The determinants of Islamic banking profitabilit

Given the sluggish growth and decreasing profitability of IBFI, and due to its importance within the international and national banking industry, the research aims at identifying the determinants of IBs profitability and examines their effects on IBs' overall performance. IBFI which was emerged initially to find an alternative of the conventional form of financing currently exists in Muslim and non-Muslim countries with the total global financial asset in excess of $3 trillion at the end of 2017. However, while IBs dominate the IBFI with its 80 % share of the total assets, they still represent less than 1 % of global banking assets. Therefore, the performance of IBFI has become a hot topic for practitioners, researchers, policymakers, and international financial regulatory organisations.;In this perceptive, the topic of the thesis is timely and relevant especially with the high and continuous volatility of banking operating environment due to the impact of deregulation, advances in information system and technologies, financial openness, and the subsequent financial crisis. Also, the thesis attempted to fill the gap in the Islamic financial literature that were mainly focusing on theoretical issues of IBFI and ignoring the profitability drivers and their effect on the industry. Even though, the few empirical studies noted in the Islamic financial literature found to be lacking for a robust methodological framework with their finding are mix and inconclusive.;In order to identify the determinants of IBs profitability and examines their effects on IBs' overall performance, the study firstly reviewed the existing financial performance literature for both Islamic and conventional models with a reference of the relevant financial theories. The study then set up a methodological framework with a large panel data of 25 years from 23 IB's operating countries spanning over six regional political groups with different Shariah jurisdiction covering the period from 1996 to 2015. The final dataset is tested using various econometric models and robustness checks. The findings of the study revealed an influential role of all included profitability determinants on IBs' overall performance. Therefore, the findings are significant for the practitioners, policymakers, and international financial regulatory organisations in term of providing an improved understanding of the IBs' performance to formulate and update their financial policies to let the industry reach its full potential in their respective countries. It is also important for the researchers who are interested in taking the Islamic banking and financial literature further.