The relationship of bank liquidity with profitability indicators in Islamic banks

Abstract

      The study of bank liquidity is of great importance, whether in commercial banks or Islamic banks, and this importance comes from three aspects. The first is the bank’s dependence in general on seizing investment opportunities when it has sufficient liquidity, and the second depends on the degree of achieving one of the bank’s goals, which is safety on the volume of liquidity that the bank can possess. The third aspect is the fact that the abundance of bank liquidity negatively affects profitability indicators because this abundance comes out of the funds allocated for investment and Islamic banks depend most of their operations on dealing with investors on the basis of participation with the customer, which is the sharing of profits and losses in proportions to be agreed upon. The research aimed to enable the Islamic bank to manage the liquidity risks of investment formulas and to enable the Islamic bank to harmonize between liquidity risks and the return achieved. The researcher reached the most important results, including the impact of the bank’s performance as a result of Covid 19 in 2020 The duration of the study was offset by a decrease in the return on assets to 0.009, as well as a decrease in the return on equity to 10%. One of the most important recommendations is the exploitation of high bank liquidity investments through Islamic investment formulas such as Murabaha or participation, which is reflected in the economic development of the country