Institutional quality and Islamic financial development

Mansur Muhammed (), Abubakar Jamilu Baita () and Tufail Hussain ()

Modern Finance, 2024, vol. 2, issue 1, 69-83

Abstract: The Islamic financial system has become an important source of financing for many Muslim and non-Muslim countries. Therefore, this paper examines the role of institutions in facilitating the development of Islamic financial institutions. The study covers the period 2013-2021 for a panel of 11 leading economies in Islamic finance and employs fixed effects with the Driscoll and Kraay (1998) estimator. The results show a positive impact of effective governance on the development of Islamic finance. However, regulatory quality has a significant negative impact on the development of Islamic finance. Thus, we argue for the improvement of critical institutions that include political, legal, governmental, and regulatory aspects.

Keywords: sukuk; Islamic banks’ assets; Islamic financial development; institutional quality; fixed effects; Driscoll-Kraay estimator (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:bdy:modfin:v:2:y:2024:i:1:p:69-83:id:98

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