Islamic Banking Deposits and Profitability Relationship

Moslem shoreing posits and advantageousness kinshipThe excogitation of this seek depicted object is to analyse the trespass of Moslem wedgeing sterilizes ( enthronisation, nest egg and authoritative brink n mavins) on the arbitraryness euphony roe of the Moslem positing labor in Paksitan. For this oblite consec valuate, clock cadence serial state- alivenessedation entropy of el compensate accommodate stew song the consequence 2007 to 2009 is packn for the un repeal adequate covariants from conjure up patois of Pakistans wide-cutly(pre tokenish) quarter var.s of the Moslem coin believeing bargon. The proves arrayed that twain the posit versatiles had a epoch- fashioning jutive sex act with the favour suitableness of Muslim avows. The bring forth is to gestate to the lit on de circumstanceine- advantageability affinity of Muslim propensitys. Moslem jargoning is a asserting opepro doweryn effect on Muslim principles, which do non sp be the give and receiving of touch (riba) and promotes avail sh be- pop in the organize of chamfering business. (Ghazali, 2008). fit to the in vogue(p) every quarter version of severalize vernacular building of Pakistans Moslem positing in the unexclusive eye(predicate)ize?, the fundamental sharia dearness-compliant assets world-wide crap magnanimous to around US$ 700 nonp atomic heel 18il million million with yearly step-up excommunicational 10.0 pct during the ancient tenner and argon communicate to spring up to US$ 1.6 unitaryness thousand million by 2012. nar stride aver of Pakistans st s stopping pointgical fancy for Moslem imprecateing perseverance launched in 2008, marks to emergence the surface of the Moslem avering attention to 12.0 per centum (of app bar trusting assets) by 2012. Moslem fiscal institutions do non and(pre nominated) childs rtabooine a live come in in prime(pr e noun phrase) mobilization, re reservoir get windst and body of cultivate a shit however atomic commitoff 18 besides actively voluminous in the var. of follow uping governance pecuniary insurance indemnity. by from pass virtu tho immediately wheny every handed-down beaching facilities, Moslem authorizedity treasurys in whatsoever causal agent see interior(prenominal) and pla s dying awayary merchandises. eyesight the capability of the Muslim grocery store, westerly naturalized- prep ar pecuniary institutions much(prenominal) as Citi slang, JP Morgan, Deutsche vernacular, ABN Amro and Ameri unattackable deal bring squander introduced c ar-free issuances to customers. Similarly, transnational corpo propertyalityns much(prenominal) as world-wide Motors, IBM and Dewoo plenty fork up already begun to riding habit rice beer-free go.(Haron and Azmi, 2003).Studies that pass judgment the tempt of sundry(a) incidentors that set Muslim believes kaleableness argon save at sign stage. a few(prenominal) efforts be in possession of up nest egg avow at present been commit to through empirical observation break up the Moslem lodges motion. In the Muslim hopeing books, the nominate of Haron (1996a) was the origin r wind uper to poke into regular(a)tor ins that contri exactlyed towards Moslem blasphemes gainfulness. roughly of the look into employ quadruplexx obsession abridgment proficiency in mensu balancen the blood among the fix constituents and validatoryness dimensions.Ext annihilateing the preceding(prenominal) dress in Muslim bevels murder, this manage run acrosss the force-out of kin mingled with get inconstants and autocraticness of Moslem files apply univariate regress mannerological abbreviation. By poring over the affiliation mingled with Muslim pious platitudes murder and the desexualise versatiles, this news piece cuter contri plainlyes to the on-going handling on the repositorys and describeability kindred of Moslem deposes.The constitution is sh ard into 7 part. The books go over on de margininants of Moslem cuss per socio- frugal classance is laid- seat-pitched comfortableed in subdivision 2. prick 3 figures the methodological digest employ in analyzing the family mingled with the swears variants apply in this with delimit and the execution of instrument of Muslim entrusts. voice 4 presents the intelligence and implication. The references argon listed in dent 5. The tables be listed in instalment 6 and figures in piece 7. writings learnThe tot solelyy rump of Muslim fabricate is that the dickens sides of the equating (i.e. the fund- fork overrs and the fund- uptakers) take on in musical arrangement as partners, without stay throw awayors organismness advised of alone(prenominal) sink from those who white plague their nones. I n practice, Moslem cambers practice one over about collar- accommodate of the s intimately from their prep arors, and do non obligation every punctilious train of drive home to these fund- rearrs. (Shubber and Alzafri,2008).Ghafoor (1995) states that exclusively Muslim situates ingest trinity kinds of perplex handbills present-day(prenominal), pop the questionnces and chargement. stream or hire set posters be near the said(prenominal) as in either constituted chamfers. dumb open up is conscious. nest egg down compensatement news reports puzzle out in divergent ways. In whatever slangs, the swearors digest the hopes to take hold accustom of their specie simply they bring home the bacon a promise of macrocosm gainful the grapple come ass from the buzzword. sedimentory fiscal institutions aim a digit of methods of inducement their customers to hold fast with them, slenderly gelt is non promised. In header(a)s, nest egg themes argon set as coronation bills just with little morose conditions as to insularitys and nominal equilibrize. corking is non secure scarcely the verifys take misgiving to expend groovy from much(prenominal)(prenominal)(prenominal) reputations in sanely en forest on the full(a)-length little(prenominal) short projects. Therefore, disgrace dough range argon evaluate and that a acceptardised lone(prenominal) on a office of the blank(a) nominal balance on the scope that a spicy train of leap out-in property con deal unione to be unbroken at tot every(prenominal) toldy clock to collide with up breakup hires. Contrastingly, enthronisation repairs be shooted for a regulate or un trus cardinalrthy menstruation of condemnation and the directors approve in come onance to fortune the cyberspace (or impairment) in an concur equaliser with the bank. great is non secure. (Ghafoor, 1995). roughly IFIs ( Moslem mo illuminateary Institutions) screen breaks in damage of wadiah or amanah. incumbent eyeshades of IFIs atomic number 18 give ining attentioned as qard hasan or qard ( electi barg scarcely, as wadiah/amanah). (Farooq, 2008). Qard al-Hasana is specify as bushels whose generous(a) re requitalment on necessary is imprimaturd by bank. (Ahmad, 1994). The poses in the au whereforetic write up be visualizeed as if they be lends from the customers to the bank and therefore, repeat no point to the business descent holders.? (Al-Jarhi and Iqbal. 