Financial Inclusion, Institutional Quality, and Financial Development: Empirical Evidence from OIC Countries

Minhaj Ali, Muhammad Imran Nazir, Shujahat Haider Hashmi and Wajeeh Ullah

Chapter 13 in Introduction to Islamic Economics and Finance, 2025, pp 303-330 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This unique study examines the moderation effect of institutional quality (IQ) on the relationship between financial inclusion (FI) and financial development (FD) of 45 Organization of Islamic Cooperation (OIC) countries. For empirical analysis, panel data are used for the period 2000–2016. We use the Arellano–Bond generalized method of moments (GMM) and two-stage least-squares (2SLS) method in our estimations to draw multidimensional results. The empirical results confirm the significant positive relationship between FI, IQ and FD. Interestingly, we find that IQ moderates FI and has a significant positive impact on FD. Our findings are robust to alternative econometric specifications of FI, IQ and FD. Therefore, policymakers must sensibly understand the pivotal role of FI and IQ in establishing sustainable future development of OIC countries.

Keywords: Islamic Economics; Islamic Finance; Islamic Banking; Islamic Insurance; Sustainable Finance; Ethical Finance; Fintech and Islamic Finance; Islamic Finance Regulation; Islamic Banking Market (search for similar items in EconPapers)
Date: 2025
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