Register/Login   ISSN: 2600-7975   eISSN:2550-1895   Frequency: Three times a year      


SCImago Journal & Country Rank

  • Ulrichs (
  • Focus (Journals and Conference Proceedings)
  • UiTM Institutional Repositories (ePrints)


Volume 22 No. 3, December 2023


Article History:
Received: 01 October 2023
Accepted: 30 October 2023
Available online: 01 December 2023


Financing Concentration and Credit Risks: Empirical Study on the Islamic Banks in Malaysia

Abdulazeez Adewuyi Abdurraheem1, Md. Mahmudul Alam2♣, and Farah Aida Ahmad Nadzri3

1Department of Finance, Faculty of Management Sciences, University of Ilorin, Ilorin, Nigeria
2Economic and Financial Policy Institute, School of Economics, Finance and Banking,
Universiti Utara Malaysia, Kedah, Malaysia
3Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia


Sectoral financing concentration in a few sectors of the economy by Islamic banks in Malaysia has become a recurring issue. The objective of this study was to examine the relationship between financing concentration and Islamic banking credit risks in Malaysia. The study employed the Hirschman-Herfindahl-Index (HHI) to investigate the sectoral concentration of the financing portfolio. Dynamic OLS Approach of Cointegration was estimated to determine the long-run relationship between financing concentration and credit risks in the Islamic banking system. The HHI indicated that Islamic banks in Malaysia held a highly concentrated financing portfolio during the period 2007-2018. The result of the Dynamic OLS Approach of Cointegration indicated the existence of the long-term relationship between the banks’ financing concentration and credit risks. Findings from the study present practical implications for policy formulation and monitoring functions of the regulatory authorities, and managers of Islamic banks in particular, to protect the interests of depositors and the financial system against the consequences of an unanticipated macroeconomic shock. The study provides new insights into financing concentration as a determinant of credit risk in Islamic banking in Malaysia using static and dynamic statistical methods.

Keywords: Credit risk, financing concentration, Hirschman-Herfindahl Index, Dynamic OLS.
Corresponding Author: Md. Mahmudul Alam; Economic and Financial Policy Institute, School of Economics, Finance and Banking, Universiti Utara Malaysia, Kedah, Malaysia; Email: This email address is being protected from spambots. You need JavaScript enabled to view it.


Main Email :

Principal Contact
Prof. Dr. Jamaliah Said :


Accounting Research Institute (ARI)
Level 12, Menara SAAS 
Universiti Teknologi MARA (UiTM)
40450 Shah Alam
Selangor, MALAYSIA

Tel: +603 5544 4829   |   Fax : +603 5544 4992