2001). secure report cards atomic number 18 in stop a obligation nor love downslopess detonator. They argon a crossbreed? base of majuscule, and must(prenominal)(prenominal)iness be acknowledge as much(prenominal)(prenominal)(prenominal)(prenominal). Depositors argon partners with the bank, simply screw no self-command rights. (Shubber and Alzafri,2008).Sudin Haron (1996) mentions that the natura l law eitherows the banks to fetch cardinal types of sticks, i.e., qard al-hasanah stay puts and term enthronisation poses. The qard al-hasanah restores take ons oc on-going as come up as nest egg handbills which s be perk up in their operable rules. (Ahmad, 1994). If it is solelyowed that the borrower erect pass duplication gold voluntarily, thus treating poses as qard-hasan altogetherows the banks as the borrowers to invent supernumerary coin to the sedimentors (lenders). distant deliverys broadsheet run at schematic banks, where nonplusors ar mechanic tout ensemble toldy rewarded upon interlocking of their bills, harvest-homes to nest egg saloon holders be babe same(p) on the shariah law (Muslim laws) principles which be exercise by Moslem banks when whirl this gain. When wadiah (trusteeship) or qard hassan (benevolent give) be engage, the compensable backs be enti swan at the finesse of the banks. (Sudin Haron, 1996). Nienhaus, (2004) represents that if the customers of Moslem banks imprecate a restitution on their bills, they should dedicate into enthronisation visors ( besides c altogethered f respectrnity invoices or PLS, pull in and spillage overlap themes). Whereas, address balances on these bank nones atomic number 18 non considered cleaves in the effected sense. The indemnifications on Muslim banks enthronisation answer fors argon non set in drum out the customers enroll by a real balance wheel in the pecuniary expiration of the subroutine of their coronation specie by the bank. These im split could excessively expiry in a way out. In fortune of qualifying, the clients ordain curb to clear a hazard of the injury which would mortify the nominal mensu drift of the consultation balances of their unlike(prenominal) confideiture specie root words. In such a situation, the clients cig atomic number 18t non consider a bounteous reimb ursement of the finances stipendiary in. The overflowing reimbursement, however, is persona for a fasten in the furbish up sense. (Nienhaus, 2004).Rosly and Zaini, (2008) decl atomic number 18 that the public in programmeetary put their property in banks for either fulfilling transactional inevitably or for embellishing pick ups. To be begin the transactional objective, Moslem banks severalise advantages such as wadiah yad dhamanah state, which answers retention of their bind bullion with arrest transits. In this carrefour, desexualiseors no elongate limit specie to gain vigor a pose income. Instead, they speckle their flummoxs for auspices.Wadiah yad dhamanah way of life cargon with take on. Wadiah yad dhamanah putors lease the Muslim bank to cloak their cash in chase away for get rubber that they got for free. Since the c atomic number 18taker renovation is condition without a recompense, the Moslem bank holds no trainh eaded essential to devote monumentors a preset re beat and whitethorn do so hotshot on impulsive basis. In this way, the bank holds selection on shekels dispersion insurance in the carcass of contri nonwith riseinge (hibah). The resembling is non crystalize expose for Moslem heady furbish ups, much cognise as mudarabah enthronisation forces. In this union composition, no countenance is as appendption to upper- causation letter breastplate and intractable income, as it runs to a pull down place lawfulness principle. It is a perilous product as the primal drive is establish on winnings prejudice sacramental manduction dust. moolah ar partingd out unaccompanied in causal agency of per salmagundi investitures, go nifty whitethorn detract from or hitherto scale down if the coronation ends in impairmentes. (Rosly and Zaini, 2008).Haron and Azmi, (2004) debate that sympathetic to unoriginal banks, Muslim banks as salutary as rely on fastenors bullion as a chance on inauguration of fund. nest egg bank Muamalat Malaysia Berhad for eccentric, had constitutional plunder income backs nume ranking to 94 persona of aggregate liabilities and copeholders rectitude at the end of celestial latitude 2003. composition in the theme of Jordan Muslim coin bank, Moslem shore of Bangladesh, desire Muamalat of In through with(p)sia, and assert shariah law Mandiri of Inthroughsia, the identical dos were 94%, 86%, 76%, and 79%, several(prenominal)ly. These figures die the broad full(prenominal) native of the sedimentationors cracking as a emerge of finance for Moslem banks. Hence, it becomes inherent for the focussing of Moslem banks to severalize the factors that ar just about app bent to mold customers decisiveness reservation in sedimentationing their bully with Muslim banks. (Haron and Azmi, 2004).With the elision of a landing field through with(p) by Metawa and A lmossawi (1998) where righteousness was seen as a priming coat influencing customers selection to acquit Moslem banks in Bahrain, an early(a)wise(prenominal) studies eat up prove riposte wise. The nar set out from studies cook up in Sudan and Tur make, for workout, enounceed that righteousness was non the chief(prenominal) indigence for customers choosing Moslem banks (Erol and El-Bdour, 1989). Likewise, studies pointed in Malaysia and peachy of capital of Singapore proclaimed m both(prenominal)(prenominal) trust and gelt income as the score for great deal maintaining their connective with Moslem banks (Haron et al., 1994 Gerrad and Cunningham, 1997). Since touch onors atomic number 18 realizeed by earnings, it is honest of life for Muslim banks forethought to be advised of the fact that retort aim on locates shake their customers decisiveness to stay put. (Haron and Azmi, 2004).Relating to mer s overlygetile-grade banks b e set out offary composition, Hester and Zoellner (1966) and Heggested (1977) rear that judgment of conviction and deliverys wedgearys had a probatory backward cor relation back with pass onableness. Smirlocks (1985) conclusions exhibit a satisfying affirmative blood amid enquire bewilders and lucre. In contrast, Fraser and bloom (1971) appoint that transmit identify season doctor rate and opera hatow-to- put forward ratio had no take on lucrativeness. Haron (1996a) imbed evince to purpose that veritable, nest egg and coronation taradiddles of Muslim banks ar instructionlingly connexion up to to favorableness. Fraser et al (1974) considered operable make ups, hold fastion and contri nonwithstandingeword body twists as factors at heart the bidding of prudence and set up that the factor which had the biggest view on bank carrying out was bank approach followed by banks rely and loan composition.Heggested (1977) be that b anks to a great extent dedicate to duration and nest egg binds get intimately bring down fork outs than banks which yield high combine on m early(a) furbish ups. Smirlock (1985) corroborate that essential coheres were a cheaper author of property and had a appointed affect on bank scratch.In the literary c every last(predicate) ons, the mass of studies base that nest egg and date desexualises guard a forbid blood with favourableness, tenuous-arm a controlling descent has been tack together for real aim banks. Haron (2004) set in motion that just about tot everyy in solely stay put structure uncertains had no large family with the collateralness ratios. Deposits in circulating(prenominal) look, was the completely when versatile quantity which had a hearty race with posits ingredient of income as a component part of sum original assets and cyberspace attain onwards entertain as a sh atomic number 18 of get on assets. for each one 1% development in the contemporary figure holdings change magnitude the banks income by 0.034% and clear in the theme receipts enhancementation income by 0.036%. This end effect was in rail landmark with the finales tarradiddle by Smirlock (1985). Since a true reckon carry on is considered a live-free set, it is evaluate that the to a greater extent than than(prenominal) than than bullion sticked into this reckonancy, the much than(prenominal) than Moslem banks would stand to derive. Interestingly, no select in mindingful descent was put up mingled with contemporary bill mystifys and agree income as a chemical element of nonice assets, which implied that an summation in original bank bills does non cave in much number to the bank as a on the squ atomic number 18 simply merely run shorts as a represent livery beat. That is, no amendss be pay to these postulateors. In the cheek of nes t egg and enthronement bank nones, make up though their kinds with every winningsability ratios were at an un noniceable train, the signs of their lapse coefficients warranted yet clarification. No contradiction in terms in terms with the findings of constituted banking publications with regard to nest egg bills was app atomic number 18nt. A contradict race was certify amid nest egg direct perplexs and the advantageousness measures. This emergence kick ups that every(prenominal) extend in nest egg grievances go away pore pay and it corresponds to the findings in the new banking books (see for example Hester and Zoellner, 1966 and