The impact of housing loan/financing on risk performances in a dual banking system

• Main Author: Muhammad Arif Fadilah, Ishak
• Format: Thesis
• Language: English; English; English
• Published: 2018
• Subjects: HJ Public Finance
• Online Access: https://etd.uum.edu.my/8301/1/S821923_01.pdf; https://etd.uum.edu.my/8301/2/S821923_02.pdf; https://etd.uum.edu.my/8301/3/S821923_references.docx; https://etd.uum.edu.my/8301/

The housing loan/financing are important product to the bank due to its the major contribution to the bank profit. This study investigates the impact of housing loan/financing and other variables with bank risk performance of dual banking system in Malaysia. The dependent variable used in this study is Non-Performing Loan (NPL) and Loan Loss Provision (LLP). This study uses six (6) independent variables which are divided into two parts; bank specific and macro-economic variables. Bank specific variables involve variables which are controllable within bank management and these include expenses (TEXPTI), total loan (TLTA), income (INCTL) and housing loan/financing (LPRO). Macroeconomic variables refer to the external factor variable and this study uses Gross Domestic Product (GDP) and Consumer Price Index (CPI) as proxies of macroeconomic variables. The data is restricted to commercial and Islamic banks in Malaysia within the period of 2002-2016. The results from Random and Fixed Effect models show that housing loan/financing has significant and negative impact on banks (NPL). As for other dependent variable, housing loan/financing also show significant relationship with banks (LLP). From the analysis, it can be concluded that even though commercial banks seem to dominate housing loan/financing market, but Islamic banks are capable to compete with commercial bank in this specific type of financing. Furthermore, housing loan/financing are very importance to the bank. It’s because the result show housing loan/financing are low risk portfolio in bank investment. As nature, the housing loan/financing will be backed by the mortgage and it will mitigate the risk in investment.