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In this article problems regarding murabaha and

It is felt that there is a serious lack of empirical studies on Islamic banking. This paper attempts to fill that gap to some extent. This paper uses data for the period 1990-98 to test some hypotheses and common perceptions about Islamic banking. Both trend and ratio analyses have been used in this evaluation of Islamic banks. Some new objective 'benchmarks' for various ratios have also been developed for this purpose. In addition, a 'control group' of conventional banks was used to compare the performance of Islamic banks to that of conventional banks.

This paper addresses the issues of financial performance measurement and proposes the need for a profit sharing distribution policy of Islamic financial institutions. A conceptual analysis of the integral concepts of performance measurement, such as income, capital and cost of funds, is done in view of the existing accounting assumptions and principles. The importance of profit-sharing ratio and the diversity of financing contracts explained in this paper affirms the need for a more comprehensive analysis of the financial performance of Islamic financial institutions.

The phenomenon of asset concentration in short and medium term investments is found to exist in the Islamic interest-free banking system. This paper finds that the dividend signaling hypothesis is able to explain this phenomenon. Managers of Islamic banks are likely to prefer investing in instruments with more certain returns in order to maintain a stable dividend payout. This results in the concentration of short and medium term mark-up based investments. The results of this paper show that dividends in Islamic banks are stable. One major source of this stability is bank earnings.

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