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Islamic banks IBs have a significant role in the growth of gross domestic product of the developing countries. The Islamic participatory schemes integrate the assets of lenders and borrowers. They allow enable IBs to lend on a longer term basis to create projects with higher risk-return profiles and, thus, to support economic growth. Our investigation examines the contribution of Islamic finance in economic growth.

Using a panel data-set, we compare between IBs and conventional banks in their adding to economic growth. We studied a sample of banks between and By means of three ordinary least-square regressions, our empirical investigation reveals that the development of non-usurious banks supports economic growth. Moreover, the cooperation between the two financing modes improves economic growth.

The integration of this new funding never neglected the role of the conventional method of financing. The practice of IBs is also away from their theoretical mode in terms of participation results. During the last two decades, Islamic banking has seen a rapid growth. Efficiency of Islamic banks during the financial crisis: An analysis of Middle Eastern and Asian countries.

Pacific-Basin Finance Journal2876 — Consequently, academics and industries from different parts of the globe have started to envision Islamic finance-driven future world in the quest for an ethical and sustainable economic system. Islamic finance is growing rapidly across the world. According to Banker Banker. Top Islamic financial institutions. The Banker, global finance intelligence since According to The National Bureau of Asian Research National Bureau of Asian Research.

Through the use of instruments that respect the Islamic law, it tried to promote inclusive growth, equitable risk-sharing and social justice.

Gheeraert Gheeraert, L. Does Islamic finance spur banking sector development? Some developing economies, such as Egypt, Jordan, Kuwait, Malaysia, Saudi Arabia … have already started to introduce this new mode of financing in their economic system. Consequently, a deeper understanding of this new mode of finance is crucial for the following benefits: Hence, Islamic banks IBs are engaged to achieve their operations in a more reliable and more certain economic framework.

According to the XL Groupe XL Groupe. The Dubai Chamber Dubai Chamber. Egyptian Islamic Finance Association. Economist Newspaper Economist Newspaper. An English-language weekly newspaper owned by the Economist Group and edited in offices based in London.

Khalid Howladar 1 1. He is a global head of Islamic Finance at Moody's during the IMF and World Bank meetings held in Washington, DC—View from IMF The rapid growth of Islamic banking and finance, as a financial system that respects the Islamic standards, has captured much interest e.

Experiments in Islamic microfinance. Inclusive growth in India through Islamic banking. Procedia - Social and Behavioral Sciences3797 — The development of Islamic financing scheme for SMEs in a developing country: Procedia - Social and Behavioral Sciences52— Determinants of the financial strategy of Islamic banks. Journal of Business Finance and Accounting16— Fasih Fasih, F.

This context has been growing; although the rate of poor people is also on the rise. The present banking system is not conducive for protecting the interests of all sections of the population. In the present case, the Islamic banking system which is based on the Islamic law Shariahcan be a solution to overcome the failures.

Fasih highlights several advantages of this method of financing: Islamic banking is an interest-free banking system founded on real assets and the risks are shared between the lender and borrower under the mechanisms of partnership, joint ownership, lease, and sale.

Unlike the conventional banking, where dealing with interest is a main product, implies that money is traded as a commodity and measured only as a tool of exchange. Islamic banking can uplift the vulnerable groups, such as farmers and small and medium enterprises SMEs and can support inclusive economic growth. Moreover, based on Islamic rules, Islamic banking is considered as an interest-free finance that may attract investment from the Gulf region. What is important is that interest-free finance provides impetus to the socialist goal envisaged by the constitution.

Huda Huda, A. In order to grow and contribute more significantly to the economy, SMEs face some constraints the main of which is the funding lack. The Islamic participatory schemes, such as mudarabah 2 2. A pre-Islamic, Arabic type of finance in which one individual provides start-up capital to another individual who will do the actual work.

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As a financial aqreement between the financier and an entrepreneur, a one-tired mudaraba exists; a two mudaraba modifies this by introducing an intermediary between these two principles.

View all notes and musharakah 3 3. Musharakah allows each party involved in a business to share in the profits and risks. Instead of charging interest as a creditor, the financier will achieve a return in the form of a portion of the actual profits earned, according to a predetermined ratio. However, unlike a traditional creditor, the financier will also share in any losses. View all notes may help to solve this problem. The participative modality of Islamic finance enables IBs to provide longer term basis to projects with higher risk-return profiles and, thus, maintain economic growth.

El-Komi and Croson El-Komi, M. They found extensively higher compliance rates for the Islamic-compliant contracts profit-sharing and joint venture than for the conventional contract interest-based. We believe that there is a great promise for these types of loans in the microfinance framework, for both Muslims and non-Muslims.

Karim and Ali Karim, R. Their sample consists of 52 IBs and CBs. The empirical evidence emphasized that capital requirements have a significant impact on the deposit and lending behaviors in their study sample. They also suggested that there is a strong positive relationship between capital requirements and deposit and loan growth for both IBs and CBs. He found strong and consistent empirical evidence that the development of Islamic banking in Muslim countries leads to a higher banking sector development.

