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Banks (Finance)

Fresh Data on Data Analytics Reveals Profitability Drivers in Islamic Banking

Strategic Insights

— 2 min read

A new study conducted by researchers from Universitas Islam Negeri has shed light on the determinants of profitability in Islamic banking across five Association of Southeast Asian Nations (ASEAN) countries. The research, published in Maliki Islamic Economics Journal, utilized panel data regression to examine the relationship between Return on Assets (ROA) and Return on Equity (ROE) as measures of profitability. The study selected 127 data observations from banks with complete and consistent financial data, and found that efficiency, market concentration, and inflation had a positive and significant impact on both ROA and ROE.

Key Takeaways:

  • The study examined the determinants of profitability in Islamic banking across five ASEAN countries, including Indonesia, Malaysia, Brunei Darussalam, the Philippines, and Thailand, from 2018 to 2022.
  • The research used panel data regression to examine both ROA and ROE as measures of profitability, and found that efficiency, market concentration, and inflation had a positive and significant impact on both metrics.
  • The study selected 127 data observations from banks with complete and consistent financial data, and used Fixed Effect Models (FEM) with robust standard errors to correct for heteroskedasticity.
  • The findings revealed that financing to deposit ratio (FDR) positively affected only ROE, while gross domestic product (GDP) showed an unexpected negative relationship with ROE.
  • The results suggest that internal efficiency and market structure are more critical to Islamic bank profitability than macroeconomic scale or governance mechanisms.
  • The study filled the empirical gap in the literature by offering comparative insight into Islamic bank performance across the ASEAN region.
  • The research was conducted by Ibnu Muttaqin, a researcher from Universitas Islam Negeri Sunan Kudus, and was published in Maliki Islamic Economics Journal.
  • The study is significant due to its comprehensive analysis of Islamic bank performance across five ASEAN countries.
  • The findings have implications for policymakers and regulators seeking to improve the profitability and efficiency of Islamic banking institutions.

Statistics:

  • The study selected 127 data observations from banks with complete and consistent financial data.
  • The models were estimated using Fixed Effect Models (FEM) with robust standard errors to correct for heteroskedasticity.
  • The findings revealed that efficiency, market concentration, and inflation had a positive and significant impact on both ROA and ROE.
  • Financing to deposit ratio (FDR) positively affected only ROE, while gross domestic product (GDP) showed an unexpected negative relationship with ROE.
  • The study filled the empirical gap in the literature by offering comparative insight into Islamic bank performance across the ASEAN region.

Sources:

  • "Unveiling Profitability Drivers in ASEAN Islamic Banking: A Panel Data Analysis." Maliki Islamic Economics Journal, 2025,5(1):78-94.
  • doi-org.sdpl.idm.oclc.org/10.18860/miec.v5i1.33867 (free version of the journal article available at this link)
  • Information Technology Newsweekly, August 5, 2025, p 1126.

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