Multi-Choice Goal Programming Model for Optimal Financial Resources in Islamic Bank

Karmila Hanim Kamil, Abdul Ghafar Ismail, Shahida Shahimi, Zaidi Isa

Abstract


ABSTRACT

As the primary operational tool in the Islamic economics system, Islamic banking is assumed to run on the broader perspective of multi-dimensional objectives based on the foundation of shariah principles. This paper explicitly develops a multi-choice goal programming (MCGP) model of an Islamic bank for the optimal allocations of financial resources that satisfy both economic and social goals. The optimization model is verified using data from one of the premier Islamic banks in Malaysia as a sample model in determining the patterns and strategies taken in the allocations of financial resources. The veracity of the model is tested in terms of its ability to meet the specified target goals with minimum total deviations and to project the optimum allocation of asset and liability composition for a one-year time horizon. Results showed that the model could generate optimal financial resources that meet the specified target goals for economic and social objectives. A simulation analysis has been successfully performed to see the impact of changing the priority weight of management goals on the composition of financial resources. Thus, the model would be beneficial to the policymakers at Islamic banks for decision support and planning in view of its ability to incorporate economic and social objectives. Additionally, the proposed MCGP model offers flexibility to decision-makers in setting management target goals in the form of interval values to avoid error estimation of the decision.

Keywords: Multi-choice goal programming; optimization; Islamic bank; economic objectives; social objectives.

ABSTRAK

Sebagai alat operasi utama dalam sistem ekonomi Islam, perbankan Islam dianggap beroperasi berdasarkan perspektif objektif multi-dimensi yang lebih luas berdasarkan asas prinsip-prinsip syariah. Makalah ini secara khusus membangunkan model pengaturcaraan gol pelbagai pilihan (MCGP) bagi bank Islam untuk peruntukan sumber kewangan yang optimum dalam memenuhi objektif ekonomi dan sosial. Model pengoptimuman ini telah menggunakan data dari salah satu bank Islam utama di Malaysia sebagai model contoh dalam menentukan corak dan strategi yang diambil di dalam peruntukan sumber kewangan. Ketepatan model ini diuji dari segi kemampuannya untuk memenuhi sasaran objektif yang ditentukan dengan jumlah sisihan minimum dan untuk mensasarkan peruntukan aset dan liabiliti optimum bagi jangka masa satu tahun. Hasil kajian menunjukkan bahawa model yang dibangunkan dapat mempamerkan sumber kewangan optimum yang memenuhi sasaran matlamat yang ditentukan bagi objektif ekonomi dan sosial. Analisis simulasi juga berjaya dijalankan untuk melihat impak perubahan pemberat keutamaan bagi sasaran matlamat pengurusan terhadap komposisi sumber kewangan. Oleh itu, model ini dilihat boleh memberi manfaat kepada pembuat dasar di bank Islam sebagai sokongan keputusan dan perancangan memandangkan kemampuan model ini dalam menggabungkan objektif ekonomi dan sosial. Selain itu, model MCGP yang dicadangkan ini juga menawarkan fleksibiliti kepada pembuat keputusan untuk menetapkan sasaran matlamat pengurusan di dalam bentuk nilai selang bagi mengelakkan daripada penganggaran ralat di dalam keputusan.

Kata kunci: Pengaturcaraan gol pelbagai pilihan, pengoptimuman, bank Islam, objektif ekonomi; objektif sosial.

 


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