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Do trust and country governance affect credit growth in GCC countries?

Author

Listed:
  • Mohamed Albaity
  • Ray Saadaoui Mallek
  • Hussein A. Hassan Al-Tamimi
  • Philip Molyneux

Abstract

Purpose - This study aims to investigate whether quality of governance (QoG), trustworthiness and confidence impacted bank credit growth in Gulf Cooperation Council (GCC). In addition, it examined whether credit growth differed between Islamic and conventional banks in GCC countries. Design/methodology/approach - Using data from 104 (56 conventional banks and 48 Islamic banks) banks located in GCC countries from 2012 to 2019, the two-step system generalized method of moments estimator was used to analyse the data. Findings - Evidence was found of the influence of trust in institutions in boosting credit growth. The QoG generally expanded credit growth which instilled confidence in the economy and the banking sector. Credit growth was more pronounced for Islamic banks. This paper has contributed to the literature evaluating the determinants of credit growth in GCC. Originality/value - This paper has been one of the few studies exploring the effect of trustworthiness and confidence (informal institutions) and macro governance (formal institutions) in GCC. GCC is different from other regions, as it is oil-dependent and shares similar legal, social and cultural aspects. This suggested that these might yield different results than expected.

Suggested Citation

  • Mohamed Albaity & Ray Saadaoui Mallek & Hussein A. Hassan Al-Tamimi & Philip Molyneux, 2022. "Do trust and country governance affect credit growth in GCC countries?," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 16(3), pages 516-538, November.
    • Handle: RePEc:eme:imefmp:imefm-07-2021-0293
    DOI: 10.1108/IMEFM-07-2021-0293
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    More about this item

    Keywords

    Quality of governance; Trustworthiness and confidence; Credit growth; Islamic banks; GCC countries; G1; G10; G21;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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