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Financial Inequality Nexus And Islamic Banking

Author

Listed:
  • Diyah Putriani
  • Prastowo Prastowo

Abstract

This research aims to investigate the role of Islamic banking on income inequality reduction. The data of this research spans from 2010 to 2015 and investigate 49 Islamic banks from 13 selected countries. This study employs Panel data EGLS. To compare with other macroeconomic variable, this research involves GDP Per capita, and inflation as control variable. The estimation result shows that financial depth measured by total customer deposit to GDP ratio has negative relationship with income inequality. It perhaps occurs when there is an increase in income, customers prefer to save their additional income in Islamic banks. As customers increase their deposits, Islamic banks enlarge its financing on the prospect entrepreneurs. These entrepreneurs, afterwards, may expand their business and create new jobs. More new jobs offer means more people get stable income and as a result may reduce income inequality in the society.

Suggested Citation

  • Diyah Putriani & Prastowo Prastowo, 2019. "Financial Inequality Nexus And Islamic Banking," Jurnal Ekonomi & Keuangan Islam, Faculty of Economics, Universitas Islam Indonesia, vol. 5(2), pages 43-52, Juli.
    • Handle: RePEc:uii:jekife:v:5:y:2019:i:2:p:43-52
    DOI: 10.20885/jeki.vol5.iss2.art1
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    More about this item

    Keywords

    Islamic Banks; Income Inequality; Financial Depth; Financial Stability;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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