The Impact of Non-Interest Income on Commercial Bank Profitability in the Middle East and North Africa (MENA) Region

Bashar Abu Khalaf, Antoine B. Awad () and Scott Ellis
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Bashar Abu Khalaf: Accounting & Finance Department, College of Business, University of Doha for Science and Technology, Doha 24449, Qatar
Antoine B. Awad: Accounting & Finance Department, College of Business, University of Doha for Science and Technology, Doha 24449, Qatar
Scott Ellis: Newcastle Business School, Accounting & Financial Management, Northumbria University Newcastle, Newcastle Upon Tyne NE7 7XA, UK

JRFM, 2024, vol. 17, issue 3, 1-15

Abstract: This study examines the effects of non-interest income on bank performance in the Middle East and North Africa (MENA) region, addressing existing research gaps and conflicting results. The analysis is based on data from 40 banks (5 banks from each country) operating in Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates between 2010 and 2022. Using correlation analysis and three regression models (OLS, FE, and RE), this study explores the relationship between non-interest income, overheads, capital adequacy, loan loss provision, bank size, and return on assets. The findings reveal positive associations among banks’ overhead, size, capital adequacy, and loan loss provision. Additionally, a favorable correlation is observed between non-interest income and bank performance. Non-interest income significantly influences the profitability of MENA region banks across all three models, supporting the main hypothesis. While the study’s limitations include sample size and geographic focus, the findings of this study provide valuable insights for policymakers, allowing them to recognize the positive impact of increasing non-interest income on commercial bank profitability in the MENA region and consider implementing policies that encourage and support banks in diversifying their income sources.

Keywords: non-interest income; return on assets; capital adequacy; credit risk; size; panel regression; MENA (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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