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The Effect of Institutional Quality on Bank Lending in the Gulf Cooperation Council Countries

Author

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  • Gani Azmat

    (Department of Economics and Finance, College of Economics and Political Science, P.O. Box 20. Al Khod 123, Muscat, Oman)

  • Al-Muharrami Saeed

    (Department of Economics and Finance, College of Economics and Political Science, P.O. Box 20. Al Khod 123, Muscat, Oman)

Abstract

This paper examines the effect of institutional quality on lending by banks in Gulf Cooperation Council (GCC) group of countries. The methodology included the estimation of a reduced form regression equation utilizing cross country data for a range of variables capturing institutional quality. The empirical findings provide evidence that conventional institutional quality measured by: the time taken to enforce a contract, regulatory quality, the rule of law and government effectiveness; are inversely correlated with the lending by the banks, among other factors. Interestingly, our findings revealed that Sharia financing legislation to be positive and statistically significantly correlated with bank lending. Our main policy implication is that strengthening the domestic conventional institutional quality in the GCC countries is vital in order to facilitate effective lending by banks.

Suggested Citation

  • Gani Azmat & Al-Muharrami Saeed, 2016. "The Effect of Institutional Quality on Bank Lending in the Gulf Cooperation Council Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 12(1), pages 55-63, April.
    • Handle: RePEc:bpj:rmeecf:v:12:y:2016:i:1:p:55-63:n:1
    DOI: 10.1515/rmeef-2015-0032
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    References listed on IDEAS

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    1. Ms. May Y Khamis & Abdullah Alhassan & Nada Oulidi, 2010. "The GCC Banking Sector: Topography and Analysis," IMF Working Papers 2010/087, International Monetary Fund.
    2. Wilson, Rodney, 2009. "The development of Islamic finance in the GCC," LSE Research Online Documents on Economics 55281, London School of Economics and Political Science, LSE Library.
    3. International Finance Corporation & World Bank, 2013. "Doing Business 2013 : Smarter Regulations for Small and Medium-Size Enterprises [Regulaciones inteligentes para las pequeñas y medianas empresas : resumen ejecutivo (Vol. 2)]," World Bank Publications - Books, The World Bank Group, number 11857.
    4. World Bank & International Finance Corporation, "undated". "Doing Business in Italy 2013 : Smarter Regulations for Small and Medium-Size Enterprises," World Bank Publications - Reports 13331, The World Bank Group.
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    Cited by:

    1. Ibrahim Khalil ALLOUCHE & Nancy HIJAZI, 2024. "Financial Stability in the MENA Region: The Impact of Banking Capitalization and Institutional Environment on Credit Availability," International Business Research, Canadian Center of Science and Education, vol. 17(1), pages 1-1, February.
    2. Florentina Melnic & Daniel Juravle, 2020. "Governance And Access To Finance," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 25, pages 151-168, June.
    3. Ali Awdeh & Chawki EL-Moussawi, 2021. "Capital requirements, institutional quality and credit crunch in the MENA region," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(8), pages 1909-1925, January.

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    More about this item

    Keywords

    GCC countries; banks; Sharia; lending; institutions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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