Islamic Banking and Financial Development

Lebdaoui, Hind and Wild, Joerg,(2016), Islamic Banking and Financial Development. , Rev. Middle East Econ. Fin, UNSPECIFIED

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Abstract With the growing number of Islamic banks worldwide, much ink has been spilled on heated debate about its merits and ability to improve the financial sector. In order to buttress the subject matter of this debate, this paper investigate the link between Islamic banking assets share and the financial development. Using five different proxies of financial development from 22 countries for the period between 2000 and 2013, this research employs the generalized method of moments to cope with the endogeneity problem, and concludes that the share of Islamic banking is positively associated with the banking sector activity as measured by private credit. The competition of banking sector intensifies in countries with higher Islamic bank shares resulting in smaller net interest margin, whereas the structure of the financial sector does not change. A financial sector index composite regression showed that in general, financial development is positively linked to the Islamic banking presence. These findings provide empirical evidence that Islamic banking presence benefits financial development in Muslim countries.
Keywords : Islamic finance, Islamic banking presence, financial development, GMM, PCA, UNSPECIFIED
Journal or Publication Title: Rev. Middle East Econ. Fin
Volume: 12
Number: 2
Item Type: Article
Subjects: Ekonomi Islam
Depositing User: Heru Prastyo
Date Deposited: 30 Dec 2019 08:10
Last Modified: 30 Dec 2019 08:10

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