International Journal of Academic Research in Business and Social Sciences

search-icon

Liquidity Management and The Islamic Bank Financing Constraints

Open access

Mohd Afandi Abu Bakar, Noormahayu Mohd Nasir, Farrah Dina Abd Razak, Nor Samsinar Kamsi, Abdul Malek A. Tambi

Pages 127-138 Received: 30 Nov, -0001 Revised: 30 Nov, -0001 Published Online: 07 Jan, 2018

http://dx.doi.org/10.46886/IJARBSS/v7-i12/3599
The major source of income for a bank comes from the financing operations. Insufficient amount of fund resources a bank have, consequently, a negative relationship between liquid assets holding, reserve, capital requirement, and provision for bad and doubtful financing with financing operations is expected. Thus, the study aim to examine the degree of constraint the liquidity management has on the Islamic bank financing activities. To realise the objectives of the study, this study utilised the dynamic panel data, Generalized Method of Moments (GMM) estimator applied to Malaysia Islamic banks annual data for the period of 1998 to 2014. The finding shows a negative relationship between liquidity and financing, which means an insufficient fund, is a constraint to the Islamic bank's financing operations. Thus, the liquid assets holding and securities holdings have a negative impact on Islamic bank financing activities, hence, excessive holding of liquidity consequently will reduce bank’s financing volumes.