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The Impact Of Islamic Financial Development On Energy Intensity: Evidence From Islamic Banks

Author

Listed:
  • Abdul-Jalil Ibrahim

    (Islamic Finance Department, Hamad Bin Khalifa University, Doha, Qatar)

  • Nasim S. Shirazi

    (Islamic Finance Department, Hamad Bin Khalifa University, Doha, Qatar)

  • Amin Mohseni-Cheraghlou

    (Department of Economics, American University, Washington D.C, United States)

Abstract

The relationship between financial development and energy intensity is yet to be firmly established as the literature develops, and the few empirical studies conducted provide conflicting results. While some conclude that there is a U-shaped relationship between financial development and energy intensity, others show a linear relationship between the two variables. This study investigates the relationship between financial development and energy intensity by focusing on the role of Islamic financial development. It covers 30 countries where Islamic banks are present. Using the fixed-effects panel model, the empirical results suggest that Islamic banking development significantly increases energy intensity in the sample countries. We also identify other important factors that increase it. These include carbon emissions, renewable energy use and energy imports. The findings point to the importance of designing policies to incentivise Islamic banks and Shari’ah-compliant investors to finance clean energy technologies as a potent tool for reducing energy intensity, achieving sustainable development, and greening Islamic finance.

Suggested Citation

  • Abdul-Jalil Ibrahim & Nasim S. Shirazi & Amin Mohseni-Cheraghlou, 2021. "The Impact Of Islamic Financial Development On Energy Intensity: Evidence From Islamic Banks," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 7(4), pages 709-732, November.
    • Handle: RePEc:idn:jimfjn:v:7:y:2021:i:4f:p:709-732
    DOI: https://doi.org/10.21098/jimf.v7i4.1409
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    Cited by:

    1. Yusuff Jelili Amuda, 2023. "Islamic Financial Surplus for Energy and Gas Investment: Towards Financial Inclusion for Improving Living Condition of Needy and Poor in Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 394-406, September.

    More about this item

    Keywords

    Islamic financial development; Renewable energy; Islamic banks; Energy intensity; Sustainability;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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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