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Islamic Banking Performance in the Middle East: A Case Study of Jordan

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Abstract

Islamic banking in Jordan started around two decades ago. Since then it has played an important role in financing and contributing to different economics and social sectors in the country in compliance with the principles of Shariah rules in Islamic banking practices. Since there have been limited studies on the financial performance of Islamic banks in the country. The aim of this paper is to examine and analyse the Jordanian experience with Islamic banking, and in particular the experience for the first and second Islamic bank in the country, Jordan Islamic Bank for Finance and Investment (JIBFI), and Islamic International Arab Bank (IIAB) in order to evaluate the Islamic banks’ performance in the county. The paper goes further to shed some light on the domestic as well as global challenges, which are facing this sector. However, this paper used the performance evaluation methodology by conducting the profit maximization, capital structure, and liquidity tests. This paper found that the efficiency and ability of both banks has increased and both have expanded their investment and activities and had played an important role in financing projects in Jordan. Another interesting finding of the paper that these banks have focused on the short-term investment, perhaps this seems to be the case in most Islamic banking practices. Another finding is that the Bank for Finance and Investment (JIBFI) has a high profitability that encourages other banks to practice the Islamic financial system. The paper also found that Islamic banks have a high growth in the credit facilities and in profitability.

Suggested Citation

  • Saleh Salman, Ali & Zeitun, Rami, 2006. "Islamic Banking Performance in the Middle East: A Case Study of Jordan," Economics Working Papers wp06-21, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp06-21
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012234.pdf
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    References listed on IDEAS

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    1. Sabi, Manijeh, 1996. "Comparative Analysis of Foreign and Domestic Bank Operations in Hungary," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 179-188, April.
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    Cited by:

    1. Ahmed Imran Hunjra & Amber Bashir, 2014. "Comparative Financial Performance Analysis of Conventional and Islamic Banks in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 3(4), pages 196-206, December.
    2. Sandrine Kablan & Ouidad Yousfi, 2015. "Performance of Islamic Banks across the World: An Empirical Analysis over the Period 2001-2008," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 4(1), pages 27-46.
    3. Muhammad IRFAN & Khalid ZAMAN, 2014. "The Performance and Efficiency of Islamic Banking in South Asian Countries," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 17(2), pages 223-237, December.
    4. repec:asi:aeafrj:2017:p:780-789 is not listed on IDEAS
    5. Kashif Rashid & Adeela Rustam, 2014. "Comparative Analysis of Local and Foreign Banks Efficiency: A Case Study of Pakistan," Oeconomics of Knowledge, Saphira Publishing House, vol. 6(3), pages 7-52, August.
    6. Ouidad Yousfi, 2013. "Does PLS financing solve asymmetric information problems?," Post-Print hal-00785325, HAL.
    7. Eric Kwaku Attefah & Ernest Appiah Darko, 2016. "Financial Ratios Approach to Evaluating Financial Performance of Cal Bank Ghana from 2010 to 2014," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(6), pages 150-176, June.

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    Keywords

    Islamic banking; Performance; Efficiency; Challenges; Jordan;

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