Effect of Macroeconomic Factors on Islamic Banking Profitability : A Case Study of Islamic Division People’s Bank of Zanzibar

Abstract

The aim of this study was to determine effect of macroeconomic factors on slamic banking profitability. A case study of Islamic Division People’s Bank of Zanzibar as measured by return on assets (ROA). The study used Secondary data collected quarterly from year 2011 to June 2018 whereby the unit root test, Co intergration, vector error correlation model have been used for estimation in the linear equation econometric model in which eight variables were examined namely GDP growth rate, money supply and inflation rate. The estimation result showed that money supply and GDP growth rate had positive significant relationship with the Islamic banks profitability, whereas inflation has negative relationship with the Islamic banks profitability, which means those are the variables that affects profitability at PBZ in a long run.