Impact of Macroeconomic Variables on Islamic Banks Profitability

  • Qaisar Ali Universiti Islam Sultan Sharif Ali (UNISSA), Bandar Seri Begawan, Brunei
  • Selamah Maamor Universiti Utara Malaysia (UUM), Sintok, Kedah Darulaman, Malaysia
  • Hakimah Yaacob Universiti Islam Sultan Sharif Ali (UNISSA), Bandar Seri Begawan, Brunei
  • Muhammad Usman Tariq Gill Universiti Islam Sultan Sharif Ali (UNISSA), Bandar Seri Begawan, Brunei

Abstract

The main objective of this study is to understand and determine the impact of macroeconomic variables on Islamic banks’ profitability in Brunei. The impact of GDP growth rate, inflation, interest rate, exchange rate, oil prices, competition and money supply on Bank Islam Brunei Darussalam (BIBD) profitability was determined from the year 2012 to the year 2016. The secondary data was obtained from DEPD, AMBD and IMF annual reports. The collected data was analysed using Stata 15. The fixed effects panel regression technique was adopted to measure the impact of each variable on Islamic banks’ profitability. The findings revealed that GDP growth rate, inflation, exchange rate, oil prices and money supply have a significant positive impact on profitability. The findings further revealed that oil prices, GDP and inflation were the most significant and exchange rate and money supply were the least significant determinants of profitability. The findings suggest the regulators and policy makers to discover alternative resources to rejuvenate economic and financial system. Islamic bankers may revamp its marketing strategies to reduce the intensity of macroeconomic variables. This study has vigorously contributed in the existing literature of single country analysis of Islamic banks particularly in the context of Brunei.

Author Biographies

Qaisar Ali, Universiti Islam Sultan Sharif Ali (UNISSA), Bandar Seri Begawan, Brunei

Qaisar Ali is a research candidate in the Faculty of Islamic Economics and Finance (FEKIM) at Universiti Islam Sultan Sharif Ali (UNISSA), Brunei Darussalam. His research interests include Islamic banking and finance, Islamic finance consumer behaviour and human resource.

Selamah Maamor, Universiti Utara Malaysia (UUM), Sintok, Kedah Darulaman, Malaysia

Selamah Maamor is an associate professor in the department of Islamic Business School (IBS) at Universiti Utara Malaysia (UUM) Kedah. She specializes in Islamic Economics and has published various research papers on Islamic Economics. Her research interests include Islamic microfinance, Islamic Economics and Management of spirituality activities.

Hakimah Yaacob, Universiti Islam Sultan Sharif Ali (UNISSA), Bandar Seri Begawan, Brunei

Hakimah Yaacob is a senior assistant professor in the faculty of Islamic Economics and Finance (FEKIM) at Universiti Islam Sultan Sharif Ali (UNISSA), Brunei Darussalam. She has published various research papers on Victimology, Islamic finance, Islamic banking, takaful and capital market.

Muhammad Usman Tariq Gill, Universiti Islam Sultan Sharif Ali (UNISSA), Bandar Seri Begawan, Brunei

Muhammad Usman Tariq Gill is a research candidate in the faculty of Islamic Economics and Finance (UNISSA) at Universiti Islam Sultan Sharif Ali (UNISSA), Brunei Darussalam. His Research interests include Islamic finance, Islamic Economics and Islamic stock Market.

Published
2018-04-30
Section
Articles