THE IMPACT OF CREDIT RISK MANAGEMENT ON PROFITABILITY AND LIQUIDITY OF ISLAMIC AND CONVENTIONAL BANKS: A CASE OF PALESTINE
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Date
2022-09-15
Authors
Aseel Jafar Ameen Al-Qatu
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Abstract
Background: Credit risk is one of the largest and most significant risk exposures facing banks.
Objective: This thesis aimed to examine the impact of credit risk management on the profitability and liquidity of Islamic and conventional banks operating in Palestine.
Methodology: The researcher analyzed data from 13 banks: 11 conventional banks and two Islamic banks. The sample period extended from 2011 to 2019. The data were collected from the Palestinian Monetary Authority and yearly financial reports of individual banks. The panel data regression analysis was used for data analysis.
Results: Results of the study indicated that credit risk measurement had a statistically significant impact on the profitability of CBs but an insignificant impact on IBs' profitability. Liquidity had a significant impact on the profitability of CBs but an insignificant impact on IBs’ profitability. Profitability had a significant impact on CBs’ liquidity but an insignificant impact on IBs’ liquidity. Credit risk had a statistically significant impact on IBs’ liquidity but an insignificant impact on CBs’ liquidity.
Recommendations: Based on the study results, the researcher suggests that the government develop Islamic systems to support Islamic banks and make a balance between liquidity and profitability through efficient management. For future studies, the researcher recommends conducting more research on the subject of the thesis using other measurements.
Keywords: Credit risk management; liquidity risk, Islamic bank, commercial/ conventional bank; Basel.