Impact of Macro-Economic Variables on Financial Performance of Islamic Banks. A comparative study of Pakistan and Bangladesh

Abstract

The aim of this study is to examine and to evaluate the impact of macro-economic variables of financial performance of the Islamic bank in Pakistan and Bangladesh. This study determined the factor affecting financial performance of Islamic bank of Pakistan and Bangladesh. The data used for the study was for the period 2010-2020 of 12 Islamic banks (4 Pakistan banks and 8 Bangladesh bank) .the study employed correlation analysis and hausman effect used random effect model to estimate the data. The result have indicated that the factor under consideration for this study have significant impact on banking performance. This research recommended that the Islamic banking should maintain a standard structure. The economic policy maker should encourage the banker to raise their capital and provide them with a suitable environment that enables economic development. Key words. Profitability, cost efficiency, macro-economic variables, bank size, liquidity ratio, GDP, inflation, exchange rate, return on assets(ROA), return on equity (ROE), cost to income ratio(Cal), over head to assets ratio.