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Islamic Banking Development and Access to Credit

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  • Florian Léon

    (CERDI, Université de Clermont-Ferrand)

  • Laurent Weill

    (LaRGE Research Center, Université de Strasbourg)

Abstract

The recent expansion of Islamic banks raises questions on its economic implications. The aim of this paper is to investigate the impact of Islamic banking development on access to credit. We combine data from a unique hand-collected database that covers Islamic banks over the period of 2000 to 2005 with firm-level data covering developing and emerging countries. We find that Islamic banking development has overall no impact on credit constraints, while banking development and conventional banking development alleviate obstacles to financing. However Islamic banking development exerts a positive impact on access to credit when conventional banking development is low. Hence we support the view that Islamic banking does not overall alleviate obstacles to financing, but it can act as substitute to conventional banking.

Suggested Citation

  • Florian Léon & Laurent Weill, 2016. "Islamic Banking Development and Access to Credit," Working Papers of LaRGE Research Center 2016-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  • Handle: RePEc:lar:wpaper:2016-02
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    Cited by:

    1. Cynthia W. Cai & Martina K. Linnenluecke & Mauricio Marrone & Abhay K. Singh, 2019. "Machine Learning and Expert Judgement: Analyzing Emerging Topics in Accounting and Finance Research in the Asia–Pacific," Abacus, Accounting Foundation, University of Sydney, vol. 55(4), pages 709-733, December.
    2. Albaity, Mohamed & Noman, Abu Hanifa Md. & Saadaoui Mallek, Ray & Al-Shboul, Mohammad, 2022. "Cyclicality of bank credit growth: Conventional vs Islamic banks in the GCC," Economic Systems, Elsevier, vol. 46(1).
    3. Florian Leon & Samuel Monteiro, 2019. "Financial constraints, factor combination and Gibrat's law in Africa," Working Papers hal-02493343, HAL.
    4. Francis OSEI-TUTU & Laurent WEILL, 2020. "Bank Efficiency and Access to Credit: International Evidence," Working Papers of LaRGE Research Center 2020-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    5. Hunjra, Ahmed Imran & Islam, Faridul & Verhoeven, Peter & Hassan, M. Kabir, 2022. "The impact of a dual banking system on macroeconomic efficiency," Research in International Business and Finance, Elsevier, vol. 61(C).
    6. Assad Ullah & Xinshun Zhao & Muhammad Abdul Kamal & Adeel Riaz & Bowen Zheng, 2021. "Exploring asymmetric relationship between Islamic banking development and economic growth in Pakistan: Fresh evidence from a non‐linear ARDL approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6168-6187, October.

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    More about this item

    Keywords

    Islamic finance; access to credit; credit constraints.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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