Abstract:
Purpose - The purpose of this research paper is to find out reasons if external factors
(macroeconomic indicators) have significant impact on profitability of Islamic Banks. The
research is also expected to find out the causes ofsuch variables to behave differently in different
countries to guide policymakers to help promoting Islamic Banking System in Pakistan.
Design/methodology/approach - The approach of study is quantitative and explanatory used
secondary data from 2008 to 2017, data have collected of 4 Islamic banks’ profitability measures
ROA and ROE from Pakistan, Turkey, Saudi Arab and Malaysia total 16 banks and 4 countries
macroeconomics indicators including Inflation, Interest rate, GDP and FDI for independent
variables, the study used panel least-square and fixed effect method to determine the impact of
macroeconomic indicators on profitability on Islamic banks in different Islamic countries
Findings - Study have found that GDP and Interest rate have significant role and positive impact
on profitability of Islamic banks in Malaysia and Pakistan whereas Turkey and Saudi Arabia’s
Islamic banks profitability does not have significant impact ofmacroeconomics indicators except
GDP.
Practical Implications -The author conclude the impact offew macroeconomic indicators on the
profitability ofIslamic banks in Malaysia and Pakistan are significant. The findings ofpaper might
interest the policy makers. It is recommended to introduce new Islamic products and create more
alliance with other countries who are dealing in Islamic finance successfully such as Malaysia and
Saudi Arabia
