Effects of Islamic Modes of Financing on Profitability of Banking Institutions

Q4 Business, Management and Accounting

International Journal of Business and Management Science Pub Date : 2023-09-25 DOI:10.5539/ijbm.v18n5p237

Dayah Abdi Kulmie, Mohamed Abdirahman Abdulle, Mukhtar Sheikh Hussein, Hussein Abdi Mohamud

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Abstract

This study intended to examine the effect of Islamic financing modes on profitability of banking institutions in Mogadishu Somalia. In detail, the study examined the effects of Murabaha (cost-plus) and of Mudarabah (profit sharing) on profitability of banking institutions in Mogadishu Somalia. The study used a correlational research design, and data were collected through self-administered questionnaire from 56 respondents. The results indicated that Murabaha and Mudarabah have a statistically significant positive effect on profitability of banking institutions. The findings reveal that a significant increase and adherence to these Islamic modes of financing is expected to significantly improve and increase the profitability of banking institutions. The study concludes that both Murabaha and Mudarabah are vital for Islamic bank performance and profitability. It is recommended to the management of Islamic banks to start putting into consideration clients’ credit rating while determining the mark-up value and at the same time carry out regular and systematic visits to their partners to gain an insight into the operations of the joint venture businesses and also remind them to clear their obligations.

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伊斯兰融资模式对银行机构盈利能力的影响

本研究旨在考察伊斯兰融资模式对索马里摩加迪沙银行机构盈利能力的影响。该研究详细审查了Murabaha(成本加成)和Mudarabah(利润分享)对索马里摩加迪沙银行机构盈利能力的影响。本研究采用相关研究设计，通过对56名被调查者进行问卷调查收集数据。结果表明，Murabaha和Mudarabah对银行机构盈利能力有统计学显著的正向影响。研究结果表明，显著增加和坚持这些伊斯兰融资模式有望显著改善和增加银行机构的盈利能力。研究得出结论，Murabaha和Mudarabah对伊斯兰银行的业绩和盈利能力都至关重要。建议伊斯兰银行的管理层开始考虑客户的利益。在确定加价的同时对合作伙伴进行信用评级，同时对合作伙伴进行定期、系统的访问，以了解合资企业的经营情况，并提醒他们明确自己的义务。

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International Journal of Business and Management Science Business, Management and Accounting-Business and International Management

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期刊介绍： The International Journal of Business and Management Science (IJBMS) (Print: ISSN 1837-6614; Online: 1985-692X) is a double-blind peer-reviewed semiannual journal. Generally the journal publishes the articles that expand knowledge on business and management issues. Business Complexity and Performance Management were the two of the top ten problems IJBMS cover pageof 20th century management. In the 21st century, overcoming such problems seem to be challenging to educators and practitioners. Do educators and practitioners agree on which management skills are required for success in the 21st century? These all issues call for substantial research to achieve a very modern sustainable business era of the global economy. IJBMS intends to focus on the business and management issues with the vision of sustainable competitiveness along with scientific evidences. The quantitative approach for analyzing a research problem is promoted by IJBMS.