In this case, banking sector development is measured by the amount of private credit or bank deposits scaled to GDP. This result occurs by the new banking practice Shariah-compliant which does not crowd out the conventional banking system. The investigation of Zawawi et al. In addition, it is interest-free, and entails the sharing of losses, if they should occur traditional project financiers, who are highly averse to carry out projects.

Karich, Karich, I. A stream of the literature highlights the welfare-enhancing role of Islamic finance through the encouragement of ethical values and an alternative financial behavior see, e. Saleem, Saleem, S. Role of Islamic banks in economic development. Islamic finance in the global economy. Conversely, at the same time, some findings believe that the Islamic finance practice has detrimental economic consequences, e.

Cobham, Cobham, D. Finance for development and Islamic banking. Intereconomics27— Islamic economics and the Islamic subeconomy. Journal of Economic Perspectives9— Islamic Economic system — A Threat to Development? The conflicts on the impacts of Islamic finance are far from being settled. It is, however crucial, for the policy-maker to know whether allowing Islamic financial institutions to operate has desirable, or, possibly, detrimental outcomes for the economy.

In this context, we develop our research. By referring to banks 54 IBs and 66 CBsthe aim of our study is to compare the contribution of each bank type to economic growth. In order to appreciate the contribution of each bank type, we investigated this interrelationship for the 54 IBs and the 66 CBs, each alone.

In this way, we used three OLS regressions. The first is a general overview in which we test the contribution of banks to economic growth in those 10 countries of our sample.

To distinguish the effect of each type, we included a dummy variable which takes the value 1 if the bank is Islamic and 0 if it is conventional if we are interested in the effect of IBs and vice versa if we are interested in the effect of CBs. Does Islamic banking matter for economic growth in Bangladesh?

Journal of Islamic Economics, Banking and Finance3— Islamic banking and economic growth: International Journal of Islamic and Middle Eastern Finance and Management55 — Empirical evidence from Malaysia. Journal of Economic Cooperation and Development3059 — The role of Islamic banking in economic growth.

Journal of Finance Services of Research3895 — All the variables in a growth form model are stationary, while cointegration long-run impacts demands that all the variables, as a pre-requisite, need to be non-stationary.

Our approach in this study is to estimate the short-run and not the long-run elasticity that circumvents the lack of data. There is a strong motivation for us to apply a growth form approach to analyze the role of IBs on economic growth. Islamic finance is one of the most important events over the last decade in the banking industry in several Islamic and non-Islamic countries.

In spite of the substantial size and growth of this recent segment, the role of Islamic banking in the economy is still heavily debated and very little empirical work is available. In particular, Islamic banking has many characteristics that may trigger economic growth; however, little empirical evidence exists in this context. The algorithm of the article is as follows: Section 2 emphasizes the related literature, followed by Section 3 that summarizes the econometric method, while Section 4 presents the used data and depicts the empirical findings.

Finally, Section 5 contains the concluding annotations and presents some policy implications. Several researches have focused on the role played by banks on economic growth see, e. Bernanke, Bernanke, B. Nonmonetary effects of the financial crisis in the propagation of the great depression. American Economic Review73— Implications for theory and policy. Journal of Finance18— Bank fund reallocation and economic growth: Bank stock returns and economic growth.

Financial markets and economic growth in Greece, — What do a million observations on banks say about the transmission of monetary policy? American Economic Review90— Stock markets, banks, and economic growth: Empirical evidence from the MENA region. Research in International Business and Finance21— Banks as coordinators of economic growth and stability: Microfoundation for macroeconomy with externality. Journal of Economic Theory.

There is a general controversy of these studies about the relationship that links banks and economic growth. Bernanke Bernanke, B. They confirmed that local financial development matters.

Their investigation also showed that if capital markets are segmented, there will be a variation of the output due to the variation of bank lending and this is what Becker suggests. Using VAR models, Hondroyiannis et al. The empirical results emphasize that both banks and stock markets financing can stimulate economic growth in the long-run even though its effect is not significant. Furthermore, Hondroyiannis et al.

Naceur and Ghazouani Naceur, S. Their empirical study is based on the estimation of a dynamic panel model with GMM estimators.

The empirical results reinforce the idea of no significant relationship between banking, stock market development, and growth. The absence of this relationship may be related to underdeveloped financial systems in the MENA region that hamper economic growth. Then, more needs to be done to maintain the institutional environment and develop the functioning of the banking sector in the MENA region.

In the same vein, Cole et al. They used dynamic panel techniques to analyze panel data from 18 developed and 18 emerging markets covering the period from to The empirical study showed a positive and significant relationship between bank stock returns and future GDP. This relationship is independent from the previously documented relationship between market index returns and economic growth.

Increasing returns and long-run growth. The Journal of Political Economy94— The results showed that the Walrasian equilibrium with an auctioneer, does not achieve the social optimum. Ueda stressed that with several banks strategically intermediating capital, a Nash equilibrium emerges with a realistic institution, i. The equilibrium autocome is uniquely determined and socially optimal.

