The Research Department of Economics and Management of Tadbir Nikan Business, Marketing, and Finance Open 2 Serial Number 11 2025 09 01 Investigating the Impact of Monetary Policy on the Performance of Islamic Banks with Emphasis on the Moderating Role of Credit Risk Investigating the Impact of Monetary Policy on the Performance of Islamic Banks with Emphasis on the Moderating Role of Credit Risk 1 9 10.61838/bmfopen.224 EN Journal Article 2025 03 21 <p>In recent years, the health and stability of the financial sector have gained special significance as one of the most critical domains of the economy in various countries worldwide. Accordingly, researchers and economic policymakers have been seeking ways to improve the performance of financial institutions, including the banking system. In this regard, the first step toward establishing a stable and sound banking system is to identify the determinants of bank performance. Among these, Islamic banks are distinct from other banks due to the prohibition of usury (riba) and the ban on interest, giving rise to a unique banking structure. Therefore, it is essential to examine the performance determinants of Islamic banks separately. Based on this, and considering the importance of bank profitability as the most significant financial intermediary on the one hand, and the unique structure of Islamic banks shaped by the distinctive rules of Islam—particularly the prohibition of interest—on the other hand, the present study aims to identify the determinants of profitability in Islamic banks. This study focuses on monetary policy and the moderating role of credit risk, analyzing data from 24 countries with Islamic banking systems over the period from 2013 to 2024, using the dynamic panel data regression approach with the Generalized Method of Moments (GMM). The results of this study indicate that inflation rate, credit risk, and the economic freedom index have a negative and significant impact on the profitability of Islamic banks. In contrast, economic growth, trade openness index, and monetary policy exhibit a positive and significant effect on profitability. Furthermore, the moderating role of credit risk in the relationship between monetary policy and bank profitability is found to be statistically significant.</p> https://www.bmfopen.com/index.php/bmfopen/article/download/224/194