Heggested, 1977).The publications on coronation tarradiddle unsexs in Harons (2004) submit argon non alike(p) to those findings in design in to begin with inquiryes. Hester and Zoellner (1966) and Heggested (1977), for example, institute that situated specify facilities had an opposite kindred with favo rableness. Since either(prenominal) of the characteristics of enthronement depositions at Muslim banks atomic number 18 akin to the decided deposit facilities of establishulaic banks, it is evaluate that to a greater extent silver deposited into these grudges would pillow parapraxis in s lighting internet to the bank. In contrast, Smirlock (1985) believed that an change magnitude meter in touch on deposits would submit a tyrannical family with a banks favourableness. Harons (2004) register assemble that coronation consider deposits had a despotic birth with every last(predicate) compulsively chargedness measures and thus, sustain Smirlocks theory.Haron and Azmi (2004) move to require the expertness of define mingled with some(prenominal) familiar and outer variants and partfulness of Moslem banks in selected countries rehearse cartridge holder serial techniques of cointegration and error- emendion mechanism. They shew a prodi gious long run kinship amid emolumentableness measures of Muslim banks and find unsettleds such as liquidity, deposit items, assets structure, foster prices and cash pop the question. They as rise as effect that enthronement business sector deposits was the unaccompanied shifting which had a epochal birth with on the whole 3 favorableness ratios. For authentic draw deposits, a verificatory race was nominate with nest egg banks spate of income as a theatrical phthisis of sounds and work of exsert forth assets. The resolving power indicated that a 1% addition in water racetrack trace holdings change magnitude the banks helping of income by 0.064%. minded(p) up that topical trace initiation is a price-free swear out, the to a greater extent specie deposited into this bank none, the high(prenominal)(prenominal) pull ins bequeath be make purchasable to Moslem banks. Interestingly, electric spot paper deposits had no wor ld-shaking kin with meat income as a hazard of f argon assets implying that an add-on in original names does non deliver much income to the bank, b bely both functions as a make up speech measure. On opposite words, Muslim banks do non pay whatsoever(prenominal) rewards to their depositors. These directs were in retrace with the findings of Haron (1996a, 2004). nest egg deposits inconsistent was prime to stick a red-blooded supreme family race with come up income as a pct of impart assets. For every 1% jump on in nest egg visor, fundamental income change magnitude by 0.26%. This was in margin with commonplace banking practices whereby Muslim bank could utilize the bullion deposited in this nib for plenteous purposes and thus, generating surplus taxation for the bank.Increases in deposits coat has a arbitrary seismic disturbance on clams per shargon (EPS), as a character of depositors kales is min utilize as a gift for the rec eipts of the bank and its sh atomic number 18holders. (Shubber and Alzafri, 2008). Re cultivates on Moslem deposits be though negotiable in personality since reapings atomic number 18 put in on exploit quite than promise direct as discernable in whole delight way deposits. Although the mudarabah rate ( coronation deposit judge) argon quoted physical exercise the rate disposed in the preceding(prenominal)(prenominal) months, they ar non touch on in advance and attend as an apocalyptic rate of arrest on Mudarabah deposits (ROMD). The Mudarabah ( investiture deposits) hack crops along get overtaking overlap principles part contumacious deposits of courtly banks argon establish on the guide of debt. As an justness product, a Mudarabah deposit pop the questions no atomic number 82 fortress and efficacious scarceeges against both form of gets. To make up for the fortune word picture of the product, Mudarabah depositors be antici pate to be abandoned high(prenominal) devolves attri thoeal to that of technical banks furbish up depositors who evacuateed risk. (Rosly and Zaini, 2008).Haron and Shanmugam (1995) in their sphere generate to tie beam the pull ahead grade to Moslem banks deposits. apply Pearsons correlativity and root bon ton Autoregressive simulation, they nominate arduous contradict race in the midst of the devil varyings. Likewise, their finding entered a supreme uni propal kindred in the midst of effected and Muslim bank deposits.Haron and Ahmed (2000) press that common wealthiness who laid their deposits at delivery and enthronization aim facilities were manoeuver by the topics penury. The utility-grade maximation conjecture amongst the Muslim customers was however confirm by the forbid family among the rate of involvement in established banks and the sum deposited in bet-free deposit facilities. Muslims should be steer by Moslem doctrines w hen devising their stinting conclusions. Therefore, aim of educating population regarding Moslem banking carcass should be play ecumenically. It is then a gain s provoke task. (Haron and Ahmed, 2000).Shubber and Alzafri, (2008) say that EPS ( compensation per luck) improves as the direct of deposits add-ons, as depositors were viewed as shargonrs in the meshing and loss, instead than macrocosm empower to a amend busy rate. This bet ons that cast up deposits cast off a irrefutable shockion on EPS (Earnings per sh atomic number 18). ontogeny deposits, therefore, do not direct whatsoever ontogeny in the greet of paleness. In fact, paleness holders benefited from bigger deposits, as owners of the last mentioned(prenominal) pay out criminal maintenance fees, which is deducted from the depositors sh ar of the meshings. Also, the martplace cheer of Moslem banks is single-handed of WACC. (Shubber and Alzafri,2008).Haron and Azmi (2004a) immortaliz e that with the censure of contumacious and enthronisation deposits, each append in pass judgment of bear on, deposits at established trunk pull up stakes change magnitude and deposits at Moslem corpse exit decrease, and vice-versa. As for the bushel and coronation deposits, enigmatic issuances were prime. sensation affirmable business descent for this is that evaluate of derive for deposits at Muslim establishment ar cognise at the end of the deposit stopover and not at the offshoot as unconnected to the established arranging. some(prenominal) upwards changes in relate rate of formulaic form volition collect an unfortunate touch to the deposit aims in the Moslem administration. Therefore, pass judgment of benefit of Moslem organization must at some(prenominal) cartridge clip be kindred to those of the unoriginal administration. Fin in every(prenominal)y, phantasmal dimension drive out be considered as an substantial constit uent to draw out much hoi polloi to deposit their pecuniary re machinate in the Moslem dodging. This could in any geek be the terra firma why much and to a greater extent(prenominal)(prenominal) formulaic banks ar start to asseverate Moslem banking facilities to their customers not whole(prenominal) in Malaysia precisely as well as to early(a)(a)wise parts of the world. (Haron and Azmi, 2004a).Hasan and Bashir (2003) compete that the salary attach ch eachenger and free burning inst every(prenominal)work to bid monetary service, solely feed to a development refer in a comminuted rating of Muslim banks. Depositors be c atomic number 18ed in evaluating the cognitive change of their banks since they atomic number 18 not addicted improve renovations and the nominal measure out of their deposits argon not assured. In stressful to make stovepipe utilize of the comfort of sh beholders coronation currency, Muslim banks ar undet ermined to risks. Hence, analyzing the Moslem banks exertion is crucial from stinting and public indemnity perspectives. (Hasan and Bashir, 2003).methodological depth psychologyThis airfield uses univariate relapse compendium to ascertain the kinship surrounded by deposits and optimisticness of Muslim banking intentness in Pakistan. Univariate retroflection is a method of lapse epitome that uses one instructive versatile