Determinants of Islamic banking growth : an empirical analysis

Abstract EN

This paper examined the determinants of growth rate in Islamic banking using annual time series data.

We apply several econometrics methods including Generalized Linear Model (GLM) and survey based indicators.

We use the World Bank Enterprise Survey data to supplement our answers.

Our results support the view that high oil prices, stable domestic prices, higher educated populace and greater presence of capital resources have positive effects on growth in Islamic banking.

Our findings revealed that instability adversely affect Islamic banking growth.

We found no clear conclusion on the impact of economic growth, greater presence of Muslim population and presence of sharia in the legal system of the country on Islamic banking growth.

The major constraints impeding Islamic banking growth include regulations, tax rates, and skilled labor force.

The findings call for urgent policy measures in the medium and long-term, which includes price stability, regional stability, tax reform, revamp the education system and increase sensitization of Islamic finance.

Secondary school education should be encouraged to address skilled labor force.

Women participation in the labor force needs to be encouraged in order to enhance greater sensitization.