SECTORAL ANALYSIS ON THE IMPACT OF ISLAMIC BANKS TO THE MALAYSIAN ECONOMY

  • Imam Wahyudi Indrawan International Islamic University Malaysia
  • Maya Puspa Rahman International Islamic University Malaysia
Keywords: ARDL, Economic growth, Islamic bank financing, Malaysia, Sectoral analysis

Abstract

Malaysia is a well-known Islamic finance hub with a growth trend in its Islamic financial assets. The growth of the Malaysian economy since independence has also been commendable, with a rising contribution from Islamic banking and finance. This study offers a different perspective by undertaking a sectoral analysis on the impact of Islamic banks in Malaysia. It aims to fill the gap in the literature by investigating how Islamic bank financing (IBF) affects economic growth in Malaysia, both overall and at the sectoral level. Three sectors are observed in this study: agriculture, industry and services. Both long-run and short-run analyses are undertaken for the data period 2007Q1 to 2018Q4. The Autoregressive Distributed Lag (ARDL) method is utilised where IBF is found to significantly and positively affect the economic growth of Malaysia, at the overall and sectoral level. Nonetheless, there is a negative relationship in the agriculture sector and no cointegration in the industry sector. The results of this study are expected to provide insights for policymakers in encouraging more optimalIslamic financing to economic sectors in Malaysia.

Author Biography

Maya Puspa Rahman, International Islamic University Malaysia

Assistant Professor in the Department of Economics

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Published
2020-03-10
How to Cite
Indrawan, I., & Rahman, M. (2020). SECTORAL ANALYSIS ON THE IMPACT OF ISLAMIC BANKS TO THE MALAYSIAN ECONOMY. Journal of Islamic Monetary Economics and Finance, 6(1). https://doi.org/10.21098/jimf.v6i1.1119
Section
Articles