Financial development, structure, and economic growth: The case of Egypt, — Research in International Business and Finance19— Does bank lending affect output?

Evidence from the U. Journal of Monetary Economics51— Driscoll Driscoll, J. His study found that, in general, there is no correlation between bank fund reallocation and economic growth at the provincial branch level in China during the period of study.

Nevertheless, Driscoll stresses, as China undertakes market-oriented reforms of the banking sector, positive effects of fund reallocation, and bank loans on local economic growth start to emerge. Bolbol and Fatheldin Bolbol, A. This study is the first published paper in the MENA region that analyses the simultaneous effect of the development of stock markets and banking sector on economic growth.

They found that bank-based indicators have a negative effect on TFP unless they are associated with a threshold level of per capita income; whereas, the effect of market-based indicators is positively reinforced by private net resource flows. Focusing on their empirical results, they found no association between bank fund reallocation and regional economic growth or between bank loans and regional economic growth but they found a positive correlation between bank deposits and growth. The relationships between IBs and economic activities or economic growth at the local level have been the focus of many researchers in recent years.

Despite the favorable views on Islamic banking and finance floating in finance circles, these views have not received much systematic and empirical treatment.

It is only recently that some literature has emerged to seriously and empirically look at the Islamic banking and finance. Unlike classical banking, where dealing with interest is a key product and money is traded as a commodity, Islamic banking is interest-free banking system founded on real asset. The risks, in this system, are shared between the lender and the borrower according to the principle of partnership, joint ownership, lease, and sale.

Under the principles of Islamic finance, the money is qualified only as tool of exchange. According to Fasih Fasih, F. Economic growth in the Middle East, — International Journal of Middle East Studies14— Poverty, inequality and growth in the era of globalization. Institute for International Economicsp. Economic growth in East Asia: Brooking Paper on Economic Activity291 — Does culture affect economic outcomes? Journal of Economic Perspectives2023 — An old puzzle revisited.

Journal of Institutional and Theoretical Economy, 41 — New YorkNY: Nafissi Nafissi, M. Barlow Barlow, R. In addition, Collins and Bosworth Collins, S. In this analysis, which treats the link between economic growth and religion, especially the Islamic one, we can mention the study of Kuran Kuran, T. Based on Islam, he stressed that Islamic practices, such as succession rules, have hindered the development of commercial institutions similar to those that were developed in the West during the Renaissance.

As a result, these practices are unfavorable to Islamic merchants which are competing with their Western counterparts. Using national capital measures, Bhalla Bhalla, S. He believes that this situation is attributed to Islam itself. In the same context, based on an analysis of the World Value Survey data, Guiso et al.

Furqani and Mulyany Furqani, H. They employed time data series of total IB financing IBFinancing and real GDP per capita RGDPfixed investment GFCFand trade activities TRADE to represent real economic sectors. The empirical results showed that in the short run only fixed investment that granger causes IB to develop for The study of Abduh and Chowdhury Abduh, M.

In this study, the authors used the quarterly time series data of economic growth, total financing and total deposit of Islamic banking from Q1: This result implies that the development of Islamic banking is one of the crucial policies which should be taken care of by the government to improve their income.

The aim of Abduh and Omar Abduh, M. The empirical investigation demonstrates a significant relationship in the short- and long-run periods between Islamic financial development and economic growth. It appears to be a bidirectional relationship.

A large number of studies have focused on the relationship between the Islamic financial system and economic growth see, e.

Johnson, Johnson, K. Case study Iran and Indonesia. Journal of Economic Cooperation and Development331 — The general consensus of these researches is that the respect of the Islamic economic precepts promotes harmonization, synchronization, and compatibility between the financial and productive sphere.

Therefore, the practice of Islamic finance principles can overcome some conventional system lacunas in terms of information asymmetry and interest conflicts. Goaied and Sassi Goaied M. Financial development and economic growth in the MENA region: What about Islamic banking development, working paper. They attempted to verify the specific effect of Islamic sector on economic growth using the amount of credit issued to the private sector by IB as an Islamic financial development measure.

Their results are based on GMM system estimation of a dynamic panel model. The empirical results showed no significant relationship between IBs and economic growth in those 16 countries. These results support the idea that the Islamic finance system does not stimulate economic growth.

Finally, these authors pointed out that the relationship between financial development and growth is heterogeneous between the MENA countries where the relationship is negative for oil-exporting MENA and positive trade forex make money rob taylor insignificant in the MENA countries without oil wealth.

How do debt collection agencies make money, only few of copy a professional forex trader studies have linked between IBs and economic growth in a comparative context.

The purpose of this study is to fill this research gap by introducing a comparative analysis between those two financial models. The comparative study clarifies the advantages and disadvantages of each of them. Our goal in this paper is to compare the contribution to economic growth between IBs and CBs.

Using data from to for 10 countries, we compare this contribution between 66 CBs and 54 IBs. The bank data-set is extracted from the basis how to earn money in conquer online Bankscope Bankscope.

