Success Factors of Islamic Banks: An Empirical Studyinformation on these variables is generally not available in the published
annual reports.
Despite these shortcomings, this section still provides important evidence
that will help in identifying the factors that are responsible for the success or
the failure of Islamic banks, whether in the countries where the 7 banks are
located in Arab and Islamic countries or elsewhere.
3.1 Growth of Assets and Invested Assets
Islamic banks vary greatly in their ability to increase their overall assets in
general and their invested assets in particular. Tables 1 and 2, show the
growth of assets and invested assets respectively in case of some Islamic
banks.
It may be observed at Table 1 that, while one of the banks (bank C) was
able to increase its assets by 96 per cent over three years followed by bank G
with a growth of 42 per cent, a decline may be noticed in the assets of
another bank (bank F) by 18 per cent.
Surely this increase in assets is strongly indicative of the bank’s ability to
grow and succeed. More importantly, it indicates the bank’s ability to generate
earnings because growth in asset does not merely increases in the amount of
money the bank can invest, but increases the bank’s ability to invest in
projects with higher returns. In other words, the bank is able to improve the
quality of its investment. The two points are reflected in an increased
profitability of the Islamic bank.
Table 1: Percentage Growth of Total Assets in Some Islamic Banks
BANK 1998/1999 1999/2000 2000/01 1998/2001 Average
A 7.10 9.42 9.56 28.40 9.47
B 0.26 22.25 1.62 24.55 8.18
C 19.34 25.87 30.46 95.96 31.99
D 38.11 -16.06 -5.13 9.99 3.33
E 4.19 1.90 8.77 15.48 5.16
F --- 2.13 -20.03 -18.33 -9.16
G 6.00 14.47 17.27 42.31 14.10
Average 12.50 8.57 6.08 28.34 9.01When the growth of assets in Table 1 is examined, it is found that the
general increase in assets alone does not give the complete picture. We should
attempt to understand the phenomena and factors behind this increase. Here
we would find two Islamic banks C and G that were able to maintain steady