The Impact of the Islamic Banking Industry on Economic Growth and Poverty Reduction in Pakistan

Muhammad Abubakar Siddique (), Mirajul Haq () and Memoona Rahim ()
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Muhammad Abubakar Siddique: International Islamic University
Mirajul Haq: International Islamic University
Memoona Rahim: International Islamic University

Chapter Chapter 11 in Enhancing Financial Inclusion through Islamic Finance, Volume II, 2020, pp 259-279 from Palgrave Macmillan

Abstract: Abstract Pakistan’s banking sector has been under Islamic financial paradigm since 2004. According to various studies, it is performing well in terms of efficiency, profitability, and growth. Limited focus is placed on its role in achieving Sustainable Development Goals (SDGs) of poverty eradication and economic growth—the basis for this chapter. The study uses Salam, Murabaha, Diminishing Musharakah (DM), Ijarah, and Istisna as dependent variables. Four fully fledged and five standalone branches of conventional banks were selected. It employs annual unbalanced panel data for 2004 to 2017. Based on the findings for Im, Pesaran, and Shin panel unit root test, Breusch-Pagan LM test, and Hausman test, random-effect (RE) estimation technique is applied. The results show that Islamic bank-specific and macroeconomic variables have significant impact on poverty reduction and economic growth implying that Islamic Banking Industry (IBI) has potential in the achievement of SDGs and therefore recommends for its promotion.

Keywords: Islamic banking; Economic growth; SDGs; Poverty alleviation; Unemployment (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psibcp:978-3-030-39939-9_11

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DOI: 10.1007/978-3-030-39939-9_11

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