The Effect of Car Ijarah / Lease Financing on the Pakistani Islamic Banking Sector's Performance
Journal Title: Pakistan Journal of Economic Studies - Year 2023, Vol 6, Issue 3
Abstract
Purpose: This study aims to identify the effect of car ijarah / lease financing on the Pakistani Islamic banking sector's performance. It is one of the primary enhancements offered by Islamic financial institutions. Research Gap: Lack of studies that focus on how Car Ijarah / Lease financing affects Islamic banks is a research gap in this field. Design/Methodology/Approach: In the study, six independent variables were used: return on equity (ROE), net profit margin (NIM), Log of total financing (LTF), Ijarah real financing (IJRF), cost of total financing (CTF), total financing over total resources (TFTR), base percentage (BP), customer value index (CVI) and gross domestic product (GDP). Moreover, study analyzes the effect of Ijarah financing on Islamic bank performance in Pakistan from (2018-2022) using Variable and Arbitrary Effect Models Analysis (AFMA). The Main Findings: The study shows that Islamic banks are more profitable, liquid, better capitalized, and have lower credit risk than conventional banks. However, operational efficiency and ROE are negatively linked, while Ijarah's finance and cost total financing have a positive impact on NIM and GDP. Theoretical/Practical Implications of the Findings: Ijarah facilitates ROE development, making it attractive for banks, especially for development contributions. As a result, Ijarah financing is supportive of racial and religious growth. Thus, Islamic bank profitability and sustainable growth can be enhanced by Ijarah financing. Originality/Value: This paper presents an original study of the Islamic banking system's performance based on the study of Car Ijarah / Lease finance in Pakistan.
Authors and Affiliations
Muhammad Saeed Iqbal, Sofi Mohd Fikri, Mohsin Ali, Muhammad Umar, Hassan Dauda Yahaya
Keywords
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