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Islamic Banks in Jordan: Performance and Efficiency Analysis

Saleh, Ali Salman and Zeitun, Rami (2007) Islamic Banks in Jordan: Performance and Efficiency Analysis. Review of Islamic Economics, 11 (1). pp. 41-62. ISSN 0962-2055

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Abstract

Islamic banking commenced in Jordan approximately two decades ago. Ever since it has played an important role in financing and contributing to different economic and social sectors in the country. However, there are limited studies on the financial performance of Islamic banks. This paper, therefore, examines and analyzes the Jordanian experience of Islamic banking, focusing on the two largest Islamic banks in the country: the Jordan Islamic Bank for Finance and Investment (JIBFI) and the Islamic International Arab Bank (IIAB), and evaluates these Islamic banks' performance. The paper also sheds some light on the domestic and global challenges that this sector faces. We used a performance evaluation methodology, and conducted profit maximization, capital structure and liquidity tests, and found that both banks' efficiency and ability has increased, both have expanded their investment and activities and played an important role in financing projects in Jordan. Another interesting finding is that these banks focused on short-term investments, which is often found in most Islamic banking practices. Our research also found that Islamic banks have a high growth in credit facilities and in profitability; and postulates whether this might encourage other banks to adopt the Islamic financial system.

Item Type: Article
Uncontrolled Keywords: ResPubID14422, banking industry, business performance, Islamic banks, Jordan, profit
Subjects: Faculty/School/Research Centre/Department > School of Economics and Finance
FOR Classification > 1402 Applied Economics
FOR Classification > 1502 Banking, Finance and Investment
Depositing User: VUIR
Date Deposited: 22 Aug 2011 00:10
Last Modified: 22 Aug 2011 00:10
URI: http://vuir.vu.edu.au/id/eprint/3395
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