The impact of Islamic Murabaha Financing on the profitability of Libyan commercial banks

Abstract

The study aimed to examine the effect of Islamic Murabaha financing on the profitability of Libyan commercial banks that adopted Islamic Murabaha financing during the period (2015–2023).The research relied on the descriptive-analytical approach and statistical methods to determine the impact of Murabaha financing on profitability indicators, as well as the type and strength of the relationship between them, The study measured the contribution of Islamic Murabaha financing to total revenues (net profit) as an independent variable, and profitability indicators {return on assets (ROA) and return on equity (ROE)} as dependent variables for each selected bank: Jumhouria Bank, the National Commercial Bank (NCB), Sahara Bank, and Wahda Bank, The analysis was conducted using SPSS. The results indicated that Islamic Murabaha financing had no statistically significant effect on the profitability of Jumhouria Bank, the National Commercial Bank, Sahara Bank, and Wahda Bank as measured by ROA. The findings also revealed a weak positive correlation between Murabaha financing and ROA in Jumhouria Bank, the National Commercial Bank, Sahara Bank, and Wahda Bank. Additionally, a weak negative correlation appeared between Murabaha financing and ROA specifically in Sahara Bank, Based on these results, the study recommends that commercial banks expand and enhance the use of Islamic Murabaha financing as a key financing tool due to its role in generating stable returns, diversifying the customer base, reducing risks, increasing profitability, and improving information systems related to Murabaha financing.