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Islamic bank contribution to Indonesian economic growth

Author

Listed:
  • Suhardi M. Anwar
  • Junaidi Junaidi
  • Salju Salju
  • Ready Wicaksono
  • Mispiyanti Mispiyanti

Abstract

Purpose - This paper aims to examine the short run and long run of Indonesia Islamic bank (IIB) contribution to economic growth over the periods 2009: Q1 – 2019: Q4. IIB is considered which supported by the largest Muslim population in the world. Deposits, financing and offices are proxy to highlight the relationship between Islamic banks and Indonesia's economic growth. Design/methodology/approach - Through cointegration analysis, autoregressive distributed lag (ARDL), vector error correction model (VECM), variance decompositions (VDCs) and impulse response functions (IRFs), this study investigates the Islamic bank and economic growth nexus. Findings - A significant relationship in the short-run and long-run between IIB deposits and offices and economic growth. There is evidence of a bidirectional relationship between the Islamic bank and economic growth. Social implications - In spite of their market share less than a conventional bank. The result proved than IB a prosperous sector and has a contribution to economic growth. This address regulator must have a dedicated unit to handle IIB legal cases should it go to the court for adjudication. Originality/value - The study role of Islamic banking contribution to economic growth in the context of Indonesia is limited. This paper is the first study that examines empirically the effect of Indonesian Islamic banks on economic growth measured by the amount of gross domestic product (GDP), financing, offices and deposits.

Suggested Citation

  • Suhardi M. Anwar & Junaidi Junaidi & Salju Salju & Ready Wicaksono & Mispiyanti Mispiyanti, 2020. "Islamic bank contribution to Indonesian economic growth," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 13(3), pages 519-532, June.
    • Handle: RePEc:eme:imefmp:imefm-02-2018-0071
    DOI: 10.1108/IMEFM-02-2018-0071
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    Cited by:

    1. Faris Alshubiri & Mawih Kareem Ani, 2023. "Financing and returns of Shari’ah-compliant contracts and sustainable investing in the Islamic banking of Oman," Economic Change and Restructuring, Springer, vol. 56(4), pages 2455-2491, August.

    More about this item

    Keywords

    Indonesia; Islamic banking;

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