Stability of Islamic banks: Evidence from Nigeria

Abstract

This research studies the stability of Islamic banking through a closer observation of Jaiz Bank Nigeria. The study covers a period of seven (7) years (covering 2012 to 2018). Z-score has been used as a proxy for Bank Stability (SB) in other to derive the values of SB. Bank data as well as descriptive statistics were used. An analysis of the impact of macro-economic variables (Inflation and ΔGDP) on the Return on Assets (ROA) of Jaiz Bank as well as the ROA of some five conventional banks in Nigeria selected for the purpose of comparison. The SB figures of these banks were also compared to verify the most stable, over this period of seven years. The use of tables was employed to make data readable at a glance. This study found that Jaiz Bank is consistent with theoretical studies which expect a positive correlation of profitability with ΔGDP and a negative correlation with a rise in inflation and vice-versa. The conventional banks on the other hand were not consistent. Some of the banks behaved in a similar manner to Jaiz Bank at some point while some others had no clear pattern. However, the bank stability derived by SB(K) and SB(ROA) indicated that, conventional banks are more stable while SB(CAR) figures shows that Jaiz Bank is second, only to Access Bank and Jaiz Bank maintained smaller Stdv figures indicating a much smaller variation in the figures and therefore more stability.