Company information and business intelligence. Macroeconomic variables, such as the inflation rate and the GDP, are extracted from the World Bank Development Indicators. We employ annual time series data for the variables of IBs and CBs. Return on assets ROA nifty option prices historical return on equity ROE are used in this study in order to measure economic profitability.

We also use interest variables IV such as interest rate deposits and gross fixed capital formation GFCF. In addition, we used VA, PS, GE, RG, RL, and CC as the variables which measure the role of the state.

In general, studies about growth use GDP as the principal variable reflecting economic growth. The data are collected about the period — and the variables used in this investigation are chosen on the basis of economic theory and data availability.

Islamic banking has already had a strong presence in are binary options legal in the usa how it works sample. According to the Central Bank of Bahrain CBBin recent years, Bahrain has quickly become a worldwide leader in Islamic finance.

It is the host of the largest concentration of Islamic financial institutions in the Middle East. Currently, there are seven Islamic insurance companies Takaful and two retakaful companies working in the Kingdom. Additionally, Bahrain is at the forefront in the market of Islamic securities sukukcounting short-term government sukuk, and leasing securities.

In this case, we note that the Central Bank has played a leading role in the insertion of this innovative financial industry. The market share of IBs correspondingly increased from 1. In addition to the various Islamic financial institutions operating in its financial sector, this country is a center of the organizations to the development of Islamic finance such as the AAOIFI 4 4. Accounting and Auditing Organization for Islamic Financial Institutions Most profitable assets for binary options is a Bahrain based not-for-profit organization that was established to maintain and promote Shariah standards for Islamic financial institutions, participants, and the overall industry.

View all notes ; the LMC 5 5. Liquidity Management Centre LMC was established for the purpose of facilitating the investment of the surplus funds of IBs and financial institutions into quality short- and medium-term financial instruments structured in accordance with the Shariah principles. View all notes ; the IIFM, 6 6.

Its primary focus lies in the standardization of Islamic products, documentation, and related processes. View all notes the IIRA 7 7. Islamic International Rating Agency IIRA has been set monster hunter freedom unite easy way to make money to provide independent assessments to Islamic financial institutions and capital market instruments globally.

View all notes and the SRB. Shariah Review Bureau SRB is a Middle East-based Shariah advisory company. View all notes By reference to data from the Thomson Reuters Thomson Reuters. A Cairo-based Islamic banking organisation.

There are 14 banks licensed to provide Shariah-compliant products—three full-fledged IBs, including Faisal Bank, and 11 CBs with Islamic branches. Rim stock market symbol for goldman sachs figures illustrated high demand for transactions; particularly they offer different unique services and products, Saudi Gazette Saudi Gazette.

Moreover, in accordance with a Global Financial Development Report Global Financial Development Report. The most comprehensive report yet on the topic. As it has been done in many parts of the world, the Islamic banking system in Kuwait has gone solid. The strong increase reflects the strong demand in the country for Islamic products and services that comply with Shariah rules, and further growth is expected in Referring to Banker Banker.

Global does duke basketball make money intelligence since Islamic deposits grew by 8. This growth exceeded that of the overall banking sector in Kuwait, which recorded 7. Moreover, Islamic banking assets accounted for By referring to Tribune Tribune.

The express with the international new work times. Pakistan comes in the eighth position. According to the Global Islamic Finance Report Global Islamic Finance. Leading Islamic intelligence since vecm stock market exchange rate oil price In Pakistan, the largest IB is Meezan Bank, which is the fast assuming mainstream prominence. If this trend continues, then one should expect that in the next three years, Islamic banking assets will at least double 99 binary options risks their current size of Rs billion.

This reflects that IBs in Qatar are gaining strength, with Shariah-compliant lenders outperforming their conventional counterparts in many areas duringdespite the confines of a progressively more competitive market. According to Thomson Reuters Thomson Reuters. Saudi Arabia has the second largest Islamic finance sector, after Malaysia.

Furthermore, this country was among top 10 countries for educational infrastructure, with 7 universities offering degrees and 22 institutions offering courses on Islamic finance. Al Rajhi Bank, Islamic Development Bank, and Bank AlJazira are the largest IBs in Saudi Arabia, Islamic Finance Development Islamic Finance Development Indicator Islamic Finance Development Indicator. The banking system in Sudan has experienced a dramatic development since its independence.

In fact, Islamic financial industry has attracted the Sudanese population. Al-Haaj and Shatah Al-Haaj, I. For example inthe total amount of current accounts of only 6 IBs reached 86,4 Million Dinars, while it reached ,4 Million Sudanese Dinars in 18 commercial banks.

This indicates that IBs succeeded in attracting more deposits than forex profit multiplier bonus banks money on the internet and binary options trading starter kit in other hand.

The Islamic banking sector, in Turkey, has experienced a profitable stock market patterns of solid growth to reach a total of 6. A recent report by Thomson Reuters Thomson Reuters. According to a report by Dubai Chamber of Commerce and Fun way to make money on runescape DCCI Dubai Chamber.

