Evaluation of the structure of granted facilities in the form of Islamic contracts on the performance of the banking system

Document Type : Original Article

Authors

1 Faculty member of Economics, Kharazmi University, Tehran, Iran.

2 Faculty member of Economics and Management, Emam Hossein University, Tehran, Iran.

3 Faculty member of Monetary and Banking Research Institution, Tehran, Iran.

4 MA in economics, Kharazmi University, Tehran, Iran.

5 Faculty member of Economics, Kharazmi University, Tehran, Iran

Abstract

This study examines the impact of the facility structure for bank profitability in Iran, using panel data over the period 2005-2019. The method used in this study is Panel ARDL.
In order to achieve this objective, of all the private banking institutions, we have chosen 9 banks that allocate their banking facilities in the form of Islamic contracts. Given that Installment sale and civil partnership, respectively, with 29/71% and 37/44% of total loans accounted for the largest share of banking facilities.
Thus, in this study, in order to study the profitability of the banks, the variables above were considered as representatives of the sector of facilities. Also, the profitability criteria used include return on equity (ROE), return on assets (ROA) and net interest margin (NIM).
The results of this study show that there is a positive and significant relationship between civil partnership and ROA in the short and long term, and between Installment sale and profitability measures ROA and ROE there is a negative relationship.
According to the results, it is suggested that balancing the various types of contracts in the granting of facilities by the banking system. Also, given the lower profitability of exchange contracts for banks, an independent section under the supervision of the central bank is created to determine the rate of profit to encourage people to use the facilities above.

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References

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