BANK-SPECIFIC DETERMINANTS OF ISLAMIC BANKING PROFITABILITY: EVIDENCE FROM SELECTED AFRICAN COUNTRIES
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Date
2026
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Published by the Department of Banking and Finance, University of Abuja
Abstract
The determinants of Islamic bank profitability in Africa remain a subject of
empirical investigation as the extent to which bank-specific variables affect
performance is underexplored by past studies. This study therefore investigated the
effects of bank-specific characteristics on profitability of Islamic banks in Africa.
Specifically, the study examined the effects of asset quality, liquidity, operational
efficiency, revenue diversification and capital adequacy on Islamic bank
profitability is selected African countries. The study population consists of 25
African Islamic Financial Services Board (IFSB) member countries as at January
2026. Purposive sampling technique was used to select 5 countries while quarterly
data were collected from IFSB database for period, 2013 to 2024. The data were
analysed using Fixed Effect Regression estimation technique. Results showed that
capital adequacy (β=0.91, p<0.05), deposit liability (β=0.33, p<0.05), revenue
diversification (β=0.69, p<0.05) and total financing (β=0.16, p<0.05) had positive
and significant effects on return on assets. Conversely, non-performing financing
(β=-0.28, p<0.05), cost to income ratio (β=-1.98, p<0.05), and liquidity ratio (β=-
5.72, p<0.01) had negative significant impact on ROA. It was concluded based on
these findings, that bank-specific factors affect profitability of Islamic banks in
selected African countries. It is therefore recommended for policy implementation,
that the management of Islamic banks in Africa should ensure that the banks are
adequately capitalized by maintaining good capital adequacy to enhance their
profitability. Islamic banks in Africa should also ensure that their financing
activities are efficiently and effectively executed and monitored, to reduce nonperforming
facilities that are capable of depleting their profitability
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Citation
Jimoh et al. (2026)