Participative banking performance in a regulated emerging market: Evidence from Morocco
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Abstract
This study examines the financial performance of participative banks in Morocco, a regulated emerging market characterized by centralized Shariah governance and prudential supervision. Using an unbalanced panel of four banks over 2017-2024 and annual data extracted from published financial reports, the paper estimates fixed effects models for ROA and ROE, with standard errors clustered at the bank level to account for within-bank correlation. Random effects benchmarks, Hausman tests, and two robustness checks based on lagged regressors and the exclusion of early operating years complement the baseline estimations. Ijara financing is empirically null across the sample and is therefore excluded from the regressions. The results show that performance is positively associated with financing intensity and net participative financing margins, while operational costs relative to income and concentration in real-estate Murabaha are associated with weaker outcomes. Equipment Murabaha is associated with stronger performance, and credit risk exerts a negative effect, especially on ROE. The paper contributes by combining profitability indicators with financing-specific measures in a context of centralized Shariah governance, offering a framework that may be useful for other regulated emerging markets.
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