Open AccessIntroducing financial inclusion to MENA Islamic-banks profitability determinants
Author(s) -
Osama El-Ansary,
Mohamed M. Rashwan
Publication year - 2020
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv18i1siart2
Subject(s) - profitability index , capital adequacy ratio , financial inclusion , market liquidity , risk adjusted return on capital , financial system , credit risk , panel data , financial ratio , business , economics , return on assets , financial services , finance , monetary economics , capital formation , financial capital , econometrics , human capital , profit (economics) , microeconomics , economic growth
This paper assesses Islamic banks (IBs) profitability determinants by investigating bank-specific, macroeconomic, and financial inclusion variables in MENA. Data is collected from Zawya, Bankscope, The Banker, Global Findex and World Bank databases covering 73 IBs from 2008-2017. ROA and ROE are deployed as IBs’ profitability term with new predictor variables assessing financial inclusion: overall financial structure, financial service penetration, and self-service banking prevalence. Common bank-specific variables are employed that include; credit risk, liquidity, size, capital adequacy, the effect of income fees and charges, and operating costs with other macroeconomic variables; GDP, inflation, and the average world governance indicator (WGI). A dynamic panel data is applied using a GMM model. Both ROA and ROE have almost the same significant relationship with credit risk, size, capital adequacy, and effect of income fees and charges but no significance was established with Basel capital adequacy. The same significant relationship between ROA and ROE is validated with only WGI as a macroeconomic variable and self-service banking prevalence as a financial inclusion indicator. Guiding IBs executives to improve bank profitability by utilizing macroeconomic and financial inclusion factors. Results may imply the importance of new products and alternative channel development in enhancing IBs’ profitability. Few studies are found measuring the effect of bank-specific, macroeconomic, and financial inclusion variables. Thus, this paper contributes to the existing literature by introducing other dynamics affecting IBs’ profitability