Assessing cost technical efficiency of banks in Kuwait. In Proceedings of the Economic Research Forum 8th Annual ConferenceCairo. Exchange rate euros to dollars chase bank cost, profit and X-efficiency of Islamic banks.

International Seminar on Islamic Banking: A comparison of performance of Islamic and conventional banks — Journal of Economic Behavior and Organization, S93 — S An examination of technical, pure technical and scale efficiencies in GCC banking. American Journal of Finance and Accounting1— The determinants of Islamic banks' efficiency changes. International Journal of Islamic and Middle Eastern Finance and Management2— In this case, Leverage ratio forex trading and Sassi Goaied M.

All those IB advantages allow them to promote economic growth. However, using data envelopment analysis DEA and meta-frontier analysis MFAJohnes et al. They found that IBs are typically on a par with conventional ones in terms of gross efficiency. Similarly, for Abduh and Chowdhury Abduh, M. The authors confirmed that the Islamic banking development has a positive and significant relationship with economic growth.

Like Abduh and Omar Abduh, M.

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Based on the research of Johnson Johnson, Vecm stock market exchange rate oil price. A higher score is indicative of a more positive assessment of government, Kaufmann GDP is a universal statistics to characterize the income level of a particular country within a certain time range. Studies about growth always use GDP as the main variable measuring economic growth. The empirical model we developed in this research is consistent with the broader theoretical and empirical literature on the association between banks and economic growth and takes the following form: This equation can be rewritten as follows: NV is the nominal variables dummy variables.

We employed, in our three estimates, the static panel estimation techniques. Therefore, for the pooled data, we used the OLS regression model. Ordinary least squares OLS or linear least squares are a method for estimating the unknown parameters in a linear regression model. This statistic tool allows minimizing the sum of squared vertical distances between the observed responses in the data-set and the responses predicted by the linear approximation. The resulting estimator can be expressed by a simple formula as follows: Like Guo, Jiang, Kim, and Xu Guo, D.

Political economy of private firms in China. Journal of Comparative Economics42— We started the results with a descriptive analysis.

In Table 1we report descriptive statistics of the variables used in our analysis for the whole sample, for the sample of CBs and for the sample of IBs. Typist job from home malaysia balance sheet data are collected yearly from Bank Scope, and cover the period — Macroeconomic variables are all from the World Bank.

Governmental variables are all from WGI. Table 1 indicates that the global banking situation in our sample is generally in degradation during the study period, except for a few relatively small improvements. This is explained in large part, by the subprime crisis which affected the world economy. In fact, during this crisis, although IBs showed their performance, Bashir Bashir, B. Portfolio management of Islamic banks: Journal of Banking and Finance7— Determinants of profitability in Islamic banks: Some evidence from the Middle East.

Islamic Economic Studies1131 — Islamic banks and financial stability: Journal of Financial Services Research3895 — Efficiency in Islamic and conventional banking: An international comparison3425 — Inefficiency and heterogeneity in Turkish banking: Journal of Applied Econometrics20— Cost and profit efficiency of conventional and Islamic banks in GCC countries.

Journal of Productivity Analysis3445 — Moreover, as shown in recent research, Ben Khediri, Charfeddine, and Ben Youssef Ben Khediri, K. Islamic versus conventional banks in the GCC countries: A comparative study using classification techniques. Research in International Business tactical accessories for sks Finance33 global futures brokerage, 75 — This means that similar to classical banks, the non-usurious banks did not escape to recent crisis effects.

However, based on the average values of the ROA and the ROE, we noted that there futures spread trading joe ross not much difference between the two bank types in terms of financial profitability. This is in line with the finding of Ben Khediri et al. This is about two to three times review about robots in binary options magnet than the rate at which CBs grew over the same period, due, in part, to the global financial crisis.

Our research emphasizes a small difference in earn big money onyx medal mean value of this variable.

This rapprochement between the values of these variables highlights some similarity between the two bank categories. This leads us to believe that there is not much difference between the two bank samples in contributing to economic growth. Table 1 shows a large difference in the average value between the IB and CB of certain variables, in particular, those which measure the bank development. It shows a large difference between the two bank types. Although Islamic finance has developed as a fast-growing industry with an estimated one trillion dollars in assets, El-Komi and Croson El-Komi, M.

Panel unit root tests have become one of the key tests among economists, particularly econometricians though testing unit roots on panel data is more recent. They are much more powerful compared to the normal unit root tests for individual time series.

Surfear la ola forex, Pesaran, and Shin Im, K. Testing for unit roots in heterogeneous panels.

Journal of Econometrics, 53 — Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 1 — These two tests are based on the ADF forex broker back office software india. However, LLC assumes homogeneity in the dynamics of the autoregressive coefficients for all the panel members. Nevertheless, since it allows for heterogeneity in these dynamics, the IPS is more general.

