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

Authors: Mohammad Ashraful Ferdous Chowdhury; Mohamed Eskandar Shah Mohd Rasid

Addresses: Department of Business Administration, Shahjalal University of Science and Technology, Sylhet, Bangladesh ' INCEIF, The Global University of Islamic Finance, Lorong University, Kuala Lumpur, Malaysia

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.

Keywords: bank profitability; Islamic finance; macroeconomics; determinants; Islamic banks; credit risks; liquidity risks; GDP growth rate; inflation; banking industry; Asia; Africa; ordinary least squares; OLS; operating efficiency ratio; equity finance.

DOI: 10.1504/IJBG.2015.071913

International Journal of Business and Globalisation, 2015 Vol.15 No.3, pp.375 - 388

Received: 15 Feb 2015
Accepted: 06 May 2015

Published online: 23 Sep 2015 *

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