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The absorption of financial services in an Islamic environment

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  • Mertzanis, Charilaos

Abstract

This study examines the determinants of access to finance by firms residing in 42 Islamic countries. Firm-specific characteristics, such as size, sector, legal status and export status are found to be robust predictors of financing constraints of firms. Small-size firms appear to face more binding financing constraints, whilst firms operating in manufacturing and focusing on exports appear to face lower constraints. The auditing of accounts, the location of operations and ownership structure appear significant with a varying effect on direction. Differences are documented on the role of firm-specific characteristics between Islamic and non-Islamic countries. Both the absolute and relative size of Islamic bank assets is a significant predictor of firms’ financing constraints. The results add new insights on the role of non-economic institutions, social and cultural factors across regions in predicting financing constraints of firms in Islamic countries. Effective financial inclusion reform must focus on small-size, introverted and services-oriented firms operating in some distance from the center as well as understand the divergent role of institutions, social structures and culture within the Islamic world.

Suggested Citation

  • Mertzanis, Charilaos, 2016. "The absorption of financial services in an Islamic environment," Journal of Economic Behavior & Organization, Elsevier, vol. 132(S), pages 216-236.
    • Handle: RePEc:eee:jeborg:v:132:y:2016:i:s:p:216-236
    DOI: 10.1016/j.jebo.2016.10.025
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    2. Hassan, M. Kabir & Aliyu, Sirajo, 2018. "A contemporary survey of islamic banking literature," Journal of Financial Stability, Elsevier, vol. 34(C), pages 12-43.

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    More about this item

    Keywords

    Financing constraints; Investment models; Islamic countries;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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