Institutional quality and Islamic financial development

Mansur Muhammed (1) Abubakar Jamilu Baita (2) Tufail Hussain (3)
(1) Indonesian International Islamic University, Indonesia & Usmanu Danfodiyo University, Sokoto, Nigeria
(2) Indonesian International Islamic University, Indonesia
(3) Indonesian International Islamic University, Indonesia

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.

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Authors

Mansur Muhammed
mansur.muhammed@uiii.ac.id (Primary Contact)
Abubakar Jamilu Baita
Tufail Hussain
Author Biographies

Mansur Muhammed, Indonesian International Islamic University, Indonesia & Usmanu Danfodiyo University, Sokoto

1) Department of Economics, Faculty of Economics and Business, Indonesian International Islamic University, Depok, Indonesia; email: mansur.muhammed@uiii.ac.id

2) Department of Economics, Usmanu Danfodiyo University, Sokoto

Abubakar Jamilu Baita, Indonesian International Islamic University

Department of Economics, Faculty of Economics and Business, Indonesian International Islamic University, Depok, Indonesia; email: abubakarbaita@gmail.com

Tufail Hussain, Indonesian International Islamic University

Department of Economics, Faculty of Economics and Business, Indonesian International Islamic University, Depok, Indonesia; email: tufail.hussain@uiii.ac.id

Muhammed, M., Baita, A. J., & Hussain, T. (2024). Institutional quality and Islamic financial development. Modern Finance, 2(1), 69–83. https://doi.org/10.61351/mf.v2i1.98

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