Macroeconomic Indicators impact on Investment of Islamic Banking Industry An Empirical analysis from Pakistan
The aim of this research is to study the impact of Macroeconomic and Bank specific indicators on Investments of Islamic Banks in Pakistan. Data has been obtained from 2006 to 2018 of full-fledged Islamic Banks in Pakistan. Bank investment was taken as the dependent variable. Macroeconomic variables such as GDP, Exchange Rate, Interest Rate and Inflation were taken as an independent variable, whereas Bank specific variables are Bank Spread, NIM, Credit Risk, Bank Size, Financing, Deposits and Lag of dependent variable as previous year investments were used as Predictors. Descriptive statistics, Correlation Matrix, Trend Analysis and Panel least square regression method was applied. It was found that GDP has a significant and positive impact on Islamic Banks' investment. Moreover finding suggest that NIM, Bank Size and previous year investments have a significant and positive impact on investment of Islamic Banks in Pakistan whereas financing has a negative and significant impact on investment of Islamic Banks in Pakistan. This research will be useful to all stakeholders such as SBP, SECP and Bankers to recognize the key variables that create a significant impact on investment of banks so they can implement the strategy which makes the financial system efficient and robust and will directly contribute in the growth of the economy as well. This study is also helpful to academician and it will minimize the gap in the existing literature of Islamic Banking in Pakistan.