Does Sukuk market development promote economic growth?

Abstract

<jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>This paper aims to explain the relationship between sukuk market and economic growth. In this context, the study investigates the impact of sukuk market development on economic growth for nine countries (Brunei, Indonesia, Jordan, Kuwait, Malaysia, Nigeria, Saudi Arabia, Pakistan and Turkey) which have Islamic finance and banking system.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>The study analyzed the data of nine countries as Brunei, Indonesia, Jordan, Kuwait, Malaysia, Nigeria, Saudi Arabia, Pakistan and Turkey for periods between 2014Q1 and 2017Q4. As a part of gross domestic product, total sukuk export measured by the sukuk market and the sukuk density which was considered as annual sukuk export per country were used to determine sukuk market development. Inflation, trade deficit and financial stress series were used as control variables.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>It was determined that there was a long-term cointegrated relationship between sukuk market development and economic growth. Sukuk volume and sukuk density had a positive effect on growth in the long run. One unit increase in sukuk volume increased growth by 0.5%, while increase in sukuk density increased growth by 1.7%. According to short-term relationships, it was seen that sukuk variables did not have an effect on growth. However, sukuk exports contributed positively to growth rates in the long run.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Research limitations/implications</jats:title> <jats:p>The findings of this study are limited with nine countries (Brunei, Indonesia, Jordan, Kuwait, Malaysia, Nigeria, Saudi Arabia, Pakistan and Turkey). Also, the accessible data of sukuk market was used and the periods of 2014Q1–2017Q4 was analyzed in a study. Accordingly, future studies can find different results for different countries which has Islamic finance and banking system for different periods in the global market.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>This study provides empirical findings to the related literature, and it proves that sukuk market development contributes positively to the economic growth of countries including Islamic finance and banking system in the long run.</jats:p> </jats:sec>

Does Sukuk financing boost economic growth? Empirical evidence from Southeast Asia

“…The findings indicated that Sukuk financing has a significant effect on the economic growth in Southeast Asia. Unlike what Echchabi et al (2018) have determined that Sukuk issuance has no significant effect on economic growth, the empirical results of this paper according to the endogenous growth model are reliable with the findings of Yıldırım et al (2020), Al-Raeai et al (2018, Sari et al (2018), Malikov (2017), Mitsaliyandito et al (2017), Smaoui and Nechi (2017) and Khoutem (2014)…”

Islamic securities (ṣukūk) and economic growth: New empirical investigation from Southeast Asia using non-parametric analysis of MCMC panel quantile regression

“…Dissimilar to the studies of Echchabi et al (2018), Grassa and Gazdar (2014) and Ibrahim (2015),that determined that Islamic securities do not stimulate economic growth in which those studies are reliable to "neutrality hypothesis" of Lucas's (1988), which claimed that finance is an impractical factor to economic growththe empirical findings in this paper demonstrate that Islamic securities are promoting economic growth exogenously based on the "endogenous growth theory" (Romer, 2011), as well, since the increasing Islamic securities in Southeast Asia is leading to increased economic growth and the Islamic capital market development in Islamic securities (Sukuk) and economic growth Southeast Asia is promoting economic growth which validates the concept of the "supplyleading hypothesis" of Schumpeter (1934) and the interpretation of McKinnon (1973) and Shaw (1973) which claims that capital securities markets' development promote the economic growth. Therefore, this study is reliable with Ledhem (2020), Yıldırım et al (2020) and Al-Raeai et al (2018) which showed that Islamic securities markets development is enhancing economic growth.…”

“…Furthermore, as reported by Azmat et al (2021), Islamic securities can depend on customers' emphasis on religiosity; this makes Islamic securities as attractive instruments for investors as other conventional assets which indicates that Islamic securities can replace conventional assets in the capital markets from this side also. Consequently, although Islamic capital markets are still small compared to the conventional capital markets (IIFM Sukuk Report, 2019, this paper indicates that Islamic capital markets are expected to be prosperous in the future as an alternative financial system that enriches economic growth through increasing the capital stock and investments, consistently with the expectations of Cevik and Bugan (2018), Ledhem (2020) and Yıldırım et al (2020).…”

“…3.2 Experimental variables 3.2.1 Islamic securities variable. Following Ledhem (2020), Yıldırım et al (2020), Echchabi et al (2018) and Smaoui and Nechi (2017), this paper employs total issued Islamic securities holdings as a determinant for the Islamic securities variable (ISEC) in all of Malaysia, Indonesia and Brunei Darussalam (Table 1).…”

The Effect of Financial Literacy and Knowledge of Capital Market on Intention to Invest on Islamic Stock Exchange

“…13/1978, the Jordanian government had allowed Jordan Islamic Bank to issue Muqaradah Bonds. Permission to publish Muqarabah Bond Act in 1981 (Yıldırım, Yıldırım, & Diboglu, 2020). Sharia investment in the financial sector has grown significantly by developing product innovations that are not limited to conventional products such as fixed opinion instruments, derivatives, and mutual fund structures that meet sharia criteria (Al-Salem, 2009).…”