Islamic
education, Islamic voluntary sectors, and legal frameworks.

 WU1But
this is not what you seem to be studying…