Author

Tayyaba Ayub

Student Number

13703

Degree

Master of Science in Islamic Banking & Finance

Department

Department of Finance

Faculty/ School

Faculty of Business Administration (FBA)

Date of Award

Fall 2021

Advisor

Dr. Irum Saba, Associate Professor, Program Director & Coordinator of MS(IBF)/BBA, Department of Finance, Institute of Business Administration (IBA), Karachi

Project Type

MS IBF Research Project

Access Type

Restricted Access

Pages

ix, 30

Keywords

ROA, ROE, Islamic banks, Cash

Abstract

Liquidity is the challenging issue for the Islamic financial institutions because they don’t have avenues to park. Profitability is the prime focus for all the institutions including Islamic banks but to earn or achieve profit, the banks must deploy excess liquidity in an efficient manner. Islamic banks lack opportunity because of lack of shariah compliant instruments. Sukuks have issued but they are quite limited.

The objective of this study is to find out the linkage of liquidity and its impact on profitability of IBIs in Pakistan. The study includes full fledge Islamic banks. The quarterly data is used for this study from 2007-2017 and the liquidity variables are perceived through cash and dues to total asset (CA), Cash and due to total deposit (CD), Investment to total asset (INVTA) and Investment to total deposit (INVTD). Profitability can be measured through the proxy of return on Asset (ROA), return on equity (ROE) and return on deposit (ROD). The overall model found significant and liquidity management has a significant impact on profitability. Whereas, on individual basis the Meezan bank and bank Islamic liquidity impact found insignificant on ROA while all individual variables are significant. Hence, both the banks must deploy their cash to increase a good return on Assets

Included in

Finance Commons

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