Realization of SDGs through Shariah Compliant Financing by Islamic banking Industry: An Evidence of Economic Growth from Pakistan. M. Abubakar Siddique & Dr. Miraj-ul-Haq
International Institute of Islamic Economics (IIIE),International Islamic University Islamabad
Abstract
In Pakistan, banking sector was brought under the umbrella of Islamic financial paradigm since 2004. Many studies has proved that Islamic banking industry (IBI) with its macro indicators was performing well. But no study has been done yet to analyze the role of Shariah compliant financing of IBI in achieving the SDGs. This study attempt to explore this role of Pakistani IBI considering one of the SDGs economic growth. This study used Islamic bank-s products like Salam, Murabaha, Diminishing Musharkah (DM), Ijarah and Istisna as independent variables, while GDP growth rate was used as dependent variable. Keeping in view the availability of data, this study selected thirteen banks; four full-fledged Islamic banks and standalone Islamic Branches of nine conventional banks in Pakistan. The study employed annual unbalanced panel data spanning from 2004 to 2018. In the light of findings obtained from Im, Pesaran and Shin panel unit root test, Breusch-Pagan LM test, and Hausman test, Random Effect (R.E) estimation technique was employed. The results showed that Islamic bank specific variables as well as macroeconomic variables had significant impact on economic growth in Pakistan. The study concluded and recommended that Shariah compliant financing has great potential to boost up the economic growth of Pakistan and to achieve other SDGs in Pakistan as well, if government of Pakistan takes solid steps to promote Shariah compliant financing.
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