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Does the Profit and Loss Sharing Financing increase the Performance of Islamic Banks?

Author

Listed:
  • Ali BENDOB

    (Ain Temouchent University, Ain Temouchent, Alegria)

  • Fatma BENNACEUR

    (Ain Temouchent University, Ain Temouchent, Alegria)

  • Rachida BENAHMEDDAHO

    (Tlemcen University, Tlemcen, Algeria)

Abstract

The profit and loss sharing financing may be effect on the performance indicators of Islamic banks. This paper aims to tests the relationship between PLSF and profitability, liquidity and risk indicators and analyzes why the Islamic banks neglect the long term financing, based on empirical case of thirteen bank at level of thirteen Islamic countries namely: Algeria, Bahrain, Bangladesh, Dubai, Indonesia, Iran Jordan, Kuwait, Malaysia, Pakistan, Qatar, Saudi Arabia and Sudan, during 1997 to 2013. We use the regression analysis model with unbalanced panel data. The relationship between PLSF and performance indicators (Profitability, liquidity, risk) is significant, and the dual fixed effects model is accepted which shows the difference in the relationship between the variables differs depending on the characteristics of the bank and the country as well as period. We propose to re-test this problematic with distinction between Mudharaba, Musharaka and PLSF, and the use of other econometrics method.

Suggested Citation

  • Ali BENDOB & Fatma BENNACEUR & Rachida BENAHMEDDAHO, 2017. "Does the Profit and Loss Sharing Financing increase the Performance of Islamic Banks?," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 54-67.
    • Handle: RePEc:ddj:fseeai:y:2017:i:3:p:54-67
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    References listed on IDEAS

    as
    1. Othman, Arshad Nuval & Masih, Mansur, 2015. "Do profit and loss sharing (PLS) deposits also affect PLS financing? Evidence from Malaysia based on DOLS, FMOLS and system GMM techniques," MPRA Paper 65224, University Library of Munich, Germany.
    2. Rachida Benahmed-Daho & Abdelnacer Bouteldja & Ali bendob, 2015. "Liberalization of Financial Services and Performance of Commercial Banks in Algeria: An Empirical Study (1998 2012)," International Journal of Economics and Financial Issues, Econjournals, vol. 5(4), pages 889-896.
    3. Nico P. Swartz & Odirile Otto Itumeleng, 2015. "Profit And Loss Sharing As an Offshoot for Bank Stability: A Comparative Analysis," International Journal of Business, Economics and Management, Conscientia Beam, vol. 2(3), pages 64-77.
    4. Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January.
    5. Dr. Waheed Akhter & Ali Raza & Orangzab & Muhammad Akram, 2011. "Efficiency and Performance of Islamic Banking: The Case of Pakistan," Far East Journal of Psychology and Business, Far East Research Centre, vol. 2(4), pages 54-70, February.
    6. Nico P Swartz & Odirile Otto Itumeleng, 2015. "Profit And Loss Sharing As an Offshoot for Bank Stability: A Comparative Analysis," International Journal of Business, Economics and Management, Conscientia Beam, vol. 2(3), pages 64-77.
    Full references (including those not matched with items on IDEAS)

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