Financing in the Islamic System and Sustainable Economic Development of Selected Islamic Countries

Sepideh Khavarinezhad; Paolo Biancone; Vahid Jafari-Sadeghi

doi:10.13135/2421-2172/6158

Sepideh Khavarinezhad University of Turin https://orcid.org/0000-0003-2236-3817
Paolo Biancone University of Turin, Department of Management http://orcid.org/0000-0002-4819-9878
Vahid Jafari-Sadeghi Aston University https://orcid.org/0000-0003-3083-6119

DOI: https://doi.org/10.13135/2421-2172/6158

Keywords: Financing, Islamic financing, Economic growth, Sustainable development, Islamic countries, Sukuk

Abstract

Financial markets have the obligation to support the real economy has become the development and sustainable economic growth. Capital is an indispensable tool for economic growth and prosperity, which is accelerated through the financial markets, and Islamic finance tools have developed significantly in Islamic countries in recent years. Promoting macroeconomic objectives such as sustainability and achieving endogenous and viable economic growth are the purposes of all economic systems. Increasing growth of financial methods and development of these systems drives from this reality that the sustainable development of the financial system is an integral part of economic system development. Islamic financing has emerged in the world financial literature, intending to provide a new model for replacing conventional financial plans and providing financial, commercial and investment facilities and opportunities by the principles of Sharia. This system has been able to identify its various dimensions. Due to the particular benefits and advantages of Islamic financing, the issue of Islamic financing has become critical in the international arena. By assuming Islamic financial systems, it can be concluded that they do not permit the use of current financial methods since usury is forbidden in Islam. So, they attempt to create Islamic financial instruments. As an Islamic and non-usury financial instrument, Sukuk has found a suitable position among Islamic governments and companies. Islamic financing has emerged in the world financial literature to provide a new model for replacing traditional and conventional financial systems and providing financial, commercial and investment facilities and opportunities under the principles of Sharia. The purpose of the present study is to investigate the role of Islamic financing of Sukuk on the economic growth of Malaysia, Iran, Pakistan, Qatar, Bahrain, Turkey, Indonesia, UAE and Saudi Arabia; applying the panel data, will be analysed the variables affecting economic growth (government spending, gross capital formation, labour force, exports and Sukuk).

References

T. Hua, “Market and Monarchy: Economic Thought and History in Early Modern China,” Springer Nature, 2021.

N. Ahmad, W. Ripain, N. Bahari, N. F. and W. S. S. Shahar, “Growth and prospect of Sukuk in Malaysian market,” In Proceeding of the 2nd International Conference on Management and Muamalah , 2015.

P. P. Biancone, and M. Mohamed Radwan Ahmed Salem, “ Social finance and financing social enterprises: an Islamic finance prospective” European Journal of Islamic Finance, 2019.

A. Trokic “A Islamic accounting; history, development and prospects”, European Journal of Islamic Finance, 2015.

I. Wahyuningsih, and M. S. Nurzaman, “Islamic financial instruments and economic growth; Evidence from Indonesia,” In 2020 6th International Conference on Information Management, pp. 46-50.

V. Jafari Sadeghi, and P. Biancone, “Shariah compliant international entrepreneurship: A study of Islamic finance in Europe. European Journal of Islamic Finance, 2017.

M. M. Hanefah, A. Noguchi, and M. Muda, Sukuk: Global issues and challenges, 2013.

R. C. Merton, “A functional perspective of financial intermediation,” Financial management, 23-41, 1995.

R. C., Merton, and Z. Bodie, “Design of financial systems: towards a synthesis of function and structure,” In The world of risk management. 1-27, 2006.

R. Capolupo, “Finance, investment and growth: Evidence for Italy. Economic Notes: Review of Banking,” Finance and Monetary Economics, 47(1), 145-186, 2018.

L. Effiom, and Edet, S. E. “Financial innovation and the performance of small and medium scale enterprises in Nigeria,” Journal of Small Business & Entrepreneurship, 2020, 1-34.

W. S. Frame, “ Technological change, financial innovation, and diffusion in banking.” DIANE Publishing, 2010.

R. J. Barro, and X. Sala-i-Martin, “ Public finance in models of economic growth,” The Review of Economic Studies, 1992, 59(4), 645-661.

W. S. Frame, and L. J. White, “ Empirical studies of financial innovation: lots of talk, little action,” Journal of economic literature, 2004, 42(1), 116-144.

R. Levine, “Financial development and economic growth: views and agenda,” Journal of economic literature, 1997, 35(2), 688-726.

J. A. Schumpeter, “ The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle, “Transaction Publishers,1982, 1- 244.

L. Amoah, C. K. D. Adjasi, I. Soumare, K. A. Osei, J. Y. Abor, E. B. Anarfo, I. Otchere, (2020), “Finance, economic growth, and development,” In Contemporary Issues in Development Finance, 2020, pp. 20-50). Routledge.

J. Fonseca, and B. Van Doornik, “Financial development, labour markets, and aggregate productivity: Evidence from Brazil,” Unpublished Working Paper, 2019.

