In previous chapter, data collection, sample typesand sizes, settings and models are being done.
While this chapter will carrieson with the interpretation and analysis on the results generated through thetest that have been mention on previous chapter. This chapter will start withthe normality test followed by descriptive and trend analysis. The overallsignificance of the model and the individual significance of the independentvariables are to be discussed in detail in the correlation and regressionanalysis in order to figure out the effect of the independent variable towardsthe dependent variable in immediate effect and in the short-run.The above table shows the Shapiro-Wilktests that are often used to determine whether that data is normallydistributed or not.
The Shapiro-Wilk was used because this study has a samplethat is less than 50. The table shows that the TD and TF have concluded to thevalue of significance that is less than 0.05. Suggesting that both TD and TFdata is not normally distributed. However, the test result on GDP suggest thatGDP is normally distributed as (sig. 0.890>0.05).
The table above summarizes allthe dependent variable (GDP) and independent variables (TF and TD) descriptivestatistics for Islamic Banks. On average the mean value of GDP for 10 years is935366134670 with the minimum of 664914799200 and maximum of 1226096454800. Thestandard deviation for GDP value is 192908681576.7. The mean of TF is lesserthan TD where it derives the value of 1265752772.
3 and 1367793101.3respectively. The maximum value of total deposit is 1861492879 which are lesserthan TF at 2056815201.
The result also shows that the minimum value of TF ishigher than TF with the value resulted at 910512754 and 142864599. However, theTF standard deviation is higher compare to total deposit standard deviationwhere the difference is quite far apart. This indicates that TF is morefluctuated if compared to TD. Trend analysisevaluates an organization’s financial information over a period of time.Periods may be measured in months, quarters, or years, depending on thecircumstances.
The goal is to calculate and analyze the amount change andpercent change from one period to the next. Beginning inthe year 2007, we see the total financing for fully fledge Islamic Banks,Foreign Islamic Banks, and banks that offered Islamic Banking windows startedto growing rapidly, capping the total amount of RM140610375 in that year alone.The bank that contributed the largest amount of financing is the Asian FinanceBank with the accumulate amount of RM90789188. The bank also continue to injecttheir total financing with consistently increase across the period.
StandardChartered Saadiq contributes the lowest amount oftotal financing during this period, with an accumulate amount of RM37,886,656.A small decline of total financing can be seen in 2015 from RM2,056,815,201 toRM1,839,695,581. As suggested by (Global Islamic Getaway, 2017), the Islamicbanks assets is on the decline starting 2014, thus explaining the totalfinancing of Islamic Banks is in a downtrend during that period.
In 2016however, the total financing recovered, placing them in a RM1, 882,715,962valuations.The graph above shows the trend or themovement of the total deposits acquired from all of the Islamic banks inMalaysia which include the full-fledge Islamic banks, foreign Islamic banks andIslamic bank windows and are within the range of 10 years from the year 2007 to2016. The trend shows a stable increase of the deposits especially after theyear of 2008 which was the year that the global financial crisis had occurred.This might be because of the increase in Islamic banks customers dueto the stable characteristics of Islamic banking system which prohibits the useof Riba’ (interest) in it system.
Thegraph also shows a sharp increase in the total deposits in the year 2012 withthe total of RM 1,840,537,988, 000 while the previous year, 2011 has stated thetotal of RM 1,305,424,432,000. This means that it has increase by 29.07% andthe largest contribution was from the Asian Finance Bank with the increase inRM 492,812,257,000 during the year 2012. The trend however shows a downwardmovement from the year 2013 till the 2016.The GDP valueof Malaysia represents 0.48 percent of the world economy. In 2009, the GrossDomestic Product (GDP) for Malaysia falls from previous year performance,standing at RM712,575,159,800 mainly due to the Asian Financial Crisishappening in the year 2008.
After the crisis, the growth of the Malaysianeconomy improves throughout the period, eventually breaking an all time in 2010valuing at RM820,517,197,500 in that year. Further uptrend can be seen in 2014 with the implementation of Goods andServices Tax (GST) which inject funds towards the economy. GDP in Malaysia wasworth RM1156,718,460,300 in 2015.
Malaysia’s 6.2 per cent growth in GrossDomestic Product (GDP) in the third quarter of 2017 makes it among the fastestgrowing economies in Asia, a minister said today. The (World Bank, 2017) recentprediction suggest that Malaysia’s economic will project itself to 5.2% by theend of 2017.
After theanalysis for both of the independent variable has been done, the comparisongraph between those two were created to see the differences in the movement ofboth of the graphs. The trends of both of the graphs shows a steady increasefrom the year 2007 to 2011. The graph also shows a sharp increase during theyear 2012 which was the same for both of the variables.
When the total depositsshows a downward trend in the year 2013, the total financing however has showna further increase until it reach the year 20014before going back downwards afterward. It then increase back in the year 2015and this shows that the total financing of the Islamic banking system inMalaysia are quite volatile in the past few years. This might be affected bythe total deposits collected by the banks since the volatility started when thetotal deposits shows a sharp decrease after the year 2012 to 2016.AugmentedDickey-Fuller was deployed for the reliability test to see whether the serieshas stationary properties or not.The Schwarz Info Criterion was used todetermine the optimal lag length for this test.
