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Performance indicators of banks in a total Islamic banking system: the case of Sudan

Performance indicators of banks in a total Islamic banking system: the case of Sudan Purpose – The purpose of this paper is to describe the common performance traits of banks operating in a whole Islamic banking system in Sudan. Sudan is among the few economies in which a whole Islamic banking system is in place. Design/methodology/approach – Nine banks representing the most active and large banks are used as a sample for this analysis. The study applied factor analysis to a large set of financial ratios that are commonly used in financial analysis of banks. Findings – The study found that six factors are able to explain most of the variation of the financial ratios used in the study. These factors ranked according to the percentage of variation explained are: liquidity risk, coverage, efficiency (utilization), profitability, capital adequacy, and control. The study also tested for the stability of these factors over time and found that both the extracted factors and their loadings are stable over time. Practical implications – Thus, this study provides a reduced set of indicators of performance of Islamic banks that operate in a total Islamic banking system that may be beneficial to a large group of stakeholders and parties that have interest in Islamic banking. Originality/value – This study provides an opportunity to interested researchers in the area of Islamic banks about an important aspect of a total Islamic banking system, such as Sudan. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Islamic and Middle Eastern Finance and Management Emerald Publishing

Performance indicators of banks in a total Islamic banking system: the case of Sudan

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Publisher
Emerald Publishing
Copyright
Copyright © 2013 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8394
DOI
10.1108/17538391311329833
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to describe the common performance traits of banks operating in a whole Islamic banking system in Sudan. Sudan is among the few economies in which a whole Islamic banking system is in place. Design/methodology/approach – Nine banks representing the most active and large banks are used as a sample for this analysis. The study applied factor analysis to a large set of financial ratios that are commonly used in financial analysis of banks. Findings – The study found that six factors are able to explain most of the variation of the financial ratios used in the study. These factors ranked according to the percentage of variation explained are: liquidity risk, coverage, efficiency (utilization), profitability, capital adequacy, and control. The study also tested for the stability of these factors over time and found that both the extracted factors and their loadings are stable over time. Practical implications – Thus, this study provides a reduced set of indicators of performance of Islamic banks that operate in a total Islamic banking system that may be beneficial to a large group of stakeholders and parties that have interest in Islamic banking. Originality/value – This study provides an opportunity to interested researchers in the area of Islamic banks about an important aspect of a total Islamic banking system, such as Sudan.

Journal

International Journal of Islamic and Middle Eastern Finance and ManagementEmerald Publishing

Published: Jun 14, 2013

Keywords: Islamic banks; Sudan; Performance indicators; Financial ratios; Factor analysis

References