Nigerian Journal of Banking and Financial Issues (NJBFI)

COMPARATIVE IMPACT OF CONVENTIONAL AND ISLAMIC BANKING SYSTEMS ON ECONOMIC GROWTH IN NIGERIA

Abstract

This study examined the comparative impact of Islamic and conventional banking systems to Nigeria's economic growth. Specifically, the research evaluated their contributions to GDP, financial inclusion, risk management, customer acceptance, and corporate social responsibility practices. The research adopted a quantitative methodology, leveraging secondary data from the annual reports of Access Bank (conventional) and Jaiz Bank (Islamic) over ten years (2015–2024). Stratified and purposive random sampling techniques were used to select the appropriate banks for comparison. The research employed statistical tools such as Pearson correlation analysis and paired sample t-tests for data estimation. Findings from the study revealed that conventional banks achieve broader market penetration and financial service accessibility than Islamic banks in Nigeria. Whereas, Islamic banks significantly enhance financial inclusion, risk-sharing and fostering greater customer acceptance than conventional banks in the country. However, both Islamic and conventional banking exhibit limitations in corporate social responsibility investments but contribute to the Nigeria economic growth. The findings further revealed that Islamic banking offers a more equitable financial framework but remains underutilized due to infrastructural and cultural barriers. The study recommended hybrid banking models that combine the inclusivity and ethical principles of Islamic finance with the accessibility and operational efficiency of conventional systems. Policymakers are urged to implement supportive frameworks to promote Islamic banking, especially in underserved rural areas. This research offers actionable insights for financial institutions and policymakers, emphasizing the potential of hybrid systems for socioeconomic development.