Islamic Banking Performance in the Middle East: A Case Study of Jordan

Ali Saleh Salman () and Rami Zeitun ()
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Ali Saleh Salman: University of Wollongong, http://business.uow.edu.au/econ/who/index.html

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: Islamic banking in Jordan started around two decades ago. Since then it has played an important role in financing and contributing to different economics and social sectors in the country in compliance with the principles of Shariah rules in Islamic banking practices. Since there have been limited studies on the financial performance of Islamic banks in the country. The aim of this paper is to examine and analyse the Jordanian experience with Islamic banking, and in particular the experience for the first and second Islamic bank in the country, Jordan Islamic Bank for Finance and Investment (JIBFI), and Islamic International Arab Bank (IIAB) in order to evaluate the Islamic banks’ performance in the county. The paper goes further to shed some light on the domestic as well as global challenges, which are facing this sector. However, this paper used the performance evaluation methodology by conducting the profit maximization, capital structure, and liquidity tests. This paper found that the efficiency and ability of both banks has increased and both have expanded their investment and activities and had played an important role in financing projects in Jordan. Another interesting finding of the paper that these banks have focused on the short-term investment, perhaps this seems to be the case in most Islamic banking practices. Another finding is that the Bank for Finance and Investment (JIBFI) has a high profitability that encourages other banks to practice the Islamic financial system. The paper also found that Islamic banks have a high growth in the credit facilities and in profitability.

Keywords: Islamic banking; Performance; Efficiency; Challenges; Jordan (search for similar items in EconPapers)
Pages: 19 pages
Date: 2006
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-eff and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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