Additionally, in the case where cross-country data are used, slope heterogeneity is more logical. In this context, heterogeneity arises because of divergence in economic conditions and degree of development in each country. Consequently, Levin et al. Thus, in this work, we used the ADF test in order to test the stationary of the panel data obtained for the banks. The panel unit forex overnight strategy test proposed by Im et al.

The results of this test are summarized in Table 2 for the three different regressions Conventional and Islamic banks, Conventional banks chadstone shopping centre opening hours melbourne cup day Islamic banks. In all the three panels, the null hypothesis of a unit root Series contains a unit root is rejected in favor of the stationary alternative Series is stationary.

As a result, the study variables are stationary and integrated of order zero because there is no differentiation for the first stationary. The correlation matrix among the selected variables related to all banks, CBs and IBs is represented in Tables 3—5.

In this panel, we report the Pearson correlation coefficients. In statistics, the autocorrelation of a random process describes the correlation between the values of the process at different times, as a function of the two times or of the time lag.

Autocorrelation, also known as a serial correlation, is the anzac day shops trading hours of a signal with itself. Informally, it is the similarity between observations as a function of the time lag between them. It is a mathematical tool for finding repeating patterns, such as the presence of a periodic signal obscured by noise, typing work from home in bhopal identifying the missing fundamental frequency in a signal implied by its harmonic frequencies.

It is often used in signal processing for analyzing functions or series of values, such as the time domain signals. The effects of one of these two explanatory variables can be destroyed by the effect of the other variables. By analogy, Table 3 shows the result of this test for the total sample banks.

Therefore, the total asset variable is strongly and positively correlated with the three variables of total deposit, total investments, and total income. In our initial estimate, we will choose the total asset variable. The effect of this variable in the studied phenomenon economic growth also reflects the effect of these three variables.

The same estimation will be made for the other two estimations for 66 CBs and 54 IBs. The Hausman test is a statistical hypothesis test in econometrics named after James Durbin, De-Min Wu, and Jerry A. This test evaluates the significance of an estimator versus an alternative estimator.

It helps evaluate if a statistical model corresponds to the data. These two values allow us to choose the fixed effect. The authors also indicated that all the Durbin—Watson values 1. This means that there is no the autocorrelation in the sample. In order to test and compare the effects of conventional and IBs on economic growth, we used some preliminary tests, such as the autocorrelation test, Hausman test, descriptive statistic test, and augmented Disky —Fuller ADF test to apply our technique including cross-section pooled ordinary least squares OLS.

We employ the Breusch—Pagan Lagrange Multiplier LM test to examine the null hypothesis of no random effects. The augmented Disky —Fuller is used to verify the stationarity of the variables used in our study. The ADF test shows that all the variables are stationary and integrated of first order. These tests imply that the cross-section OLS technique is appropriate. According to the three regressions For all banks, CBs and IBsthe Breusch—Pagan LM test rejects the null hypothesis of no random effect.

The Hausman statistics specification test, which rejects the null hypothesis of RE models, is appropriate and more efficient. In this context, we can say that the results of FE models are more appropriate than the RE models. Due the strong correlation between the government variables, we can emphasize that all those government variables are significantly and negatively associated with GDP.

We note the same affects of the three variables; ROA, IR, and DIR. In addition, a magnitude of 0. However, the variables which measured the State rate have a significant and negative effect on GDP. This means that the institutional framework requires some changes to improve economic growth.

In fact, the government sector played a crucial role in promoting economic growth. This result is consistent with the findings of Reinert Reinert, E. The role of the state in economic growth. Journal of Economic Studies26— Economic growth and decline with endogenous property rights.

Journal of Economic Growth2— This means that, in our sample case, IB contribute better to economic growth than CB. Regarding to the individual effect, as it is shown in Figure 1we see that the individual effect evolution of each bank type is characterized by a significant volatility with both negative and positive tendency throughout the study period.

Furthermore, we noted that in some periods, CBs support growth, while in other periods, the IBs are those which support it. Individual effect of Islamic and conventional bank on economic growth. The average of this individual effect shows that the IB with a 0. However, the difference between the two averages is small.

This minimal difference between the two average values combined with the instability of the two curves and the effect of the dummy variables makes the effect comparison of each bank type on economic growth ambiguous.

In order to appreciate the effects of each bank type on economic growth, we will study the relationship between the bank and economic growth for each sample separately. Next, we divide the sample into two subsamples according to the bank type 64 CBs and 56 IBs. This leads us to the following questions: What is the role of classical bank in economic growth in the context of our sample of countries? Similarly, what is the role of IB in economic growth?

This link is anticipated although the banking system plays a key role in the savings allocation and financing of investment projects. This result is somewhat consistent with the study of Boot Boot, A. What do we know? Journal of Financial Intermediation97 — Law, finance, and firm growth.

The Journal of Finance53— The role of banks in reducing the costs of financial distress in Japan. Journal of Financial Economics2767 — Indeed, the magnitude of 0. Few studies focused on the relationship between Islamic banking development and economic growth.

