Assessing the Efficiency of the Financial Performance of Palestinian Islamic Banks Using the Leading Financial Indicators (A comparative study of a sample of Islamic and commercial banks)

Abstract

This study sought to evaluate the financial performance of the Palestinian Islamic banks comprising two banks and comparing this with the industrial standard, in addition to a similar sample of commercial banks between 2013 and 2017. The comparison was drawn regarding the number, convergence in the volume of assets, deposits, profits, and the number of branches in the same duration. To realize the objective of this study, the researcher used the analytical - descriptive approach, which is based on collecting the data and information on those banks’ financial statements. The financial statements were analyzed using a set of financial ratios that fall under the indicators of profitability, liquidity, capital structure, and market shares. The arithmetic mean of those indicators was calculated and a comparison was drawn between the indicators of Islamic banks and the industrial standard those banks belong to. Moreover, a comparison was made with the Palestinian commercial banks. The study found a convergence regarding the indicators of the performance of both Islamic banks and commercial banks. Also, it was revealed that the performance of the Islamic banks was very close to the indicator of the industrial standard during the fiscal years under study, which is an indicator that the performance of Islamic banks is growing. In addition, this shows that Islamic banks employ the standards of the banking sector. The study came up with some recommendations. The Islamic banks should carry out a periodic and deep evaluation of performance using leading financial indicators to identify the strengths and weaknesses to handle them to maintain and improve performance and enhance competitiveness.