Determinants of Viability of Islamic Banking Products: A Case Study of Jaiz Bank Plc

International Journal of Research and Scientific Innovation (IJRSI) | Volume VIII, Issue X, October 2021 | ISSN 2321–2705

Determinants of Viability of Islamic Banking Products: A Case Study of Jaiz Bank Plc

Malanta S. Abdullahi, Adamu Kuku Usman and Nuraddeen M. Lawal
Economics Department, Yobe State University Damaturu, Nigeria

Abstract: This paper investigates the long-term prospects of Islamic banking products in Nigeria amidst the rising popularity/acceptability of non-interest banking, especially the Islamic banking system. The rationale is to examine how the products of Islamic Banks contribute to the banks’ level of profitability and to also find out what factors affect the viability of Islamic banking products. Jaiz Bank Plc being the first official Islamic bank to be introduced into the Nigerian banking sphere is considered as a case study. The range of products/services offered by the bank are investigated in detail as well as their viability, keeping in mind the socio-economic and demographic factors prevailing in the environment. Data were sourced primarily with the help of a structured questionnaire. Discrete choice models were used as the econometrics tools of data analysis and the impact of seven variables was assessed on the viability of Islamic banking products. Also, Heteroskedasticity, Multicollinearity and F. tests were all conducted to ascertain the validity of the analysis. Six independent variables were found to be statistically significant at 1% levels and conform to a priori expectations. While the remaining variable even though it conformed to a priori expectations; was not found to be statistically significant. The research discovered that Islamic banking products are viable enough to add to the bottom line/profitability of Islamic financial institutions.

Keywords: Islamic Banking Products, Viability, Determinants, Jaiz Bank Plc

JEL Classification Numbers: E44, G10, G20

I. INTRODUCTION

Islamic banking is systematically growing in importance in some countries and in many others, too significant to be ignored. Since its emergence in its modern form in 1963, slightly less than a half-century, Islamic banking has become an indispensable part of the global financial system that is catering for not only the specific need of the Muslim community but also non-Muslims who want to pursue their economic activities without interest. Since the late 1990s, as a viable and competitive form of financial intermediary, Islamic banking has provided a wide range of financial products and services not only in Muslim countries but also in the secular world and has gained international recognition (Dogarawa, 2011).
Over the last decade, Islamic banking services have seen a sharp rise globally and have begun to provide a real and attractive alternative to the sort of financial services most people have become accustomed to. As of 2017, the total worth of the Islamic finance industry across its three main sectors (banking, capital markets, and TAKAFUL), was

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