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Institutional quality and Islamic financial development

Author

Listed:
  • Mansur Muhammed
  • Abubakar Jamilu Baita
  • Tufail Hussain

Abstract

The Islamic financial system has become an important source of financing for many Muslim and non-Muslim countries. Therefore, this paper examines the role of institutions in facilitating the development of Islamic financial institutions. The study covers the period 2013-2021 for a panel of 11 leading economies in Islamic finance and employs fixed effects with the Driscoll and Kraay (1998) estimator. The results show a positive impact of effective governance on the development of Islamic finance. However, regulatory quality has a significant negative impact on the development of Islamic finance. Thus, we argue for the improvement of critical institutions that include political, legal, governmental, and regulatory aspects.

Suggested Citation

  • Mansur Muhammed & Abubakar Jamilu Baita & Tufail Hussain, 2024. "Institutional quality and Islamic financial development," Modern Finance, Modern Finance Institute, vol. 2(1), pages 69-83.
    • Handle: RePEc:bdy:modfin:v:2:y:2024:i:1:p:69-83:id:98
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    References listed on IDEAS

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    1. Muhamad Abduh & Mohd Azmi Omar, 2012. "Islamic banking and economic growth: the Indonesian experience," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 5(1), pages 35-47, March.
    2. Mishkin, Frederic S., 2009. "Globalization and financial development," Journal of Development Economics, Elsevier, vol. 89(2), pages 164-169, July.
    3. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, vol. 57(C), pages 101-113.
    4. Abubakar Jamilu Baita & Hussaini Usman Malami & Mamdouh Abdulaziz Saleh Al-Faryan, 2023. "Fiscal policy and sukuk market development in OIC countries," Journal of Islamic Accounting and Business Research, Emerald Group Publishing Limited, vol. 14(8), pages 1216-1231, January.
    5. Muhamad Abduh & Mohd Azmi Omar, 2012. "Islamic banking and economic growth: the Indonesian experience," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 5(1), pages 35-47, March.
    Full references (including those not matched with items on IDEAS)

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