BANK’S PROFITABILITY AND MACROECONOMIC INDICATORS: A COMPARATIVE ANALYSIS BETWEEN CONVENTIONAL AND ISLAMIC BANKS OF PAKISTAN

Abstract

Purpose The purpose of this study was to find the impact of macroeconomic factors on the Islamic and conventional banks profitability in Pakistan. Methodology & Design A panel data from 14 banks of Pakistan was collected for a time period of 2005-2020. Research design includes positivist approach. Data was collected through bank’s annual reports and later on multiple linear regression has been used to analyze the data. Findings Macroeconomics variables, i.e. GDP, FDI, Inflation rate and Interest rate have no sufficient impact on the profitability of both type of banking sector working in Pakistan. Limitations One of the major limitations in the field ofresearch is data collection. Availability, relevancy and reliability, of data very important and thus encountered the same as were not fully able to collect significant data such as quarterly financial statements etc. also accessibility to data as well some ofthe resources ask money to provide reliable data which made us unable to collect larger samples. Recommendations We recommended the policy makers of banking sector of Pakistan to include more variables to analyze their impact on profitability. In future this research could be expanded b analyzing the impact offinancial and economic indicators on performance rather than profitability.