Monzer Kahfconfirmed in Table 10, which shows a rapid drop in the ratio of deposits
share to customers’ deposits, as indicated by the negative signs in Table 10.
Table 10: Profit Share of Investors/Customers’ Deposits
BANK 1998 1999 2000 2001 Avg. 98/99 99/00 00/01 98/01
A 2.66 2.12 3.20 3.20 2. 79 -20.45 51.32 0.14 20.22
B 4.36 3.71 2.15 2.45 3.17 -14.81 -42.12 14.05 -43.76
C 4.06 4.33 4.83 3.53 4. 19 6.68 11.63 -26.95 13.00
D 5.17 4.29 5.66 4.87 5.00 -17.11 31.93 -13.91 -5.85
E 4.02 4.22 4.43 2.66 3.88 5.02 4.88 -39. 99 -33.91
F --- 6.66 5.55 5.72 5.98 --- -16.75 3.06 14.20
G 4.56 4.47 4.30 3.29 4.16 -2.03 -3.89 -23.46 -27.93
Average 4.14 4.26 4.30 3.67 4.16 -7.12 5.29 12.48 -16.92
The importance of cooperation between the investment and marketing
departments is strikingly shown in these two tables. There is an apparent link
between a depositor’s share of profit and her desire to keep on depositing in
the bank’s investment accounts, or even in the current account that he is used
to.
If the rate of return is so important to depositors that we find a positive
relationship between the size of investment deposits and the profit, though at
a lag, Table 10 points out a fact, often forgotten, that through improvement
in its services, a bank can lure customers to remain with it – what is called
customers’ loyalty – even with weak a return on deposits. This may explain
why even a smart researcher will not find a perfect correspondence between
highest deposits and highest returns. This kind of “second line of defence” is
imperative for the Islamic bank should take: improved services and high
confidence/reliability can be leaned on if high returns become temporarily
scarce.
3.4 Change in Earnings and Expenses
A study of the expenses and earnings of the Islamic banks enable us to
understand the efficiency of the policy adopted in expenses and in pricing its
services. Tables 11 and 13 show the growth of expenses and earnings,
separately, while Table 12 ties expenses to investment deposits. Table 14
illustrates the change in the relation between expenses and earnings of the 7
Islamic banks. It should be noted that depositor’ share of profits is not
considered in an Islamic bank as part of the expenses, in contrast to interests
in a conventional bank.
Cost efficiency is usually defined as the gap between the expense of a
given bank and the expense of the lowest other bank for providing the same