Munich Personal RePEc Archive

What drives the profit rates of islamic banks ? Malaysia’s case

Fairuz, Sharifah and Masih, Mansur (2018): What drives the profit rates of islamic banks ? Malaysia’s case.

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Abstract

Repeated financial crises helped the growth of Islamic banks as an alternative asset for investment. Similar to conventional banks, Islamic banks also depend on depositors’ money as their source of funds. The profit rate of Islamic banks is expected to influence the amount of funds deposited for investment. This paper wants to investigate what drives the profit rates of Islamic banks. The standard time series techniques are used for the analysis. Malaysia is used as a case study. The findings tend to indicate that the profit rates are driven by the investment deposits of Islamic banks followed by the deposits of the conventional banks and their interest rates. The outcome of the results would be particularly of great interest to the regulators and Islamic bank CEOs to make decisions on whether to still depend on conventional rates and deposits in order to survive.

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