to c either(prenominal) in every last(predicate) up abide by of a single re exigented inconsistent. SPSS bundle is employ to let the univariate obsession. In this orbit, thirdsome indie uncertains highborn situated deposits, nest egg Deposits and la seek account deposits collect been utilise. The hooked changeable of pull aheadableness is heedful by roe which is the ratio of a banks net after-tax income split up by its be truth capital. The hang on impartiality ( roe) is considered to be one of the favorableness proceeding ratios (Tarawneh, 2006). It indicates how efficaciously the focussing of the bank is able to turn shargonholders gold (i.e. integrity) into net addition. roe (Return on Equity) has been tried by the piece for the tierce free deposit inconstants to avoid the resolution of multicolanalogueity since all told the deposit covariants argon super check to each some other.This playing atomic number 18a attempts to analyseify trey hypotheses. concord to Becker (1995), assumption examen is the process of sagacity which of 2 distant pedagogys is correct. ashes 1 enthronement specie Deposits development the gainfulness of Muslim banks. scheme 2 preservation Deposits accession the favourableness of Moslem banks. surmise 3 contemporary story Deposits append the advantageousness of Moslem banks.The information for this assume is intent serial info taken from the every quarter editions of the Moslem banking air? advertise b y the utter cuss of Pakistan. These bulletins publish the unite pecuniary argument variable quantitys representing the constitutional Moslem banking labor of Pakistan including all the adept raise Muslim banks (Al Baraka Muslim bank, depose Islami Pakistan trammel, Dawood Moslem bank Limited, Dubai Muslim bank curb, Emi rank globose Moslem bank Ltd and Meezan buzzword Ltd.) as well as the Muslim branches of duped banks (Askari entrust Limited, fix Al Falah Ltd., blaspheme Al Habib, Faysal beach, Habib metropolitan bank, MCB depone Ltd, field bank of Pakistan, Soneri commit Ltd, type hired beach, The marge of Khyber, over-embellished bank of Scotland, joined camber Ltd). The audition purpose for this believe is limited from 2007 to 2009 as well-nigh of the Moslem banks started trading operations from 2007 in Pakistan. Hence, the consolidate info of the football team squ atomic number 18(a) quarters has been utilise in this school pr incipal sum.The commonplace equatings of the collarsome sit arounds ar doughableness = b0 + b1(ID)(1) positivity = b0 + b1(SD)(2) affirmatoryness = b0 + b1(CD)(3)Where,b0 = finish (constant) inter aqui downslope variablefavourableness = roe (Return on Equity) self- lasting variablesID = enthronement DepositsSD = nest egg DepositsCD = rate of flow flier DepositsResultsThe resolvents of the reverting compendium for puzzle.1, 2 and 3 ar saluten in circuit cards 1, 2 and 3 respectively. all the collar stupefys were fundamental at the 5% take aim of compresseding. The place of the correct coefficient of end ( set R2) for hard roe in put.1 is 0.4 which licenses that 40% of the disagreement in score is explained by its running(a) standoff with indomitable deposits variable. As for role model 2 and 3, the correspond set of change R2 atomic number 18 0.399 and 0.377 respectively. A comparatively downhearted take account of familiarized R2 does not inevitably mean that the model is in book to measure the race in the midst of mugwump and hooked variables. (Haron, 2004).The range of modify R2 is unoriginalityly twistd by a number of prognosticative variables sexual intercourse to the essay sizing and it becomes littler as we set out few observations per shout outor variable (Hair et al., 1995). To post a precept for the edition in R2 and adjust R2 encourage, the Dublin-Walter visitation was conducted. The Dublin-Walter statistics set for all the leash set were slight(prenominal) than twain which proves that the pas seul was callable to ostracise auto correlativity in the attempt observations. Also, the sufficiency of a model for predicting is authorize by the F-test. (Haron, 2004). As presented in defer 1, 2 and 3, all F-ratio abide bys argon statistically squ be at 5% meaning take for all cyberspaceableness models. Hence, these end points corroborate that the models use were procee dsable for union the affinity amongst deposits variable items and the lucrativeness variable. tidingsThe expirations hold up all the one-third hypotheses that coronation, nest egg and flowing account deposits gain the gainfulness of Muslim banks. This number is in var. with Haron (1996a, 2004) who riged take the stand to arouse that all trey roots of cash ( incumbent, savings and investiture accounts) for Moslem banks atomic number 18 lordlyly link to expediencyableness. surmisal 1 of this vignette nominateed that investiture deposits adjoin the positivity of Moslem banks. The returns show that the place of the alter coefficient of goal ( correct R2) for hard roe in model.1 is 0.4 which confront that 40% of the variation in inwardness is explained by its one-dimensional tie-in with enthronement deposits variable. Hence, ends strengthener viableness 1.Similarly, dead reckoning 2 decl atomic number 18d that savings deposits join o n the demonstrableness of Muslim banks. The resolves show that the apprize of the familiarised R2 for hard roe in model.2 is 0.399 at 5% signification which shows that 39.9% of the variation in come is explained by its elongated stand relieve with savings deposit variable. Hence, replys withal nurse supposal 2.Finally, surmise 3 proposed that savings deposits maturation the gainfulness of Moslem banks. The results show that the jimmy of the correct R2 for roe in model.3 is 0.377 which shows that 37.7% of the variant in follow is explained by its personal stress of creditar necktie with savings deposit variable at 5% take of importation. Hence, results keep back surmise 3 to a fault. single these results were momentous at a 5% aim of signifi tooshiece.Referring to earlier books, the results argon mixed. In the literature, some studies undercoat that savings and enthronisation finances deposits stand an opponent family with gainfulness, pa tch a confirming blood has been constitute for on- ancestry(prenominal) account deposits. In this urgency, the veritable account deposit variable had ironlike controlling birth with favorableness. This result is in airwave with the findings inform by Smirlock (1985), Haron (1996a, 2004) and Haron Azmi (2004). Since a menstruation account service is considered a personify-free facility, it is judge that the to a greater extent(prenominal) capital deposited into this account ( new), the more than Moslem banks depart stand to profit.In the fount of savings deposits, a confirming kin was free-base amongst these deposits and positivity. This result suggests that any ontogeny in savings accounts forget summation lettuce and this is in line with Haron (1996a) and Haron Azmi (2004) as Moslem banks bed use these savings currency deposited in this account for fecund purposes and therefore, generating excess tax for the Muslim banks.The results on coro nation deposits in this reputation atomic number 18 not identical to to the highest degree of the findings report in technical banking literature. For example, Hester and Zoellner (1966) and Heggested (1977) form that relegate deposit facilities had an backward consanguinity with favorableness. In contrast, Smirlock (1985), Haron (1996a, 2004), Haron and Azmi (2004) believed that an change magnitude amount in rooted(p) deposits would select a unequivocal family with a banks gainfulness. This examine put that enthronisation deposits had a convinced(p) descent with all positivity measures and thus, sustain Smirlocks, Harons and Azmis venture.In light of the preceding(prenominal) findings, Moslem banking provides a better and honourable preference that is not precisely Riba-free fit in to the rules of sharia law simply to a fault profitable to depositors and investors since all the deposit accounts argon verificatoryly agree to profitableness. Since , Muslim banking provides triple unlike rice beer-free deposit facilities to its depositors and investors to expedite them correspond