Islamic Banking Financing Effect on Growth

Mushtaq, Afia; Arshed, Noman; Kalim, Rukhsana

doi:10.32350/ibfr.2018.05.05

Cited by 5 publications

(5 citation statements)

References 9 publications

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“…The results point towards the outcome that these Shariah-compliant products signifies their role in the economic growth process of Pakistan. The estimated results are in line with the findings of Mushtaq et al (2018), Kaleem et al (2016), Abduh and Omar (2012); Gudarzi and Sadr (2012) that came with the findings that these Shariah-compliant products have positive and significant effects on economic growth. Though most of the estimated coefficients are small in magnitude; however, the results showed that Shariah compliant financing has potential to boost-up the economy of Pakistan.…”

Section: Resultssupporting

confidence: 89%

“…These results got confirmed in the later study of Haji (2018) who showed that Murabaha, Musharkah, Mudarbah and Ijarah were significantly and positively contributing to the GDP of Kenya. Mushtaq et al (2018) examined the transmission channel to assess whether development in Islamic banking does play any role in economic growth of Pakistan. Using the vector error correction model (VECM), they found that economic growth was positively related with Islamic banking products of Ijarah, Murabaha and DM.…”

Section: Pace Of Economic Growthmentioning

confidence: 99%

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The contribution of Shariah-Compliant products to SDGs attending through the pace of economic growth: an empirical evidence from Pakistan

Siddique

Haq

Rahim

2022

IMEFM

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Purpose Since 2004, Pakistan carried the banking sector under the umbrella of the Islamic financial paradigm, consequently the Islamic Banking Industry (IBI) placed an upright position in the banking and financial market of Pakistan. In this context, this study aims to analyze the effect of Shariah-compliant products of the IBI on the pace of economic growth in Pakistan. Design/methodology/approach The data set covered 13 Pakistani Islamic banks comprising four full-fledged Islamic banks and 9 conventional banks holdings standalone Islamic Branches, for the period 2004–2019. Considering nature of the empirical model and data set, the estimation was carried out with the Pooled Ordinary least squares estimation technique. Findings The findings of the study reveal that Shariah-compliant products have a positive effect on the pace of economic growth. This indication is based on the fact that five out of six Shariah-compliant products hold positive signs and are statistically significant. In addition, the empirical evidence shows that at large conventional financial sector signifies its role in the Shariah-compliant products and pace of economic growth nexus. Among the control variables, foreign direct investment, human capital, trade openness, inflation and private credit pose negative, whereas money supply and stock market capitalization have a positive effect on the pace of economic growth in Pakistan. Findings of the study points towards the fact that Shariah-compliant financing has great potential to enhance the economic growth of Pakistan therefore to touch the sustainable development goals (SDGs). Practical implications Having played a significant role in the growth process, Islamic bankers should portray a positive image of their industry to the government authorities. The government should design a public policy to encourage Islamic modes of finance at a macro level to increase the pace of economic growth and therefore SDGs realization. Originality/value Findings of the study present new insight into the application of Shariah-compliant products of IBI toward the realization of SDGs in case of Pakistan.

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Section: Resultssupporting

confidence: 89%

Section: Pace Of Economic Growthmentioning

confidence: 99%

The contribution of Shariah-Compliant products to SDGs attending through the pace of economic growth: an empirical evidence from Pakistan

Siddique

Haq

Rahim

2022

IMEFM

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“…According to Jalil, Feridun, and Ma (2010), a single country analysis may provide a more appropriate framework for investigating the financegrowth nexus. Previous studies have used a single indicator, such as Islamic bank finance, Islamic banking assets, or Islamic banking deposits, to investigate the impact of Islamic financing on output growth (Abduh & Omar, 2012;Kalim, Mushtaq, & Arshed, 2016;Mushtaq, Arshed, & Kalim, 2018;Tabash & Dhankar, 2014). Since the sectoral composition of every economy is different (Asghar et al, 2021), so the financing needs may differ, so one financing type does not fit for all (Misman, Ahmad, Khairani, & Amran, 2020).…”

