ISLAMIC BANKS’S PROFITABILITY IN PAKISTAN

Abstract

Investigating the profitability of Islamic banks in Pakistan is the main goal of this study. The data range used for the panel regression study is from 2006 to 2021. To get the desired study results, many approaches including descriptive statistics, correlation metric, VIF, Breusch-Godfrey Serial Correlation LM Test, and Breusch-Pagan-Godfrey are used. The Hausman test's findings indicate that the Redundant Effect Test is appropriate for this investigation. The results demonstrate that Return on assets (ROE) is highly positively impacted by the Gross Domestic Product (GDP), Bank Size (BS), and Earnings per share (EPS). The ROA is greatly and adversely affected by the Non-performing Loans (NPL) and Inflation (INF). The study's conclusions suggest that by creating the bank's laws, Pakistan's Islamic bankers will undertake a critical examination into elements including non-performing loans and inflation rates. That would encourage the banks' increased productivity and profitability, which would immediately reinforce their significant role in the Pakistani economy.