A comparative analysis of the factors affecting the profit of the participation banks

The purpose of this research is to examine the functions of the participation banks and their differences from common ones, to scrutinize the factors affecting their profitability. After scanning the literature related to the research, an analysis has been done using the audited financial statements belong to these four participation banks. Efficiency measurement has been done by using Data Envelopment Analysis.Although participation banks provide interest free financial instruments to their investors, interest rates are still important for them to evaluate and decide financial assets when they use funds. In our country, the participation banks compose %4.3 of banking sector, having reached 4 banks, 607 branches and 12.677 personnel by the end of 2010. Intensity of personnel of participation bank is above the sector with approximately 21 staff per branch. Therefore, analysis of personnel and branch are done under the sector. It has been seen that the ratios of fund adequacy of the participation banks are lower than the sector, but their liquidity adequacy ratios, dividend rates and effectiveness are above the sector. Interest-free banking, different methods of fund collection and using, active using of goods and money are vital factors to affect their profitability.Key Words: Participation Bank, Islamic banking, interest-free banking, profitability, comparative analysis, productivity.