The Nexus between Economic Freedom and Islamic Bank Profitability in the MENA Banking Sectors

The study examines the impact of economic freedom on Islamic banks' profitability in the Middle East and North Africa (MENA) banking sectors during the period 2000-2010 using dynamic panel model. The findings suggest that greater financial freedom positively influences the profitability of Islamic banks in the MENA banking sectors, implying that lower intervention in the system increases Islamic banks' profitability. Furthermore, the larger, more diversified and better-capitalized Islamic banks are relatively more profitable, while credit risk and expenses preference behaviour negatively impact on Islamic bank profitability as expected.