Attached
Amana Investments was established in 1997
as the first Islamic bank in Sri Lanka.
Islamic Finance is ShaJ1a compliant finance
because and is based on the teachings in the
Holy Quran and sacred scripture of the
religion of Islam. The sim of this research is
to froyjde an overview on the Islamic
Finance Industry of Sri Lanka by identifYing
the tsctors that affect the profitabi1ity of the
industry: The profitabi1ity of Islamic banks
is measured by three dimensions, ie. return
on assets, and return on equj{y, earnings per
share. Internal explsnstoty van"ables include
bank size, gearing ratio, asset msnsgemem;
deposit ratio, non-perfonning loans ratio,
asset composition, capital adequacy rata
and operating efficiency, whereas external
explanatory variables include gross domestic
product (GDP) and consumer price index
(CP!). Since Islamic Banking is a relatively
new industry within Sri Lanka, there is a
high potential to make profits by considering
the components of the ratios used as
independent variables in the study. Although
some components indicated to be protkebk,
the risk associated with those variables and
the other mctors such as liquidity and
proDtability also have to be considered.
Results were sin1l7ar to the other researches
done for other couatries
