Islamic Banking and Economic Growth: A Case of Pakistan

Kalim, Rukhsana; Mushtaq, Afia; Arshed, Noman

doi:10.32350/ibfr.2016.03.03

Cited by 30 publications

(32 citation statements)

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“…This research is different from previous studies. El-Galfy & Khiyar (2012), Kalim et al, (2016), and Boukhatem & Moussa (2018) shows that there is a positive impact between Islamic bank financing on economic growth. The previous studies show that Islamic bank financing can stimulate economic growth if supported by clear regulations in a country.…”

Section: Resultsmentioning

confidence: 99%

Islamic Bank Financing and Its Effects on Economic Growth: A Cross Province Analysis

Afandi

Amin

2019

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Islamic banking industry shows a reasonably good development, one of which is marked by an increase in service coverage in almost all provinces in Indonesia. However, the question is how far Islamic banking capable of contributing to the improvement of Indonesia's economic growth? The purpose of this research is to examine the role of Islamic banking in promoting inclusive economic growth with a sample of 33 provinces in Indonesia. The method used in this research is panel data regression using the fixed effects model. The results show that Islamic bank financing does not have an impact on Indonesia's economic growth. In other words, the results of the research provide information that the existence of Islamic banking in Indonesia has not yet give a significant impact on the welfare of Indonesian society. AbstrakIndustri perbankan syariah menunjukkan perkembangan yang cukup baik yang salah satunya ditandai dengan peningkatan jangkauan layanan hampir di seluruh propinsi di Indonesia. Namun, yang menjadi pertanyaan adalah sejauh manakah perbankan syariah mampu memberikan kontribusi terhadap peningkatan pertumbuhan ekonomi Indonesia? Oleh karena itu, tujuan dari penelitian ini adalah untuk mengetahui bagaimana peran perbankan syariah melalui jenis pembiayaan yang disalurkan yaitu pembiayaan modal kerja, pembiayaan investasi, dan pembiayaan konsumtif dalam mendorong pertumbuhan ekonomi yang inklusif dengan sampel 33 propinsi di Indonesia. Metode yang digunakan dalam penelitian ini adalah regresi data panel dengan menggunakan fixed effects model. Hasil penelitian menunjukkan bahwa pembiayaan perbankan syariah tidak berpengaruh terhadap pertumbuhan ekonomi Indonesia. Dengan kata lain, hasil penelitian memberikan informasi bahwa keberadaan perbankan syariah di Indonesia belum memberikan dampak yang signifikan terhadap kesejahteraan masyarakat Indonesia.Kata Kunci: perbankan syariah, pertumbuhan ekonomi, data panel JEL Code: G21, O47

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Section: Resultsmentioning

confidence: 99%

Islamic Bank Financing and Its Effects on Economic Growth: A Cross Province Analysis

Afandi

Amin

2019

Signifikan

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“…The authors also ensured that the results are robust across different specifications, sample composition and time periods. Kalim et al (2016) found a supply-side relation in Islamic banking and economic growth. The findings of the study concluded that there is a long run cointegration among the variables.…”

Section: Literature Reviewmentioning

confidence: 99%

“…There are few studies available on the role of Islamic banking on growth (Khan, 2007;Kalim, Mushtaq, & Arshed, 2016), but these studies have failed to explain the channel through which Islamic banking influences growth. The current study is distinctive in terms of exploring the short and long run relationshipsbetweenthe development of Islamicfinance, its different products and economicgrowth, particularly in Pakistan.…”

Section: Introductionmentioning

confidence: 99%

Islamic Banking Financing Effect on Growth

Mushtaq

Arshed

Kalim

2018

IBFR

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The study is an attempt to explore the transmission channel through which development in Islamic banking could lead to economic growth. In order to determinethis transmission mechanism, the estimation based Vector Error Correction model (VECM) is used. This study has tested Murabaha, Ijarah and Diminishing Musharaka as proposed Islamic financial products because of their majority share in Islamic financing. This study has tested two co-integrated systems in the VECM model. The first system tests the effect of an increase in financing in Islamic banking products on the net financing of Islamic banks and the second system tests the effect of net financing of Islamic banks on economic growth. The results indicate that the financing done by Islamic banking products positively affects economic growth in Pakistan. Also, the net financing of Islamic banks is significantly based on financing in Ijarah and Murabaha. Hence, this study highlights the growth potential of Islamic banking which is gaining shares in the overall banking system of Pakistan.

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“…Besides, a functional financial sector supports the private sector to develop individual businesses and it also facilitates growth-related activities in any country. Hence the development of the financial sector is an important component for expanding economic growth (Kalim, Mushtaq & Arshed, 2016;Mushtaq, Arshed & Kalim, 2018;Gbenga, James & Adeyinka, 2019). Cetorelli and Gambera (2001) propose that the development of the banking sector can have beneficial after effect in causing industrial growth in a country.…”

Section: Introductionmentioning

confidence: 99%

“…The importance of the role of development in the financial and banking sector can be illustrated by a World Bank study such as Beck et al (2000), according to which a well-functioning sector helps the economy to evade financial crises like in Southeast Asia and Latin America. Some recent studies show that when the financial sector participates in asset-based investments, its growth-promoting effect increases (Kalim et al, 2016;Mushtaq et al, 2018). Many studies have shown that variables like economic progress (Ang & McKibbin, 2007), FDI, foreign remittances, investment, and trade boost the domestic credit to the private sector hence lead to the development of the financial sector.…”

Section: Introductionmentioning

confidence: 99%

Sources of Banking Sector Development: Case of Pakistan

Mushtaq

Arshed

Hassan

2019

J. financ. account. res.

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Banking sector development is one of the key elements benchmarking economic growth. Several empirical studies for several instances have indicated a positive relationship between banking sector development and economic growth. This study intends to examine the sources of banking sector development of Pakistan, using capital formation, interest rate, trade deficit, general price level and remittances as the proposed indicators. There is a lack of studies which investigated the impact of investment and trade deficit on banking sector development. The empirical data for the study is taken from world development indicators for 38 years. For the reliable estimates, ARDL cointegration technique has been used to estimate the long run determinants of banking sector development. Domestic credit to private sector has been used as a proxy for the banking sector development because of its market orientation. The results show that increase in the investment, imports and general price level leads to increase in the provision of domestic credit which leads to banking sector development.

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Islamic Banking and Economic Growth: A Case of Pakistan

Cited by 30 publications

References 0 publications

Islamic Bank Financing and Its Effects on Economic Growth: A Cross Province Analysis

Islamic Bank Financing and Its Effects on Economic Growth: A Cross Province Analysis

Islamic Banking Financing Effect on Growth

Sources of Banking Sector Development: Case of Pakistan

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