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Is Islamic Banking Good for Growth?

Kangni Kpodar () and Patrick Imam

No 2015/081, IMF Working Papers from International Monetary Fund

Abstract: The rapid growth of Islamic banking has attracted much attention lately in the economic literature. At the same time, a mature body of the literature has shown that financial development is broadly conducive to economic growth, which raises the question as to whether a similar conclusion holds for Islamic banking. Against this backdrop, this paper investigates the relationship between Islamic banking development and economic growth in a sample of low and middle income countries, using data over the period 1990-2010. The results show that, notwithstanding its relatively small size compared to the economy and the overall size of the financial system, Islamic banking is positively associated with economic growth even after controlling for various determinants, including the level of financial depth. The results are robust across across different specifications, sample composition and time periods.

Keywords: WP; banking development; banking assets; real GDP; private sector; Islamic banking; financial development; economic growth; conventional banking; assets to GDP; Financial sector development; Commercial banks; Terms of trade; Government consumption; Global (search for similar items in EconPapers)
Pages: 33
Date: 2015-04-28
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Journal Article: Islamic banking: Good for growth? (2016) Downloads
Working Paper: Is Islamic Banking Good for Growth? (2015) Downloads
Working Paper: Is Islamic Banking Good for Growth? (2015) Downloads
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