Author
Listed:
- Asma Sghaier
- Asma Guizani
Abstract
This study aimed to analyze the profitability in Islamic banks and conventional ones in the Middle East and North Africa (MENA) region. After restatement, our sample consisted of 184 banks (132 conventional banks and 52 Islamic banks) in 11 countries in the MENA region. For our analysis period of 11 years (from 2009 to 2019), we collected 2024 observations. We noticed that the profitability of Islamic banks was significantly different from that of conventional ones. After examining bank risk, asset quality, environmental influences such as the level of interest rate, and country effect, we found that the cost and profit efficiencies of Islamic banks are similar to those of conventional banks. Our results suggest that the country-specific variables have a significant impact on the cost and profit efficiencies of banks operating in the MENA region, and we have confirmed that Islamic banks are more profitable than conventional ones, whereas the total loan to total assets for Islamic banks is higher than that of conventional banks. Based on regression test, return on asset (ROA) is a factor of profitability for conventional banks and Islamic banks. ROA has an important relationship with the independent variable, total equity to total asset. The deterioration of the bank’s profitability poses a threat not only to the interests of consumers and internal staff but also affects investors who may equally suffer from significant financial losses. It is important to establish an effective system that assists investors in their investment choices. In prior literature, traditional models were developed but achieved short-term performances. This chapter applies a data analysis method to distinguish between conventional and Islamic banks in the MENA region. This method can successfully identify nonlinearity and correlations between the financial indicators used. The results demonstrate the superior performance of the proposed method.
Suggested Citation
Asma Sghaier & Asma Guizani, 2023.
"Banking Performance in MENA Region: A Comparative Study Between Conventional and Islamic Bank Systems,"
World Scientific Book Chapters, in: Khaled Hussainey & Hidaya Al Lawati (ed.), Islamic Accounting and Finance A Handbook, chapter 20, pages 589-621,
World Scientific Publishing Co. Pte. Ltd..
Handle:
RePEc:wsi:wschap:9781800612426_0020
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JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
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