Factors Affecting The Rate of Return of Islamic Banks

Abstract

This research aims to identify the determinants of the rate of return on Islamic bank consumers in Islamic banks. This research aims to identify the determinants of the rate of return on Islamic bank consumers in Islamic banks. An important indicator of financial performance for Islamic bank clients is their rate of return, which is determined by a number of variables consistent with Islamic finance norms. The main factors that affect the rate of return in Islamic banking are examined in this review of the literature, with an emphasis on credit risk, capital adequacy ratio, and economic growth. Growth in the economy, which indicates how well the economy is doing generally, affects profitability and investment prospects, which in turn affects returns for clients of Islamic banks. A measure of a bank's financial health, the capital adequacy ratio is essential to risk management and return stability. The possibility of a borrower failing is known as credit risk, and it has a direct effect on the bank's financial performance and, in turn, client returns. This review attempts to provide a thorough knowledge of how these factors interact to impact the rate of return for Islamic bank customers by combining findings from other studies. The knowledge acquired can help academics, banking experts, and policymakers improve the long-term viability and competitiveness of Islamic banking. To attain its goals, the author utilized data from nearly all Islamic banks in Pakistan for a period between 2017 to 2024. The information will be studied by an regression model. Data will be analyzed using Stata software.