THE ROLE OF PLS FINANCING ON ECONOMIC GROWTH: INDONESIAN CASE

Masrizal () and Budi Trianto ()
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Masrizal: Islamic Economic Department, Faculty of Economics and Business, Universitas Airlangga, Indonesia
Budi Trianto: Sekolah Tinggi Ekonomi Islam (STEI) Iqra Annisa Pekanbaru, Indonesia

Journal of Islamic Monetary Economics and Finance, 2022, vol. 8, issue 1, 49-64

Abstract: This paper investigates the role of PLS financing and non-PLS financing of Islamic banks in supporting the real sector for the case of Indonesia using monthly data from January 2009 to December 2018. Applying the ARDL approach to model their long-run and short-run relations, we find positive contribution of the PLS financing scheme to Indonesia’s economic growth. Comparing the PLS and non-PLS financing, we note that the PLS financing has a larger impact on growth, both in the long run and short run. Accordingly, for Islamic finance to have larger growth impact, concrete steps and initiatives must be put in place to increase Islamic financing based on PLS arrangements.

Keywords: Islamic banking; PLS financing; Non-PLS financing; Economic growth; ARDL (search for similar items in EconPapers)
JEL-codes: C53 G21 G23 O47 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:8:y:2022:i:1c:p:49-64

DOI: 10.21098/jimf.v8i1.1378

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