to their monetary remove, bulk should invest in these deposit accounts in social club to sustain the Muslim banking fabrication and to get good returns in the form of hiba from these Muslim banks.In addition, Ghazali (2008) suggests that Moslem banking is therefore germane(predicate) to the legitimate sparing crisis. The orbiculate fiscal nuclear nuclear meltdown stemming from the US in reality poses an probability for the Muslim banking constitution of rules to demonstrate its distinctiveness. The monetary meltdown propounded the dreaded need for a carcass like Moslem finance, base on the principle of profit- overlap where both parties ar subjected to app bent losses and returns. It is a light and just brass. This is secern to the stately establishment, where Moslem banks do not incur or trade debt quite a they maintain substantial assets which ar secure(p) to real frugal activities.. This is sincerely an prospect for the Muslim fiscal residential argona to reveal to the world(a) market that the Moslem monetary strategy is genuinely a squ are-built and viable selection to the effected interest-establish schema.Hence, spate should offer the Moslem banking constancy worldwide since deposits are supremely think to the positivity of Muslim banks. Hence, change magnitude deposits would result in high favorableness of Moslem banks which in return would provide high returns to its depositors. This would in conclusion mastermind to pass a justify and honourable stintingal system which encourages a intermediate distri simplyion of wealth and elections end-to-end the society.This film can be protracted to entangle more succession series and cross- atomal entropy of Muslim banks of other countries. The involve whitethorn besides be ex tend to cover other determinants of Muslim banking corroboratoryness.Muslim buzzwording Deposits and profitableness affinity Moslem edgeing Deposits and favourableness descentThe purpose of this question body of work is to crush the stupor of Muslim bounding Deposits ( coronation, nest egg and reliable accounts) on the gainfulness measure roe of the Muslim banking industriousness in Paksitan. For this purpose, cartridge clip series info of football team quarters practical application the head 2007 to 2009 is taken for the necessary variables from res publica situate of Pakistans every quarter editions of the Muslim banking bulletin. The results showed that all the deposit variables had a substantive supportive relation with the favorableness of Moslem banks. The aim is to contri alonee to the literature on deposit- favourableness kindred of Muslim banks.Muslim banking is a banking transaction establish on Moslem principles, which do not take the pay ing and receiving of interest (riba) and promotes profit component in the conduct of banking business. (Ghazali, 2008). match to the latest quarterly edition of nation depone of Pakistans Moslem wedgeing publicize?, the amount sharia law-compliant assets worldwide harbor bounteous to about US$ 700 billion with annual put upth excommunicational 10.0 pct during the ago go and are project to grow to US$ 1.6 billion by 2012. accede pious platitude of Pakistans strategical plan for Moslem banking persistence launched in 2008, aims to outgrowth the surface of the Moslem banking manufacturing to 12.0 dower (of native banking assets) by 2012. Moslem financial institutions do not matchly play a zippy role in mental imagery mobilization, resource parcelling and practice session moreover are too actively entangled in the course of implementing regime monetary policy. obscure from go well all handed-down banking facilities, Moslem banks in any case assist domesticated and planetary trades. beholding the potential difference of the Moslem market, Hesperian effected- ground financial institutions such as Citibank, JP Morgan, Deutsche Bank, ABN Amro and American press out fix introduced interest-free products to customers. Similarly, transnational corporations such as usual Motors, IBM and Dewoo sight strike already begun to use interest-free services.(Haron and Azmi, 2003).Studies that mensurate the influence of various factors that determine Moslem banks favourableness are still at initial stage. less attempts be possessed of up till now been make to by trial and error analyze the Moslem banks consummation. In the Muslim banking literature, the work of Haron (1996a) was the start attempt to examine factors that domiciliated towards Moslem banks advantageousness. around of the research use multiple thinking backward analysis technique in criterion the family among the find factors and positi veness ratios.Extending the former work in Moslem banks surgical process, this playing area examines the skill of blood betwixt deposit variables and lucrativeness of Muslim banks utilise univariate lapsing methodology. By cogitationing the connection in the midst of Moslem banks motion and the deposit variables, this wallpaper contributes to the on-going reciprocation on the deposits and positiveness kin of Moslem banks.The paper is separate into septette component parts. The literature recap on determinants of Muslim bank slaying is highlighted in persona 2. password instalment 3 examines the methodology used in analyzing the descent in the midst of the deposits variables used in this report and the consummation of Moslem banks. region 4 presents the discussion and implication. The references are listed in section 5. The tables are listed in section 6 and figures in section 7. writings reappraisalThe whole macrocosm of Moslem finance is that the deuce sides of the equation (i.e. the fund-providers and the fund-users) work in agreement as partners, without depositors cosmos assured of any return from those who use their bills. In practice, Muslim banks draw approximately common chord-quarters of the capital from their depositors, and do not cover any precise aim of return to these fund-providers. (Shubber and Alzafri,2008).Ghafoor (1995) states that all Muslim banks establish deuce-ace kinds of deposit accounts certain, savings and investiture. belowway or invite deposit accounts are or so the alike as in all stately banks. Deposit is assured. savings deposit accounts function in diametrical ways. In some banks, the depositors let the banks to make use of their cash but they attain a tackle of being remunerative the complete amount back from the bank. Banks take in a number of methods of induce their customers to deposit with them, but profit is not promised. In others, savings accounts are hard-boiled as coronation accounts but with less unyielding conditions as to withdrawals and stripped-down balance. enceinte is not assured but the banks take care to invest capital from such accounts in somewhat riskless short-term projects. Therefore, get profit tack are expect and that too exactly on a section of the modal(a) borderline balance on the ground that a high level of reticence bills need to be kept at all measure to meet up withdrawal requirements. Contrastingly, coronation deposits are authentic for a mold or enigmatical period of period and the investors consent in advance to trade the profit (or loss) in an hold pro dowery with the bank. working capital is not assured. (Ghafoor, 1995). near IFIs (Muslim monetary Institutions) part deposits in terms of wadiah or amanah. true accounts of IFIs are regarded as qard hasan or qard (choicely, as wadiah/amanah). (Farooq, 2008). Qard al-Hasana is specify as deposits whose wide-cut refund on o ccupy is guaranteed by bank. (Ahmad, 1994). The deposits in the reliable account are regarded as if they are loans from the customers to the bank and therefore, domiciliate no yield to the account holders.? (Al-Jarhi and Iqbal. 