DOES SUKUK FINANCING PROMOTE ECONOMIC GROWTH? AN EMPHASIS ON THE MAJOR ISSUING COUNTRIES

Abstract

For the past few decades, Islamic finance has imposed itself as a viable alternative / complementary system to the long existing conventional financial system. Nevertheless, recent research has claimed that Islamic finance as it is currently practice, does not promote economic growth. Hence, the objective of this study is to empirically test this claim, by examining the potential effect of Islamic finance in the specific form of Sukuk issuance on the economic growth represented by three proxies, namely, Gross Domestic Product (GDP), Gross Capital Formation (GDP) and trade activities. The data covers not only GCC (Gulf Cooperation Council), but also other countries including Malaysia, Indonesia, Turkey, Pakistan, Singapore, China, Brunei, Kazakhstan, Germany, United Kingdom (UK), The Gambia and France. The data were collected from the Islamic Finance Information Services (IFIS) and the World Bank databases, and were subsequently analysed through Toda and Yamamoto Granger Non Causality test. Accordingly, the findings indicated that the Sukuk issuance had an influence on the GDP and GCF only when all the countries were pulled together, otherwise no effect was identified for Saudi Arabia and the GCC.  

Keywords: Islamic Finance, Sukuk, Economic Growth, Financial Development, Saudi Arabia.

SUKUK FİNANSMANI İKTİSADİ BÜYÜMEYİ TEŞVİK EDER Mİ? SUKUK ÇIKARAN ANA ÜLKELER ÜZERİNE BİR ÇALIŞMA

Abstract

Geçen bir kaç on yıl içinde İslami finans kendisini uzun süredir mevcut olan geleneksel finans sisteminin bir alternatifi / tamamlayıcısı olduğunu gösterdi. Ancak, son araşmalar İslami finans’ın mevcut uygulamasıyla iktisadi büyümeyi desteklemediğini iddia ediyor.  Dolayısıyla, bu çalışmanın amacı bu iddianın ampirik testini İslami finans’ın Sukuk uygulamasının potansiyel etkilerini inceleyerek test etmektir. Sukuk uygulamasının iktisadi gelişmeyi gösterdiği düşünülen üç değişken üzerindeki etkilerine bakılmıştır. Bu üç değişken Gayri Safi Yurt İçi Hasıla (GSYİH), Gayri Safi Sermaye Oluşumu ve Ticaret faaliyetleridir. Veri seti sadece Körfez Ülkeleri Birliği’ndeki ülkeleri değil aynı zamanda Malezya, Endonezya, Türkiye, Pakistan, Singapure, Çin, Brunei, Kazakistan, Almanya, İngiltere, Gambia ve Faransa gibi diğer ülkeleri de içermektedir. Veri seti İslami Finans Enformasyon Servisi (IFIS) ve Dünya Bankası’ndan alınmış ve Toda and Yamamoto Granger Non Causality testiyle analiz edilmiştir. Elde edilen bulgulara göre Sukuk uygulamasının sadece bütün ülkeler dahil edildiğinde GSYİH ve Gayri Safi Sermaye Oluşumu üzerinde etkisinin olduğu, aksi takdirde Körfez Ülkeleri Birliği ve Suudi Arabistan’da bir etkisinin olmadığı bulunmuştur.

Anahtar Kelimeler: İslami finans, sukuk, iktisadi büyüme, finansal gelişme, Suudi Arabistan     

