Evidence on Islamic Banks and Economic Growth: Experience in Malaysia

• Main Authors: Mohamad Zahid, Nur ‘Izzah, Che Arshad, Noraziah
• Format: Article
• Language: English
• Published: Lembaga Zakat Negeri Kedah 2021
• Subjects: HB Economic Theory
• Online Access: https://repo.uum.edu.my/id/eprint/31418/1/IJZIP%2003%2001%202021%2090-97.pdf; https://repo.uum.edu.my/id/eprint/31418/; https://portal4.uum.edu.my/Publication/PdfReader.aspx?id_doc=J770542021051709:45:18
• Institution: Universiti Utara Malaysia

The purpose of this paper is to contribute to the empirical studies of Islamic banking literature by examining the effect of Islamic banks’ factors on economic growth from the context in Malaysia. By using a panel regression, the secondary data of 11 local Islamic banks has been extracted from annual reports while the real gross domestic product (GDP) has been collected from an International Monetary Fund (IMF) within a period from 2012 until 2019. The paper presents a model which shows the relationship between the selections of seven variables in Islamic banks (total asset, total investment, total financing, total deposit, financing to deposit, non-performing financing, total zakat) to economic growth. Although it is insignificant, total zakat in Islamic banks appeared to be positively related to the Malaysian GDP representing economic growth based on the fixed effect regression result. Hence, this finding led to several interesting discussions, including the amount of zakat paid by Islamic banks which stimulates economic growth