Measuring and analyzing the level of financial stability through the( 3Z-Score)model An analytical study of a number of Islamic banks for the period (2020-2024)

Abstract

 This study aims to measure and analyze the level of financial stability in a number of private Islamic banks in Iraq by applying the Z-Score³ model as a quantitative tool for assessing risk-bearing capacity and predicting the banks’ ability to remain viable amid financial and economic challenges. The study adopted a descriptive–analytical methodology, relying on the published financial statements of three selected banks—namely, the Iraqi Islamic Bank for Investment and Development, Al-Mashriq Al-Arabi Islamic Bank for Investment and Finance, and Al-Arabiya Islamic Bank—for the period 2020–2024.

The study population consisted of all private Islamic banks operating in Iraq and listed on the Iraq Stock Exchange, while the sample was purposively selected based on data availability and operational stability. Direct financial analysis was employed through the calculation of the financial ratios constituting the Z-Score³ indicator. The study reached a key conclusion: there is a clear disparity in the level of financial stability among the examined banks. The results indicated that the Iraqi Islamic Bank for Investment and Development achieved the highest average Z-Score³ value, reflecting relative robustness and sound financial flexibility. In contrast, Al-Mashriq Al-Arabi Islamic Bank exhibited a moderate level of financial stability with some fluctuations, whereas Al-Arabiya Islamic Bank recorded the lowest level of the indicator. The study recommends adopting prudent financial policies focused on strengthening retained earnings, improving working capital management, and increasing equity relative to liabilities. It also emphasizes the importance of utilizing the Z-Score³ model as an early-warning tool applied periodically within internal control reports and financial performance analysis.