The Determinants of Profitability of Modarabah Companies: Empirical Evidence from Pakistan

Abstract

Islamic finance industry in Pakistan achieved the tremendous growth during the several years with strong potential because of its large Muslim population. Modarabah companies are playing a significant role in economy through resource allocation by providing funds to investors. This study tries to assess the factors that affect the profitability of Modarabah companies. We applied ordinary least square method over period from 2008-2010. The findings indicates operational efficiency, gearing ratio and asset management ratio has significantly affect the profitability of modarbah companies. The external factors such as GDP, CPI and FDI also affect the profitability of modarabah companies.