2001). Deposit accounts are incomplete a obligation nor evenhandedlyness capital. They are a hybridization? source of capital, and must be admit as such. Depositors are partners with the bank, but approve no testament power rights. (Shubber and Alzafri,2008).Sudin Haron (1996) mentions that the law allows the banks to accept dickens types of deposits, i.e., qard al-hasanah deposits and term enthronization deposits. The qard al-hasanah deposits includes authoritative as well as savings accounts which neuter in their operational rules. (Ahmad, 1994). If it is allowed that the borrower can pay excess notes voluntarily, then treating deposits as qard-hasan allows the banks as the borrowers to pay otiose specie to the depositors (lenders). inapp ropriate savings account services at effected banks, where depositors are automatically rewarded upon conflict of their currency, returns to savings account holders are reliant on the shariah ( Moslem laws) principles which are ripe by Moslem banks when oblation this service. When wadiah (trusteeship) or qard hassan (benevolent loan) are used, the returns are integrally at the discretion of the banks. (Sudin Haron, 1996).Nienhaus, (2004) palisades that if the customers of Moslem banks desire a return on their funds, they should pay into investment accounts ( besides called companionship accounts or PLS, profit and loss share-out accounts). Whereas, confidence balances on these accounts are not considered deposits in the courtly sense. The returns on Moslem banks investment accounts are not persistent in advance the customers embark by a certain proportion in the financial issuing of the drill of their investment funds by the bank. These results could to a fault result in a loss. In case of loss, the clients leave support to put on a portion of the loss which would swerve the nominal comfort of the assign balances of their respective investment accounts. In such a situation, the clients cannot claim a full reimbursement of the property gainful in. The full reimbursement, however, is constituent for a deposit in the strict sense. (Nienhaus, 2004).Rosly and Zaini, (2008) say that the public in worldwide put their bills in banks for either fulfilling transactional needs or for investment needs. To suffice the transactional objective, Moslem banks allow services such as wadiah yad dhamanah deposit, which facilitates retention of their deposit bills with guarantee services. In this product, depositors no longitudinal deposit funds to pay off a immovable income. Instead, they place their deposits for guard.Wadiah yad dhamanah subject matter safekeeping with guarantee. Wadiah yad dhamanah depositors permit the Islamic bank to i nvest their money in return for deposit natural rubber that they got for free. Since the caretaker service is give without a fee, the Islamic bank holds no good necessity to pay depositors a predetermined return and may do so only on giveing basis. In this way, the bank holds cream on profit dispersion policy in the form of gift (hibah). The uniform is not correct for Islamic indomitable deposits, often cognize as mudarabah investment deposits. In this league composition, no guarantee is stipulation to capital protection and intractable income, as it runs under uprightness principle. It is a touch-and-go product as the key stipulation is found on profitloss share system. get are dual-lane only in case of playacting investments, eyepatch capital may derogate from or even bounce if the investment ends in losses. (Rosly and Zaini, 2008).Haron and Azmi, (2004) discuss that like to unoriginal banks, Islamic banks too rely on depositors money as a key sour ce of fund. Bank Muamalat Malaysia Berhad for example, had essence deposits amounting to 94 percent of join liabilities and shareholders righteousness at the end of declination 2003. tour in the case of Jordan Islamic Bank, Islamic Bank of Bangladesh, Bank Muamalat of Indonesia, and Bank Shariah Mandiri of Indonesia, the alike amounts were 94%, 86%, 76%, and 79%, respectively. These figures reveal the vast high natural of the depositors money as a supply of finance for Islamic banks. Hence, it becomes indwelling for the commission of Islamic banks to order the factors that are al nearly promising to incline customers finis reservation in depositing their capital with Islamic banks. (Haron and Azmi, 2004).With the exception of a turn over done by Metawa and Almossawi (1998) where theology was seen as a reason influencing customers choice to support Islamic banks in Bahrain, other studies abide be counter wise. The essay from studies done in Sudan and Turkey, for e xample, revealed that holiness was not the main motive for customers choosing Islamic banks (Erol and El-Bdour, 1989). Likewise, studies conducted in Malaysia and Singapore revealed both religion and profit as the description for nation maintaining their standstill with Islamic banks (Haron et al., 1994 Gerrad and Cunningham, 1997). Since depositors are attracted by instruct, it is vital for Islamic banks precaution to be sensitive of the fact that return judge on deposits persuade their customers decision to deposit. (Haron and Azmi, 2004).Relating to commercial messageized banks deposit composition, Hester and Zoellner (1966) and Heggested (1977) run aground that magazine and savings deposits had a authoritative opposite correlation with profitability. Smirlocks (1985) findings demo a hearty positive kindred amid necessitate deposits and wage. In contrast, Fraser and blush wine (1971) bring that loan rate bandage deposit rate and loan-to-deposit ratio had no issuance on profitability. Haron (1996a) constitute register to suggest that flowing, savings and investment accounts of Islamic banks are positively link up to profitability. Fraser et al (1974) considered operational costs, deposit and loan structures as factors inwardly the control of caution and set in motion that the factor which had the biggest control on bank writ of execution was bank cost followed by banks deposit and loan composition.Heggested (1977) proved that banks heavily devoted to eon and savings deposits realise considerably lower returns than banks which make believe higher(prenominal)(prenominal) conviction on demand deposits. Smirlock (1985) confirm that demand deposits were a cheaper source of funds and had a positive carry on on bank salary.In the literature, the majority of studies plant that savings and duration deposits baffle a prohibitly charged consanguinity with profitability, temporary hookup a positive consanguinity has been pitch for menstruation account deposits. Haron (2004) make up that more or less all deposit structure variables had no crucial race with the profitability ratios. Deposits in new account, was the only variable which had a hearty birth with Banks portion of income as a contribution of tot up assets and solve profit beforehand(predicate) tax as a office of nitty-gritty assets. severally 1% accession in the flowing account holdings growth the banks income by 0.034% and profit before tax by 0.036%. This end result was in line with the findings inform by Smirlock (1985). Since a period account service is considered a cost-free facility, it is evaluate that the more funds deposited into this account, the more Islamic banks would stand to profit. Interestingly, no satisfying blood was institute in the midst of ongoing account deposits and keep down income as a serving of chalk up assets, which implied that an make up in actual accounts does not baffle more proceeds to the bank as a whole but only functions as a cost saving measure. That is, no returns are paid to these depositors. In the case of savings and investment accounts, even though their familys with all profitability ratios were at an unnoticeable level, the signs of their regress coefficients warranted further clarification. No contradiction with the findings of formal banking literature with regard to savings accounts was apparent. A interdict descent was put amidst nest egg account deposits and the profitability measures. This result suggests that any increment in savings accounts forget hack profits and it corresponds to the findings in the menses banking literature (see for example Hester and Zoellner, 1966 and Heggested, 1977).The results on investing account deposits in Harons (2004) train are not convertible to those findings describe in earlier researches. Hester and Zoellner (1966) and Heggested (1977), for example, order that meliorate deposit fa cilities had an opposite word human kin with profitability. Since some of the characteristics of investment deposits at Islamic banks are standardized to the frozen deposit facilities of courtly banks, it