The impact of Ijarah financing/leasing on Islamic bank performance in Malaysia: empirical evidence

• Main Author: Mohamud Said, Yusuf
• Format: Thesis
• Language: English; English; English
• Published: 2019
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/8523/1/S823627_01.pdf; https://etd.uum.edu.my/8523/2/S823627_02.pdf; https://etd.uum.edu.my/8523/3/s823627_references.docx; https://etd.uum.edu.my/8523/

Ijarah or Leasing becomes one of the most important financing schemes provided by banking institutions to meet the substantive demand from the private and household sectors. The Ijarah financing is mode of financing of Islamic banks offered to the customers and it is the second largest financing of Islamic banks in Malaysia after Murabahah. This study investigates the impact of Ijarah financing of Islamic bank performance in Malaysia. The performance of Islamic banks is measured by return on assets (ROA) and net profit margin (NPM) as dependent variables. This study uses seven (7) independent variables which are divided into two main divisions bank specific and macroeconomic factors. Bank specific factors are factors that can control by Islamic banks and these comprises operating efficiency (EXTA), bank size (LTA), total Ijarah financing (IJTA) and total financing (TFTA) while macroeconomic factors refer to factors that are beyond ability of the Islamic banks and these includes base lending rate (BLR) or Base financing rate (BFR), consumer price index (CPI) and gross domestic product (GDP). The data is limited to the Islamic banks in Malaysia within the period of 2004 until 2018. This study analyses using Random effect models. The results show that Ijarah financing has a positive and significant effect on net profit margin as proxy of Islamic banks performance. However, the Ijarah financing has positive but no significant influence on return on as assets as proxy of Islamic banks performance. The findings suggest Islamic banks to increase the portfolio of Ijarah financing in order to raise up the performance of the Islamic banks. Also, this study has strongly contributed in the existing literature of single country analysis of Islamic banks particularly in the context of Malaysia.