Abduh and Omar Abduh, M. Islamic finance and economic growth: Paper presented in Kuala Lumpur Islamic Finance ForumKuala Lumpur. On the contrary, using no different time span of quarterly data, studies of Furqani and Mulyany Furqani, H. On the one hand, Furqani and Mulyany Furqani, H. However, the finding of Majid and Kassim Majid, S. With regard to the relationship between profitability bank and economic growth, the finding states that this relationship is significatif in the context of Islamic financing model.

By contrast, the two variables ROA and ROE, which measure the bank profitability, have no effect on economic growth in the case of CBs. This result can be explained by the difference in the profitability and efficiency between IBs and CBs, especially in our study period, which integrates the period of the last Subprime crisis.

The results are consistent with the findings of Goaied and Sassi Goaied M. This implies that the IB size is still limited.

Banks and economic growth in developing countries: What about Islamic banks?: Cogent Economics & Finance: Vol 4, No 1

However, the same variables do not have any effect if the financing model is based on Islamic financial principles. For both financing modes Islamic and conventionalwe note that the institutional framework is unfavorable for the two types of funding.

Existing studies regarding growth tend to focus more on the quality of institutions e. The oil curse, institutional quality, and growth in MENA countries: Evidence from time-varying cointegration. Energy Economics461 — 9. Institutional quality thresholds and the finance—Growth nexus.

Have economic growth and institutional quality contributed to poverty and inequality reduction in Asia? Journal of Asian Economics2771 — Foreign aid, institutional quality, and growth. Social Science Research Network The results demonstrate that the impact of finance on growth is positive and significant only after a certain threshold level of institutional development has been attained.

Furthermore, Perera and Lee Perera, L. Similarly, Apergis and Payne Apergis, N. The results revealed that better institutional quality reduces the unfavorable effect of oil reserves on the performance of the real economy. Young and Sheehan Young, A. To sum up the outcome in the table, we can say that the results indicate that both conventional and Islamic financing modes play an influential role in economic growth. The bank profitability indicators, the control variables, and interest variables are favorable to growth if the funding mode is conventional.

By contrast, the bank development indicators play a key role in funding a framework characterized by IBs. Both models contribute to economic growth.

Hence, there is not a more advantageous funding model than the other. Both models conventional and Islamic combine to create an economic environment conducive to economic growth. This indicates that economic policies that speed economic growth require the intervention of both models.

The results are confirmed by the findings of Gheeraert Gheeraert, L. Our finding shows that the market share of IBs has insignificant impacts on economic growth. This can be explained by the backwardness of IBs in the emerging countries. They are still in a preliminary phase compared to non IBs. Moreover, as it is highlighted by Huda Huda, A.

An Islamic financing structure, where an intermediary buys a property with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price including an agreed upon profit for the intermediary that can be made through a series of installments, or as a lump sum payment.

In Islamic law, a contract in which a buyer purchases an item for deferred delivery. The item must be described in detail and construction must fit the specifications. There is no set delivery date for the item. Usually, an istisna contract is made for specially made items. For example, one may make a contract to build a custom table for a client. Payment may be made in a lump sum or in installments.

View all notes and Salem, 11 Advance payment for goods which are to be delivered at a specified future date. Under normal circumstances, a sale cannot be affected unless the goods are in existence at the time of the bargain. However, this type of sale is an exception, provided the goods are defined and the date of delivery is fixed.

The objects of sale must be tangible goods that can be defined as to quantity, quality, and workmanship. View all notes are the most used in the IBs. Indeed, there is no interest for those customers to move toward IB particularly because participative products are based on the principle of Sharing the Profit and Loss SPL. In line with this, Kuran Kuran, T.

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In the same context, Siddiqi Siddiqi, N. Islamic banking and finance in theory and practice: A survey and state of the art. Islamic Economic Studies131 — By referring to our analysis in this research and the various remarks which we have outlined, our study seems important. Indeed, in line with the increased attention in Islamic finance, the literature on Islamic banking has been growing fast.

The main sizeable body of studies has explained the general Islamic principles and the product used in Islamic banking Bashir, Bashir, A. Portfolio management of Islamic banks—Certainty model. Adjustment mechanism and the money demand function in Pakistan. Pakistan Economic and Social Review20— Islamic financial institutions and products in the global financial system: Variety in the rules of Islamic financial institutions.

Arabian Journal of Business and Management Review51. The competitive nature of the Arab Middle Eastern banking markets. International Advances in Economic Research8— A comparative analysis of efficiency in Islamic and conventional banks of the MENA region, Istanbul. In Conference of Economics and Finance. Risk in Islamic banking.

Review Finance17— Business model, efficiency and stability. Journal of Banking and Finance37— Determinants of Islamic bank profitability in the MENA region. International Journal of Monetary Economics and Finance2— A comparison of the profitability of Islamic and conventional banks: The case of GCC countries. Bankers, Markets and Investors9816 — Islamic and conventional banking in the nineties: Journal of Islamic Economic Studies, Islamic Development Bank81 — Economic consequences of applying Islamic principles in Muslim societies.

