The Impact of Credit Facilities on the Profitability of Banks Operating in Jordan: An Econometric Study for the Period (2002–2025)

Abstract

This study primarily aimed to examine the impact of total credit facilities, measured by two indicators: the ratio of total credit facilities to total assets and the ratio of total credit facilities to total deposits, on the profitability of banks operating in Jordan, as measured by Return on Assets (ROA) and Return on Equity (ROE). To achieve the study objectives, the research adopted both the deductive approach and the descriptive-analytical approach within a quantitative econometric framework. The study population comprised all banks operating in Jordan, totaling twenty banks. The study sample was based on a comprehensive census of aggregated financial data for the Jordanian banking sector, obtained from the published annual reports of the Central Bank of Jordan and the Association of Banks in Jordan. The dataset consisted of twenty-four annual observations covering the period from 2002 to 2025. Data were collected from aggregated financial statements and annual reports. The statistical techniques employed included curve estimation, simple linear regression, and multiple linear regression analyses to test the study hypotheses. The findings revealed several key results. The analysis indicated a positive and statistically significant relationship between the ratio of total credit facilities to total deposits and Return on Assets (ROA) under the quadratic model. Conversely, the ratio of total credit facilities to total assets was found to have a statistically significant negative effect on Return on Equity (ROE) under the simple linear regression model. Furthermore, the independent variables, when considered jointly, exhibited a statistically significant effect on Return on Equity (ROE). Based on these findings, the study recommends that Jordanian banks develop flexible regulatory frameworks that effectively balance the expansion of credit facilities with the maintenance of adequate liquidity levels, while safeguarding the soundness of their financial positions