Volume 38, Number 1
+ Volume 38, 2019
Issue 1
+ Volume 37, 2018
+ Volume 36, 2017
+ Volume 35, 2016
+ Volume 34, 2015
+ Volume 33, 2014
+ Volume 32, 2013
+ Volume 31, 2012
Science, Technology and Development Vol. 38 (1), 2019
Research Article
Financial Stability of Islamic Banks in Pakistan: An Empirical Analysis
Inayat Ullah
Abstract: In the worldwide operations, there were 1.3 trillion assets of Islamic banks in 2012, with the growing rate of 15% annually. According to State Bank of Pakistan (SBP), there are five (5) full-fledged Islamic banks operating in Pakistan and their share of deposits in banking industry is nearly 13% and is expected to grow to 20% by 2020. Being the deposit taker and engine of economy, banks are required to be financially sound. With the passage of time, the share of Islamic banks is growing in the industry and corporate or potential investors are very keen to know about bank’s credibility and stability, which is very much questioned. To answer this, an empirical measure, i.e., Z-score, was calculated and compared with large as well small conventional banks operating in Pakistan. Financial statements for the last eight years (2007-2014) of fifteen banks were obtained and the ratios were calculated for each bank. During analysis, five large conventional banks, five Islamic banks and five small conventional banks were selected from Pakistan. Based on the average values of ratios and empirical analysis using statistical tools, it was found that Islamic banks were more stable financially than both large and small conventional banks but their return on assets was comparatively smaller than large conventional banks, however, it was larger than small conventional banks.
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