Determinants of Profitability of Islamic Banks of Pakistan – A Case Study on Pakistan’s Islamic Banking Sector

Abstract

The purpose of this study is to find out the determinants of Islamic banks of Pakistan. The author collected data of five Islamic banks of Pakistan over ten years extending from 2006-2015. The independent variables were GDP, Size, Inflation & Liquidity whereas dependent variables were Return on Asset. By using STATA software and employed panel regression, the researcher found that in fixed model effect, there are two significant variables at 5% i.e., size of Islamic banks and liquidity. Liquidity has positive whereas size has negative impact on profitability of Islamic banks. The findings will be helpful for Islamic banking sector to make their policies accordingly. Keywords: Islamic Banks, Size, GDP, Inflation, Liquidity, Return On Assets