International Journal of Social Economics24— Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region. The International Journal of Accounting4345 — Review of Finance617 — Review of Financial Economics2268 — The financial stability of Islamic banks during the subprime crisis.

Islamic financial stability during the US sub-prime crisis: Using from data panel. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport11 — The effects of the global crisis on Islamic and conventional banks: Other works focused on the performance of IBs Beck et al. Examining the efficiency and the effectiveness of Islamic and conventional banking: However, the impacts of non usurious banks on growth are far from being examined.

Thus, our research attempts to fill the gap in the empirical literature on Islamic banking and economic growth. To our knowledge, it is among the few studies that provide an empirical analysis of the IBs role on economic growth in a comparative context between those non usurious banks and their western counterparts. Over the recent years, Islamic banking has become one of the fastest growing segments in the international financial system.

Analysts expect it to maintain its rapid double-digit growth. Little is, however, known about the link between Islamic banking and economic growth.

This study tackles this issue by using OLS estimation over the period — Specifically, we examine the impacts of some bank indicators, such as bank profitability, bank development, control variables, interest variables, state rate, and dummy variables. By referring to the dummy variables, the empirical results show that IBs contribute better to economic growth than CBs. However, when it is measured by the total income, it positively affects growth only in the case of usurious banks. Bank profitability indicators are found to have a statistically significant impact in the case of banks and 54 IBs.

The effect of control variables indicators measured by income diversity ID is statistically significant in the case of all banks and classical banks. We notice the same impact in the same context for the interest variables precised by GFCF and DIR.

Our research also indicates that the inflation rate IR has a negative impact on growth if the funding strategy is based on the precepts of Shariah. It is widely known that the Muslim doctrine incites entrepreneurship and trade, encourages profit and focuses more on the real economy.

Hence, inflation seems like a hamper for this funding as it is for conventional finance. Certainly, the findings have a number of policy implications. Firstly, the empirical evidence indicates that the economic and financial profitability ROA and ROEinterest rate … are significant on economic growth in Islamic financing model.

Therefore, both usurious and non usurious banks play a fundamental role in economic society. Consequently, they are expected to be responsive to the needs of different stakeholders. Due to their religious identity and ethical character, banks which respect Islamic precepts, are expected to be more socially responsible than their classical counterparts whose functions and services are principally based on profit maximization. The Islamic banking sector acts as a complement to the conventional banking in Muslim countries, when both systems co-exist and the Islamic sector reaches a medium penetration in the total banking sector.

Secondly, our empirical evidence suggests that despite the success of IBs in recent years to record considerable progress in terms of efficiency, performance, stability, and resistance dealing with financial failures, the market share of these banks is still far-fetched from the conventional. In fact, the current practices of IB deviate from their theoretical model.

IBs should focus on investment products with which they participate with clients in the loss as in this profit. They continue to encourage them to cross the phase of a simple financial intermediation and to intervene with investments products and its operations. Additionally, the use of diverse branch models must be explored, depending on the target segment desires, ranging from light, kiosk-style sales outlets focusing on retail mass customers to full-service branches covering all the customer segments.

Alternative branch models have the supplementary advantage of potentially reducing investments, operating costs and setup times, and are principally powerful if coupled with alternative channels. A modern customer-centric image that accentuates ethical and moral values and social or environmental efforts will reach the widest audience of both Muslim and non Muslim customers.

Moreover, there is the need for education programs on Islamic banking products and structures. Furthermore, even though, the above analysis reveals that a structural complementarily and cooperation exists between the two sectors, counter balancing impacts can also intervene in unfavorable financial conditions e. Complementary studies are also required to further understand the sources of the effects.

The current essay does not allow disentangling between the three main channels through which non usurious banking can affect the overall banking development, such as banking penetration, financial innovation, and banking sector competitive structure. Each of these channels is an evenly pertinent piece of the research focus.

In this case, a logical extension of this research consists in the study of the link between Islamic banking and economic growth. In particular, can Shariah-compliant financial sector sustain the same contribution to macro-economic growth, as the conventional banking sector? Breusch—Pagan LM test for random effect.

Hausman test is the Hausman specification test. Submit an article Journal homepage. Saida Daly Faculty of Economics and Management of Sfax, Laboratory URECA, University of Sfax, Street of airport, km 4. View further author information. Received 28 Dec In this article Abstract 1. Conclusion and policy implications References. Banks and economic growth in developing countries: What about Islamic banks? Mathematical formulae have been encoded as MathML and are displayed in this HTML version using MathJax in order to improve their display.

Uncheck the box to turn MathJax off. This feature requires Javascript. Click on a formula to zoom. Abstract Islamic banks IBs have a significant role in the growth of gross domestic product of the developing countries. Introduction During the last two decades, Islamic banking has seen a rapid growth.

CBs and economic growth Several researches have focused on the role played by banks on economic growth see, e. IBs and economic growth The relationships between IBs and economic activities or economic growth at the local level have been the focus of many researchers in recent years.