Are The Sudanese Banks Financially Sound?

Abstract

This study attempts to investigate whether the banks operating in Sudan are solvent and financially sound as well as to examine whether there are roots for a banking panic. The research is also intended to determine whether there are candidate bankrupt banks. The study employs quantitative and qualitative research methods and utilizes both secondary and primary data and covers the eight-year period 2013-2020. The annual audited financial reports of banks published for the period under study represent the source of the secondary data and the primary data is collected through questionnaires distributed to depositors. The sample comprises 30 banks out of a total population of 37 banks. Also, responses from 416 participants in the questionnaire are considered for constructing the depositors’ confidence index. To test the hypotheses a number of quantitative models, namely, univariate financial ratios models, Ahmed (2003) Z-score model, Altman (2002) emergent markets Z-score model, and depositor’s confidence index (DCI) model are utilized. The statistical results of three out of the four models, namely, the univariate financial ratios model, Ahmed (2003) Z-score model, and depositor’s confidence index, document that banks operating in Sudan are financially unsound and financially distressed and none of those banks is thoroughly healthy. However, the results of EM Z-score model show that banks operating in Sudan can be categorized as healthy and financially sound and that there are no roots for a banking panic in the country.