Uche Usim, Abuja


Nigeria’s first Sharia compliant and non-interest financial institution, Jaiz Bank Plc, has been assigned positive rating by the Islamic International Rating Agency (IIRA). This is the first rating for the bank as the first Sharia compliant bank in the country.

The Bank gets an investment grade rating of BBB (Triple B) for the medium to long-term and A2 in the short-term (A Two) on the national scale, as the IIRA concluded its most recent assessment of the Bank.

According to a statement from the bank, the IIRA also assigned it a foreign currency rating of B-/B (Single B Minus/B) and local currency rating of B/B (Single B/B) on the international scale with a ‘Stable’ outlook. The international scale ratings also take into account the sovereign risk profile.

According to IIRA, Jaiz gets the positive rating due to its rapid growth which is far above the country’s high inflation rates of recent years.

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The rating agency says, “Liquidity so generated is reflected in a burgeoning portfolio of Sharia compliant treasury securities… As a result, the bank’s liquidity risk profile is superior in the context of the local banking sector as well as in relation to IIRA’s benchmark for assigned medium to long-term ratings, warranting a higher rating on the short-term scale.”

The agency affirmed that when compared, Jaiz Bank fares well in terms of risk exposure with its gross non-performance falling below 10%.

It maintained that Jaiz Bank’s profitability indicators are improving rapidly with business growth, as efficiency benefits of higher scale in operations, begins to materialize as reflected in the interim results of 2019.

IIRA also noted that with a burgeoning investment portfolio and further accruing efficiencies, the Bank’s net returns are likely to achieve optimal levels, going forward, saying “IIRA’s assessment for expected profitability and hence internal capital generation, in addition to gradually ameliorating indicators for non-performance in financings, underlies the assigned ‘Positive’ outlook.”

The IIRA equally assigned a fiduciary rating score of 65-70 to the Bank. “The Bank is viewed to be in compliance with CBN’s guidelines for corporate governance, however, it may be strengthened to align better with international best practice. Overall control framework has improved in recent periods with implementation of IFRS-9 in 2018 and CBN’s proactive oversight,” it says.

The Bahrain-based IIRA is an External Credit Assessment Institution (ECAI) that is the global leader in rating Non-Interest (Islamic) Financial Institutions and Instruments.

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