The Effect of the Global Financial Crisis on the Profitability of Islamic Banks in UAE

International Journal of Financial Research, Vol 11 No. 1 2020

8 Pages Posted: 12 Mar 2020

Date Written: November 3, 2019

Abstract

This paper empirically analyzes the profitability of the four Islamic banks operating in the UAE during the financial period between 2004 and 2009 using three profitability indicators, return on total income, return on assets and return on equity. The researcher uses a variety of techniques, equality of means, coefficient of variation and Anova analysis to assess the effect of the financial crisis on the performance of the four specified banks. The findings show that although the financial crisis began in the 3rd quarter of 2007, its impact on the profitability of Islamic banks was most profound in 2008 and 2009 where there was a notable decline in all analyzed financial indicators. Moreover, the three indicators held a higher variability rate during the crisis years spanning 2008 to 2009 in stark contrast with the pre-crisis rates of the period spanning 2004 to 2007. Anova analysis across the four banks show significant differences between the mean of most indicators, suggesting varying performance under the adverse conditions present during the recession.

Keywords: Islamic banking, bank performance, profitability analysis, bank stability, United Arab Emirates

JEL Classification: G21, G28, G32

Suggested Citation

Ibrahim, Mukdad Mohammad, The Effect of the Global Financial Crisis on the Profitability of Islamic Banks in UAE (November 3, 2019). International Journal of Financial Research, Vol 11 No. 1 2020, Available at SSRN: https://ssrn.com/abstract=3537482

Mukdad Mohammad Ibrahim (Contact Author)

American University of Ras Al Khaimah ( email )

United Arab Emirates

HOME PAGE: http://www.aurak.ac.ae

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