The Impact of Islamic Banks and Takaful Companies on Economic Growth: A Case of Pakistan

Abstract

The purpose of this study is to examine the impact of Islamic Banks and Takaful on economic growth of Pakistan. Using panel data from 2009 to 2014 of five Islamic Banks and five Takaful Companies, and taking Gross Domestic Product (GDP) as dependent variable, Total Deposits (TD) of Islamic Banks and Total contribution (TC) of Takaful companies as independent variables, analysis is done to find the impact of Islamic Banks and Takaful companies on the economic growth of the country. The study employs Fixed Effect Model for the econometric analysis. The study concluded that there is a significant role of Total Deposits of Islamic Banks and Total Contributions of the Takaful Companies in the growth of the economy. It is thus, recommended that Economic policymakers should take into account this valuable fact and should take serious measures for facilitating Islamic Financial Sector. This research can be used as a platform for the economic policymakers to evaluate and comprehend the importance of Islamic Financial System in developing countries like Pakistan.

The Contribution of Islamic Capital Market and Islamic Insurance to Inclusive Economic Development in Indonesia

“…Similarly, the Islamic capital market and insurance do not influence inclusive economic development. The results of this study contradict previous studies conducted by (Sawadogo et al, 2018;Ul Din et al, 2017), and (Rawat & Mehdi, 2017). Although it has been mentioned earlier that Islamic insurance assets are the largest among other Islamic non-bank financial institutions, this is not enough to significantly impact inclusive economic development in Indonesia.…”

“…Their result revealed a significant positive impact on economic growth in developed and developing countries. (Rawat & Mehdi, 2017) study the impact of Islamic banks and Takaful companies on economic growth in the case of Pakistan. The total contribution of Takaful companies was used as an independent variable, while Gross Domestic Product represents the economic growth of Pakistan.…”

“…Other studies with different Islamic capital market instruments were conducted by (Coşkun, Seven, Ertuğrul, & Ulussever, 2017) in Turkey, while (Taqwa, Khoirul Zadid & Sukmana, 2018), and (Sari et al, 2018) in the context of Indonesia; while (Sawadogo, Guerineau, & Ouedraogo, 2018;Ul Din, Abu-Bakar, & Regupathi, 2017) and (Rawat & Mehdi, 2017) studies specifically on Islamic insurance.…”

The Impact of Takaful Insurance on the Manufacturing Industry in Malaysia: Empirical Evidence through ARDL Bounds Testing Approach

“…To the best of our knowledge, three studies have been conducted in this direction. These include (Rawat & Mehdi, 2017), (Shahid, 2018), and (Izzati et al, 2020). Only the first of these deals with macro-econometric modeling.…”

“…On the one hand, through the strengthening of financial inclusion (Haroun & Effandi, 2019) (Ansari & Bahari, 2021) Takaful insurance can allow the conversion of an additional portion of savings into the acquisition of Takaful assets. On the other hand, since they provide financial protection and risk mitigation, as underlined by (Alhabshi & Razak, 2011), Takaful operations create a hard floor for economic activity (Rawat & Mehdi, 2017). These two effects are bound to boost economic growth by stimulating both saving and investment (Izzati et al, 2020).…”