From the table, the result forthe ADF test shows that TD and TF is non-stationary as the probability value is>0.05 at both level and first difference, suggesting that both independentvariables to have a unit root. However, GDP shows to be non-stationary at levelwith intercept test equation, with the p-value deriving at 0.9833.Tomeasure the degree of association between variables, the Spearman RankCorrelation was deployed for non-parametric measuresThe result on the immediateeffect shows that both of the IVs namely the total deposit and the totalfinancing are not significant. However, the correlation coefficient shows thatthe total deposit has a weak positive relationship while the total financinghas a strong positive relationship with the GDP.
The table shows a weakcorrelation with TD which is less than 0.05 as shown by the p-value of 0.873.The spearman correlation also shows that GDP has a weak correlation with totalfinancing as indicated by the p-value of 0.
188. This concludes that GDP has aweak correlation in an immediate effect with both total deposit and totalfinancing. This insignificant result wouldn’t allow this study to continue todo the Multiple Linear Regression on immediate effect.On the other hand, Spearmancorrelation shows a different result when running the test on the short run as bothIVs shows to have a significant result. Moreover, the correlation coefficientshows a very strong positive relationship between both the total deposits andtotal financing with the GDP. The spearman correlation coefficient value at1.
000 indicates it has a strong positive correlation for total deposit and GDP(p-value 0.000). The result also shows that GDP has a strong positivecorrelation with total financing where p-value derives 0.000. Based on theregression test, the result for total deposit and total financing regressionwith the GDP shows that both of them have explanatory power in the short-run.
MLR is anextension of simple linear regression. It is used to predict the value of avariable based on the value of two or more other variablesBased on the regressionobservation on the short run, the result for TD and TF regression on GDP in theshort run shows that it has explanatory power. The explanatory power of theadjusted R-square is at the satisfactory level of 0.980. Which means it indicatesthat 98% in the dependent variable and independent variable while acknowledgingthe degree of freedom. In fact, theregression is significant when the value falls lesser than 0.05 levels as itconcludes on 0.020b.
In order to see whether the overall regression model is agood fit for the data, we have to observe the F-ratio in the ANOVA table. Thetable shows that the independent variables statistically significant predictthe dependent variable where F(2,2) = 48.885. This finding supports the resultsfrom the Spearman Correlation that have been tested earlier. The test indicatesthat the H3 and H4 null hypothesis can be rejected.The study had examined theeffects of the total financing and the total deposits of Islamic banks inMalaysia toward the economic growth of the country. Both of the independentvariables have been studied by vary them into two periods, which are immediate,1-year period and short-term, 5-year period. The finding of the studies hasshown that the total financing and the total deposits have played moresignificant role in the short-term rather than the immediate effect.
Both ofthe independent variables obtained the value of the correlation coefficient of1.000 which indicates a very strong positive correlation with the economicgrowth.There might be a few factorswhich can influence these results. Some of them include the implementation ofthe Goods and Service Tax (GST) effective in the year 2015. Since GST is anoverall implementation towards the people within the country without takinginto account the household income of the consumers, it can slowly but surelyaffect the banking industries by reducing the purchasing power of the consumerin Malaysia. When the GST was implemented, the cost of living has beendrastically increased for the people in order to improve the economicwell-being of the country.
When this happened, people with need to pay more ontheir expenses thus they might think twice before buying something which areexpensive. To relate it with the effect towards the banking industries, peoplewill tend to spend less thus will less likely to borrow from banks. Plus,people will also have less money to save in the banks since they have to paymore for their everyday expenses thus affecting the total deposits of thebanks. The immediate effect however doesnot obtain any significant relationship between the independent and thedependent variables. This might be because of the effect of the total financingand the total deposits do not contribute toward the economy in a 1-year periodor it might be because of the lending and saving activities managed by theIslamic banks have little affects in the immediate term rather than the shortterm.Some suggestions that can be madein order for the Islamic banks to improve their businesses are by investingmore in government link project provided by the government to help them getbetter return rather than depending mainly on the total deposits such as whenthe government spends more, the suppliers come to borrow from the bank ordeposit more money due to increased money supply thus the economy thrives(Walid, 2015).
Furthermore, the government can also include the Islamic banksin their initiatives to improve the economy. For example, the government can helpthe SMEs or start-up entrepreneurs by providing them with banking loans whichcomes from the Islamic banks in Malaysia. In conclusion, it is found that the dependentvariable is normally distributed and both independent variables are not normallydistributed. For the reliability test, the ADF test suggests that that theindependent variable is non-stationary and the dependent variable is stationaryand does not have a unit root. Furthermore, the hypothesis testing shows thatin there is no significance in the immediate effect.
This concludes that H1and H2 are rejected. However, the short run correlation onboth TD and TF suggested that there is significance with the GDP and wasfurther supported when carrying out the regression analysis. Thus, H3and H4 is accepted.