Does the size of Islamic banking matter for industry growth: international evidence

Abdelaziz Chazi, Ali Mirzaei, Zaher Zantout and A.S.M. Azad

Applied Economics, 2020, vol. 52, issue 4, 361-374

Abstract: Islamic banking, which has witnessed unprecedented growth in the last quarter of the century is hypothesized to be able to contribute to the development of the financial sector and thus to economic growth through tools inherent to this faith-based model of banking. We test the hypothesis that a higher relative presence of Islamic banking is beneficial to the growth of external finance dependent industries. Using data for 28 industries in 14 countries with dual banking systems, we find that the absolute and relative size of Islamic banking do have a positive impact on industry growth. The results are robust to controlling for the quality of finance as well as for the degree of competition in the banking industry.

Date: 2020
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DOI: 10.1080/00036846.2019.1645288

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