K. U. Ehigiamusoe, and M. S. Samsurijan, “What matters for finance‐growth nexus? A critical survey of macroeconomic stability, institutions, financial and economic development,” International Journal of Finance & Economics, 2020.

T. Radjenovic, and B. Rakic, “Interdependence between level of financial system development and economic growth in Serbia,” Journal of Balkan and Near Eastern Studies, 2017, 19(6), 645-665.

R. G. Harris, “The knowledge‐based economy: intellectual origins and new economic perspectives,” International Journal of management reviews, 2001, 3(1), 21-40.

A. Popov, “Evidence on finance and economic growth,” Handbook of finance and development, 2018.

M. Boianovsky, “Beyond capital fundamentalism: Harrod, Domar and the history of development economics,” Cambridge Journal of Economics, 2018, 42(2), 477-504.

M. Boianovsky, “Domar, expectations, and growth stabilization,” Cambridge Journal of Economics, 2021, 45(4), 723-750.

M. A. Mobin, and A. U. F. Ahmad, “ Achieving sustainable economic development through Islamic microfinance and the potential of a proposed two-tier Mudarabah waqf business model,” In Handbook of empirical research on Islam and economic life. Edward Elgar Publishing, 2017.

A. C. Azmi, and M. H. Hanifa, “The Sharia-compliance of financial reporting practices: a case study on waqf,” Journal of Islamic Accounting and Business Research, 2015.

A. W. M. El-Seoudi, Z. Nasohah, M. N. Mohamad, Nor, A. H. M., Ahmad, S. Alias, “Gift of the Compensation Condition and Used in Islamic Financing Instruments. Advances in Natural and Applied Sciences, 2012, 6(7), 1075-1080.

P. P. Biancone, and M. Radwan, “ European companies: evaluation for sharia compliance “opportunities and challenges”. European Journal of Islamic Finance, 2016, (5).

M. K. Hassan, M. R. Rabbani, and M. A. M. Ali, Challenges for the Islamic Finance and banking in post COVID era and the role of Fintech. Journal of Economic Cooperation and Development, 2020, 41(3), 93-116.

I. Alam, and P. Seifzadeh, “Marketing Islamic financial services: A review, critique, and agenda for future research,” Journal of Risk and Financial Management, 2020, 13(1), 12.

H. B., Ghassan, and N. Krichene, “Financial stability of conventional and Islamic banks: A survey,” 2017.

S. Eti, H. Kalkavan, H. Dinçer, and S. Yüksel, “Predicting the role of Islamic banking on sustainable economic development: An analysis for Turkey with ARIMA model,” In Handbook of research on creating sustainable value in the global economy, 2020, pp. 146-164.

H. A. Halayqa, “Islamic Finance and Financial Stability, in Theory and Practice (Doctoral dissertation,” Hamad Bin Khalifa University (Qatar), 2019.

J. P. Bist, “Financial development and economic growth: Evidence from a panel of 16 African and non-African low-income countries,” Cogent Economics & Finance, 2018, 6(1), 1449780.

S. Nyasha, and N. M. Odhiambo, “Financial development and economic growth nexus: A revisionist approach,” Economic Notes: Review of Banking, Finance and Monetary Economics, 2018, 47(1), 223-229.

F. Muedini, “The compatibility of cryptocurrencies and Islamic finance”. European Journal of Islamic Finance, 2018, 10(1), 1-11.

S. R. Colombage, “Financial markets and economic performances: Empirical evidence from five industrialized economies,” Research in International Business and Finance, 2009, 23(3), 339-348.

I. M. Lawal, and U. B. Imam, “Islamic Finance and Economic Growth: Empirical Evidence from Nigeria,” Journal of Economics and Sustainable Development, 2016, P.P. 7-16.

A. Echchabi, “E-Banking acceptance in Thailand: An emphasis on Islamic banks' customers,” European Journal of Islamic Finance, 2018.

H. Smaoui, and M. Khawaja, “ The determinants of Sukuk market development,” Emerging Markets Finance and Trade, 2017,53(7), 1501-1518.

H. Nawaz, M. Abrar, A. Salman, and S. M. H. Bukhari, “ Beyond finance: Impact of Islamic finance on economic growth in Pakistan,” Economic Journal of Emerging Markets, 2019, 11(1), 8-18.

A. Echchabi, H. A. Aziz, and Idriss, U. “ The impact of Sukuk financing on economic growth: the case of GCC countries,” International Journal of Financial Services Management, 2018, 9(1), 60-69.

S. Drissi, and Angade, K. “Islamic financial intermediation the emergence of a new model,” European Journal of Islamic Finance,2019, (12).

J. Akter, “Bootstrapped Durbin–Watson test of autocorrelation for small samples,” ABC Journal of Advanced Research, 2014, 3(2), 137-142.

P.P. Biancone, and M. Mohamed Radwan Ahmed Salem, “Social finance and unconventional financing alternatives: an overview,” 2018.

V. Jafari Sadeghi, and P.P. Biancone, “ Shariah-compliant international entrepreneurship: A study of Islamic finance in Europe,” 2017.

Financing in the Islamic System and Sustainable Economic Development of Selected Islamic Countries

Abstract

References

Most read articles by the same author(s)