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The determinants of the profitability of Islamic banks: a cross-sectional study from Asia and Africa

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  • Mohammad Ashraful Ferdous Chowdhury
  • Mohamed Eskandar Shah Mohd Rasid

Abstract

Studies on Islamic banks' profitability are important towards improving performance, evaluating bank operations and determining management plan to survive in competitive markets. The present study seeks to fill a gap by providing new empirical evidence on the factors that influence the profitability of the Islamic banks. The ordinary least square method is employed using annual data of 2013 on 44 Islamic banks from Asian and African region. The findings reveal that bank-specific factors such as the operating efficiency ratio are negatively and statistically significant to the profitability of the Islamic banks, while equity financing is positive and statistically significant to the profitability. The credit risks and liquidity risks factors are insignificant on the performance of the Islamic banks. On the other hand, macroeconomic factors such as inflation have a positive and significant impact on the profitability whereas GDP growth rate has no significant impact on the profitability of Islamic banks.

Suggested Citation

  • Mohammad Ashraful Ferdous Chowdhury & Mohamed Eskandar Shah Mohd Rasid, 2015. "The determinants of the profitability of Islamic banks: a cross-sectional study from Asia and Africa," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 15(3), pages 375-388.
    • Handle: RePEc:ids:ijbglo:v:15:y:2015:i:3:p:375-388
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    Cited by:

    1. Segun Thompson Bolarinwa & Richard Olaolu Olayeni & Xuan Vinh Vo, 2021. "Is there a nonlinear relationship between nonperforming loans and bank profitability? Evidence from dynamic panel threshold," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 649-661, April.
    2. Philip Kofi Adom & Franklin Amuakwa-Mensah & Salome Amuakwa-Mensah, 2020. "Degree of financialization and energy efficiency in Sub-Saharan Africa: do institutions matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-22, December.
    3. Roukia Bouhider, 2021. "Econometric study of the effect of deposits on Islamic Banks profitability: Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 41(3), pages 1292-1302.
    4. Ebrahim Mohammed Al‐Matari, 2023. "The determinants of bank profitability of GCC: The role of bank liquidity as moderating variable—Further analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1423-1435, April.

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