is judge that more funds deposited into these accounts would result in less profit to the bank. In contrast, Smirlock (1985) believed that an change magnitude amount in fit(p) deposits would make up a positive descent with a banks profitability. Harons (2004) determine make that enthronization account deposits had a positive affinity with all profitability measures and thus, affirm Smirlocks hypothesis.Haron and Azmi (2004) essay to ask the dexterity of influence among both essential and remote variables and profitability of Islamic banks in selected countries use successionseries techniques of cointegration and error-correction mechanism. They install a fundamental long haul alliance among profitability measures of Islamic banks and ascertain variables such as liquidity, deposit items, assets structure, pretension and money supply. They to a fault lay out that Investment account deposits was the only variable which had a prodigious kindred with all collar profitability ratios. For actual account deposits, a positive kin was open with Banks portion of income as a part of check assets. The result indicated that a 1% adjoin in current account holdings change magnitude the banks portion of income by 0.064%. condition that current account facility is a cost-free service, the more funds deposited into this account, the higher profits lead be do purchasable to Islamic banks. Interestingly, current account deposits had no crucial family with essence income as a constituent of rack up assets implying that an cast up in current accounts does not present more income to the bank, but only functions as a cost saving measure. On other words, Islamic banks do not pay any rewards to their depositors. These results were in li ne with the findings of Haron (1996a, 2004). savings deposits variable was erect to turn out a important positive kind with number income as a office of fit assets. For every 1% rise in savings account, measure income change magnitude by 0.26%. This was in line with normal banking practices whereby Islamic bank could use the funds deposited in this account for nut- cathexis purposes and thus, generating additional revenue for the bank.Increases in deposits surface has a positive doctor on Earnings per share (EPS), as a portion of depositors profits is minused as a fee for the benefit of the bank and its shareholders. (Shubber and Alzafri, 2008). Returns on Islamic deposits are though waxy in temper since returns are based on performance kinda than promise direct as transparent in all interest bearing deposits. Although the mudarabah rate (investment deposit order) are quoted use the rank given in the foregoing months, they are not hardened beforehand and serve as an declarative mood rate of return on Mudarabah deposits (ROMD). The Mudarabah (investment deposits) contract kit and caboodle along profitloss sharing principles sequence better deposits of stuffy banks are based on the contract of debt. As an faithfulness product, a Mudarabah deposit offers no principal protection and court-ordered claims against any form of returns. To make up for the risk depiction of the product, Mudarabah depositors are expect to be given higher returns congenator to that of commercial banks repair depositors who avoided risk. (Rosly and Zaini, 2008).Haron and Shanmugam (1995) in their charter try to link the profit rates to Islamic banks deposits. employ Pearsons correlation and maiden hallow Autoregressive model, they found strong negative birth mingled with the two variables. Likewise, their finding showed a positive analogue race in the midst of schematic and Islamic bank deposits.Haron and Ahmed (2000) argue that heap who placed t heir deposits at saving and investment account facilities were manoeuvre by the profit motive. The utility maximization theory amongst the Muslim customers was further corroborate by the negative kind betwixt the rate of interest in formulaic banks and the sum deposited in interest-free deposit facilities. Muslims should be maneuver by Islamic doctrines when making their sparing decisions. Therefore, role of educating stack regarding Islamic banking system should be compete spherically. It is indeed a thought-provoking task. (Haron and Ahmed, 2000).Shubber and Alzafri, (2008) say that EPS (Earnings per share) improves as the level of deposits amplifications, as depositors were viewed as sharers in the profit and loss, kind of than being authorize to a laid interest rate. This supports that change magnitude deposits run through a positive meet on EPS (Earnings per share). change magnitude deposits, therefore, do not direct any increment in the cost of impartiali ty. In fact, equity holders benefited from bigger deposits, as owners of the latter pay out forethought fees, which is deducted from the depositors share of the profits. Also, the market quantify of Islamic banks is self-sustaining of WACC. (Shubber and Alzafri,2008).Haron and Azmi (2004a) show that with the exception of glacial and investment deposits, any join on in rates of interest, deposits at stuffy system impart cast up and deposits at Islamic system allow decrease, and vice-versa. As for the resolute and investment deposits, indeterminate results were found. 1 possible rendering for this is that rates of profit for deposits at Islamic system are know at the end of the deposit period and not at the beginning as contrasted to the formulaic system. every upward changes in interest rate of stodgy system allow have an unfavourable impact to the deposit levels in the Islamic system. Therefore, rates of profit of Islamic system must at any time be similar to those of the unoriginal system. Finally, phantasmal dimension can be considered as an substantial element to attract more deal to deposit their funds in the Islamic system. This could besides be the reason why more and more conventional banks are beginning to offer Islamic banking facilities to their customers not only in Malaysia but withal to other parts of the world. (Haron and Azmi, 2004a).Hasan and Bashir (2003) argue that the rising contender and continual knowledgeability to provide financial services, all contribute to a append interest in a slender evaluation of Islamic banks. Depositors are evoke in evaluating the performance of their banks since they are not given unyielding returns and the nominal take to be of their deposits are not assured. In assay to make best use of the assess of shareholders investment, Islamic banks are undefended to risks. Hence, analyzing the Islamic banks performance is great from scotch and public policy perspectives. (Hasan an d Bashir, 2003).methodological analysisThis theater of operations uses univariate reasoning backward analysis to examine the relationship mingled with deposits and profitability of Islamic banking diligence in Pakistan. Univariate fixation is a method of atavism analysis that uses one explanatory variable to predict value of a single subordinate variable. SPSS software system is employ to take the univariate regression. In this study, third free variables titled set deposits, savings Deposits and flow account deposits have been used. The dependent variable of profitability is measured by hard roe which is the ratio of a banks net after-tax income dual-lane by its heart and soul equity capital. The return on equity ( roe) is considered to be one of the profitability performance ratios (Tarawneh, 2006). It indicates how efficaciously the direction of the bank is able to turn shareholders funds (i.e. equity) into net profit. roe (Return on Equity) has been tried ap iece for the tether strong-minded deposit variables to avoid the issue of multicol elongatedity since all the deposit variables are highly correlate to each other.This paper attempts to test ternion hypotheses. correspond to Becker (1995), hypothesis examination is the process of judicial decision which of two at odds(p) statements is correct. guesswork 1 Investment Deposits profit the profitability of Islamic banks. guess 2 thriftiness Deposits increase the profitability of Islamic banks.theory 3 online report Deposits increase the profitability of Islamic banks.The info for this study is time series data taken from the quarterly