ABSRJ 2022 Volume 13, Number 1

How financing different industries influences the Islamic bank profitability? UAE and KSA in focus

Nasiha Osmanovic
Al Ghurair University, UAE
n.osmanovic@agu.ac.ae

Abstract

One of the most important roles in Islamic banking operation today is profitability and its performance. Islamic banks use the different modes of financing in order to achieve its profitability. The aim of this paper is to test the effects of Islamic financing in different sectors in KSA and UAE. Paper shows investing in which sector can lead to more profitable investment and positive impact on the profitability of Islamic banks. By using OLS multiple regression analysis paper shows that possibility of investment diversification is the highest in the United Arab Emirates. Particularly in investments in the sector mining and quarrying can cause losses in profitability. While investments into agriculture, forestry, hunting and fishing, construction, financial and insurance activities and real estate activities have positive impact on the profitability in United Arab Emirates. Similarly regarding to investment in KSA paper shows that the most profitable sectors are agriculture, forestry, hunting and fishing.

Keywords: Islamic banking; profitability; profit; investment; industrial sectors

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