Competitiveness of Islamic Financial System: An Empirical Analysis of Internal and External Factors Infuence on Pakistan Islamic Bank’s Proftability

Abstract

Islamic banks can be defned as a non-interest-based institution that fully acts under Islamic laws. Due to being less affected by the global fnancial crisis Islamic bank grabbed the attention of researchers, but in Pakistan the growth rate of Islamic banks is very low. Pakistan Islamic bank sector has not achieved even 15% of overall market share in banking industry (12.9% SBP, Islamic Bank Bulletin, 2018). The purpose of this study is to fnd the reasons of bankruptcy and decline in proftability of Pakistan’s fully fedged Islamic banks and determine the primary drivers of Islamic bank’s proftability. The study proposed an integrated model which examines the Bank specifc/Internal and Environment Specifc/External Factors infuence on Islamic bank’s Proftability. Managers and academics know fairly little about how the collective effects of these internal and external factors infuence the Islamic bank’s proftability. Study is quantitative in nature and primary data was collected from 508 senior managers of Pakistani Islamic banks. Conclusively, fnding reveal that internal/bank specifc, external factors have signifcant and positive impact on Islamic bank’s proftability. Results of study is helpful for the practitioners and policy makers to understand reasons of proftability decline and make new polices for Islamic banks growth