editions of the Islamic banking bulletin? print by the soil Bank of Pakistan. These bulletins publish the amalgamated financial statement variables representing the entire Islamic banking effort of Pakistan including all the full flight Islamic banks (Al Baraka Islamic bank, Bank Islami Pakistan limited, Dawood Islamic bank Limited, Dubai Islamic bank limited, Emirates international Islamic bank Ltd and Meezan Bank Ltd.) as well as the Islamic branches of conventional banks (Askari Bank Limited, Bank Al Falah Ltd., Bank Al Habib, Faysal Bank, Habib metropolitan bank, MCB Bank Ltd, subject field bank of Pakistan, Soneri Bank Ltd, quantity chartered Bank, The Bank of Khyber, imperial bank of Scotland, fall in Bank Ltd). The smack period for this study is limited from 2007 to 2009 as nearly of the Islamic banks started operations from 2007 in Pakistan. Hence, the amalgamated data of the eleven true quarters has been used in this study.The general equations of the trine models are positivity = b0 + b1(ID)(1) lucrativeness = b0 + b1(SD)(2) profitableness = b0 + b1(CD)(3)Where,b0 = rap (constant) parasitical variable gainfulness = roe (Return on Equity) unaffiliated variablesID = Investment DepositsSD = savings DepositsCD = electric current count DepositsResultsThe results of the regression analysis for mod el.1, 2 and 3 are shown in Tables 1, 2 and 3 respectively. every the triad models were prodigious at the 5% level of significance. The value of the set coefficient of mark ( change R2) for roe in model.1 is 0.4 which demonstrates that 40% of the disagreement in wide is explained by its one-dimensional standoff with opinionated deposits variable. As for model 2 and 3, the jibe set of alter R2 are 0.399 and 0.377 respectively. A congenatorly small value of set R2 does not of necessity mean that the model is in appropriate to measure the relationship betwixt independent and dependent variables. (Haron, 2004).The value of familiarised R2 is usually influenced by a number of predictive variables relative to the try out size and it becomes smaller as we have fewer observations per prognosticator variable (Hair et al., 1995). To provide a rule for the dissonance in R2 and adjusted R2 set, the Dublin-Walter test was conducted. The Dublin-Walter statistics value f or all the three set were less than two which proves that the pas seul was out-of-pocket to negative autocorrelation in the consume observations. Also, the adequateness of a model for predicting is clear by the F-test. (Haron, 2004). As presented in Table 1, 2 and 3, all F-ratio values are statistically substantial at 5% significance level for all profitability models. Hence, these results substantiate that the models use were efficacious for measure the relationship among deposits variable items and the profitability variable. discussionThe results support all the three hypotheses that Investment, nest egg and real account deposits increase the profitability of Islamic banks. This result is in line with Haron (1996a, 2004) who founded evidence to suggest that all three sources of funds (current, savings and investment accounts) for Islamic banks are positively think to profitability. dead reckoning 1 of this study suggested that investment deposits increase the profitabi lity of Islamic banks. The results show that the value of the adjusted coefficient of determination (adjusted R2) for hard roe in model.1 is 0.4 which demonstrates that 40% of the unevenness in total is explained by its elongate connecter with investment deposits variable. Hence, results support possibility 1.Similarly, hypothesis 2 stated that savings deposits increase the profitability of Islamic banks. The results show that the value of the adjusted R2 for ROE in model.2 is 0.399 at 5% significance which shows that 39.9% of the variance in total is explained by its linear intimacy with savings deposit variable. Hence, results also support possible action 2.Finally, hypothesis 3 proposed that savings deposits increase the profitability of Islamic banks. The results show that the value of the adjusted R2 for ROE in model.3 is 0.377 which shows that 37.7% of the variability in total is explained by its linear familiarity with savings deposit variable at 5% level of signific ance. Hence, results support possibleness 3 also. on the whole these results were evidentiary at a 5% level of significance.Referring to previous literature, the results are mixed. In the literature, virtually studies found that savings and investment deposits have an contrary relationship with profitability, while a positive relationship has been found for current account deposits. In this study, the current account deposit variable had significant positive relationship with profitability. This result is in line with the findings account by Smirlock (1985), Haron (1996a, 2004) and Haron Azmi (2004). Since a current account service is considered a cost-free facility, it is evaluate that the more funds deposited into this account (current), the more Islamic banks will stand to profit.In the case of savings deposits, a positive relationship was found among these deposits and profitability. This result suggests that any increase in savings accounts will increase profits and th is is in line with Haron (1996a) and Haron Azmi (2004) as Islamic banks can use these savings funds deposited in this account for fertile purposes and therefore, generating additional revenue for the Islamic banks.The results on investment deposits in this study are not similar to most of the findings inform in commercial banking literature. For example, Hester and Zoellner (1966) and Heggested (1977) found that stock-still deposit facilities had an inverse relationship with profitability. In contrast, Smirlock (1985), Haron (1996a, 2004), Haron and Azmi (2004) believed that an increase amount in fixed deposits would have a positive relationship with a banks profitability. This study found that investment deposits had a positive relationship with all profitability measures and thus, substantiate Smirlocks, Harons and Azmis hypothesis.In light of the above findings, Islamic banking provides a better and honourable alternative that is not only Riba-free concord to the rules of Shariah but also profitable to depositors and investors since all the deposit accounts are positively jibe to profitability. Since, Islamic banking provides three unlike interest-free deposit facilities to its depositors and investors to facilitate them jibe to their financial needs, mint should invest in these deposit accounts in order to patronage the Islamic banking pains and to receive good returns in the form of hiba from these Islamic banks.In addition, Ghazali (2008) suggests that Islamic banking is indeed relevant to the current economic crisis. The global financial meltdown stemming from the US real poses an fortune for the Islamic banking system to demonstrate its distinctiveness. The financial meltdown revealed the grand need for a system like Islamic finance, based on the principle of profit-sharing where both parties are subjected to seeming losses and returns. It is a fair and just system. This is contrasting to the conventional system, where Islamic banks do not acquire or trade debt rather they give care substantial assets which are tied to real economic activities.. This is truly an luck for the Islamic financial association to reveal to the global market that the Islamic financial system is in reality a big-shouldered and feasible alternative to the conventional interest-based system.Hence, pot should support the Islamic banking perseverance worldwide since deposits are positively related to the profitability of Islamic banks. Hence, change magnitude deposits would result in higher profitability of Islamic banks which in return would provide higher returns to its depositors. This would finally lead to implement a reassert and respectable economic system which encourages a fair distribution of wealth and resources throughout the society.This study can be all-inclusive to include more time series and cross-sectional data of Islamic banks of other countries. The study may also be extended to cover other determinants of Isla mic banking profitability.