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Islamic Banking Development And Financial Inclusion In Oic Member Countries: The Moderating Role Of Institutions

Author

Listed:
  • Kabiru Kamalu

    (Universiti Sultan Zainal Abidin, Gong Badak, Terengganu, Malaysia)

  • Wan Hakimah Binti Wan Ibrahim

    (Universiti Sultan Zainal Abidin, Gong Badak, Terengganu, Malaysia)

Abstract

This study argues that the effect of Islamic banking development on financial inclusion is enhanced when there exist better quality institutions. A cross section dependency test, cointegration test, causality test, and system GMM (generalized method of moments) are applied to achieve this objective. Employing panel data from 30 Organisation of Islamic Cooperation (OIC) member countries over the period 2013-2018, the analysis suggests that Islamic banking promotes financial inclusion. Furthermore, it documents evidence which suggests negative and significant coefficients of the interaction between Islamic banking development and institutional quality. This means that Islamic banking development works well in promoting financial inclusion in countries with low institutional quality.

Suggested Citation

  • Kabiru Kamalu & Wan Hakimah Binti Wan Ibrahim, 2021. "Islamic Banking Development And Financial Inclusion In Oic Member Countries: The Moderating Role Of Institutions," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 7(3), pages 527-544, August.
    • Handle: RePEc:idn:jimfjn:v:7:y:2021:i:3e:p:527-544
    DOI: https://doi.org/10.21098/jimf.v7i3.1364
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    More about this item

    Keywords

    Financial inclusion; Islamic banking development; System GMM; Organization for Islamic Cooperation (OIC);
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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