Keywords

• İslami finans, sukuk, iktisadi büyüme, finansal gelişme, Suudi Arabistan

References

1. Abduh, M., & Chowdhury, N. T. (2012). Does Islamic Banking Matter for Economic Growth in Bangladesh? Journal of Islamic Economics, Banking and Finance, 8(3), 104–113.
2. Abduh, M., & Omar, M. A. (2012). Islamic banking and economic growth: the Indonesian experience. International Journal of Islamic and Middle Eastern Finance and Management, 5(1), 35–47.
3. Abdul Manap, T. A., Abduh, M., & Azmi, M. (2012). Islamic Banking-Growth Nexus: Evidence from Toda- Yamamoto and Bootstrap Granger Causality Test. Journal of Islamic Finance, 1(1), 59–66.
4. Abu-Bader, S., & Abu-Qarn, A.S. (2006). Financial development and economic growth nexus: Time series evidence from Middle Eastern and North African countries. Discussion Paper No. 06-09. Monaster Center for Economic Research, Ben-Gurion University of the Negev.
5. Ahmed, H. (2010). Islamic finance at a crossroads: The dominance of the asset-based sukuk. Butterworth's Journal of International Banking and Financial Law, 25(6), 366-367.
6. Al-Malkawi, H.N., & Abdullah, N. (2011). Finance-Growth nexus: Evidence from a panel of MENA countries. International Research Journal of Finance and Economics, 63, 129-139.
7. Al-Malkawi, H.N., Marashdeh, H.A., & Abdullah, N. (2012). Financial development and economic growth in the UAE: Empirical assessment using ARDL approach to Co-integration. International Journal of Economics and Finance, 4(5), 105-115.
8. Azouzi, D., & Echchabi, A. (2013). Islamic banking and economic growth: The Kuwait experience. Middle East Journal of Management, 1(2), 186-195.

9. Conley, J.D. (2012). Financial development and economic growth in Kentucky countries. Unpublished PhD thesis, University of Kentucky.
10. Fink, G., Haiss, P., & Hristoforova, S. (2003). Bond markets and economic growth. IEF Working Paper No. 49, University of Economics and Business Administration, Vienna.
11. Furqani, H., & Mulyany, F. (2009). Islamic Banking and Economic Growth: Empirical Evidence from Malaysia. Journal of Economic Cooperation and Development, 30(2), 59–74.
12. Goaied, M., & Sassi, S. (2011). Financial Development and Economic Growth in the MENA Region: What about Islamic Banking Development. International Journal of Business and Management Science, 4(2), 1-23.
13. Halicioglu, F. (2006). The financial development and economic growth nexus for Turkey. MPRA paper No. 3566, available at http://mpra.ub.uni-muenchen.de/3566/.
14. Iqbal, Z., & Hiroshi, T. (2006). Emerging Islamic Capital Markets. Euromoney Institutional Investor PLC, London.
15. Jobst, A.A. (2007). The economics of Islamic finance and securitization. IMF Working Paper WP/01/117. Available at: http://www.imf.org/external/pubs/ft/wp/2007/wp07117.pdf.
16. Khan, A. (2000). The finance and growth nexus. Business Review, 2000(1), 3-14.
17. McKinnon, R.I. (1973). Money and capital in economic development. Washington DC: Brookings Institution Press.
18. McMillen, M. (2007). Contractual Enforceability Issues: Sukuk and Capital Market Development. Chicago Journal of International Law, 7(2), 427-467.
19. Pradhan, R.P. (2009). The nexus between financial development and economic growth in India: Evidence from Multivariate VAR Model. International Journal of Research and Reviews in Applied Sciences, 1(2), 141-151.
20. Shan, J., & Jianhong, Q. (2006). Does financial development lead economic growth? The case of China. Annals of Economics and Finance, 1, 197-216.
21. Shaw, E.S. (1973). Financial deepening in economic development. New York: Oxford University Press.
22. Standard and Poors (2012). Islamic finance outlook. USA: McGraw Hill.
23. Stievano, A.D.C. (2004). Finance-Growth nexus in open economies with outliers. Available at SSRN: http://ssrn.com/abstract=626841 or http://dx.doi.org/10.2139/ssrn.626841.
24. Stolbov, M. (2012). The finance-growth nexus revisited: From origins to a modern theoretical landscape. Discussion paper No 2012-45, available at http://dx.doi.org/10.5018/economics-ejournal.ja.2013-2.
25. Sunde, T. (2012). Financial sector development and economic growth nexus in South Africa. International Journal of Monetary Economics and Finance, 5(5), 64-75.
26. Ujunwa, A., Ekumankama, O., Umar, H.A., & Adamu, M.I. (2012). Finance and growth nexus in Nigeria: Do bank-based and market-based argument matter? International Journal of Business and Management, 7(23), 112-121.
27. Wilson, R. (2014). Islamic finance and economic development: Lessons Learnt. Islamic Development Bank, Jeddah, Saudi Arabia.