Section: Literature On Macroeconomic Variablesmentioning

confidence: 99%

Accelerating Industrial Output Growth through Islamic Bank Decomposed Financing Optimization in Malaysia

2022

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Literature shows two hypothesis ‘More finance more growth’ formed u-shape and ‘too much finance’ formed an inverted u-shape profile. Existing literature shows contradicting findings on finance growth nexus by taking only a single indicator of total financing, where financial expansion is detrimental to growth if it surpasses a specific threshold point. This gap is addressed in this study by decomposing Islamic financing into Islamic producer financing (IPF) and Islamic consumer financing (ICF) and its quadratic impact on industrial output growth in Malaysia. Autoregressive Distributive lag (ARDL) approach is applied over the period of 2008; Q1 to 2020; Q4 and, in order to visualize the effect of moderator to the nonlinear model, this study have used Dawson (2014) approach. This study demonstrates a u-shaped relationship between Islamic decomposed financing and sectoral output growth, highlighting that financial development starts to accelerate the growth, once it surpassed the calculated threshold point. With the intention to determine the right financial ceiling to restrict financial activity, threshold points are crucial to the regulators. Our findings imply that policymakers should not only enhance financing, but also improve the quality of the financial system for potential growth. This necessitates the simultaneous expansion and tightening of financial rules, as well as the attendant supervision and surveillance of financial activities, in order to preserve the integrity of finance growth nexus and avoid the ‘vanishing effect’ which may lead to the incidence of future economic crises. This study enriches the discussion on Islamic decomposed financing and the threshold effect to contribute to the economic growth of the country.

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“…A dearth of studies has inculcated Islamic equity/asset-backed or Islamic debt/asset-based financing in promoting entrepreneurship via risk-sharing or risk-mitigating mechanisms within the financial system. Several empirical studies have explored the role of Islamic financing on growth Kayed, 2012;Mushtaq et al, 2018), but its role in entrepreneurship is still underexplored. This study shows how Islamic debt-based contracts are useful for all prospective entrepreneurs and how this contract can decrease the access to finance gap for the entrepreneurs.…”

Section: Juristic and Asset-backed Financing As Motivating Factormentioning

confidence: 99%

Contribution of Islamic Debt Financing in Entrepreneurship Promoting Financial Sector Transformation

Sohail

Arshed

2022

IJMRES

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Empirically conventional financial development theories provided mixed results in motivating entrepreneurship. The risk transferring and fixed returns based lending may harm the new venture if the borrower is not financial literate. In comparison, Islamic finance provides a juristic, participative, and equitable alternative for new ventures, which empirically shows growth promoting effects. This study explores the holistic curvilinear effect of financial development on entrepreneurship while allowing the moderating role of rising Islamic debt financing in the economy. This study selected the unbalanced panel data of all Islamic banks of 16 countries and used panel quantile regression to estimate the quadratic financial development effects and moderation of the Islamic debt financing. The results showed that Islamic debt financing provides entrepreneurship support coverage in countries where the financial sector is not fully developed. Central Banks and Islamic advisory councils can follow the outcomes to integrate increasing Islamic financing in the national financial development policy in developing a facilitative environment for new businesses.

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Islamic Banking Financing Effect on Growth

Cited by 5 publications

References 9 publications

The contribution of Shariah-Compliant products to SDGs attending through the pace of economic growth: an empirical evidence from Pakistan

The contribution of Shariah-Compliant products to SDGs attending through the pace of economic growth: an empirical evidence from Pakistan

Accelerating Industrial Output Growth through Islamic Bank Decomposed Financing Optimization in Malaysia

Contribution of Islamic Debt Financing in Entrepreneurship Promoting Financial Sector Transformation

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