Net interest margin (NIM) represents the tradeoff between banking profitability and the social cost of intermediation. Through the lens of the dealership model and decoupling hypothesis, this study investigates determinants of NIM among 275 banks from 20 Middle Eastern and North African (MENA) countries for 2006–2021 using OLS, System‐GMM, and subsamples. The results reveal that Islamic banks consistently report lower NIMs than their conventional peers, reflecting their pro‐social, Shari'ah compliant mandate, and institutional pressure to balance profit margin with financial ethics and inclusion. NIM is positively associated with capital strength and loan specialization, but negatively associated with credit risk, regulatory quality, and economic shocks such as Covid‐19. Larger banks, especially in upper‐income countries, tend to maintain lower margins. In line with the notions of decoupling hypothesis …

Title

Review of Financial Economics

Publisher

Wiley

Publisher Country

United States of America

Indexing

Thomson Reuters

Impact Factor

2.5

Publication Type

Both (Printed and Online)

Volume

43

Year

2025

Pages

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