The Effects of Institutional Quality on Formal and Informal Borrowing Across High-, Middle-, and Low-Income Countries

Khanh, Lan Chu

doi:10.2139/ssrn.3355247

Cited by 1 publication

(1 citation statement)

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“…Interestingly, the coefficients of the interaction term in model 3 with robust standard error are the same as those of model 2, without robust standard error (-0.1587). These results indicate that better institutions complement the positive effect of Islamic banking development on financial inclusion in OIC member countries, and are consistent with Khanh (2018) and Sadi Ali et al ( 2016) Unlike conventional banking practice, borrowers from Islamic banks do not need to present any collateral security before accessing bank credit. In addition, the creditworthiness of borrowers depends on the viability of their proposed project, rather than their net worth or collateral (Tatiana et al, 2015).…”

Section: Results and Analysissupporting

confidence: 87%

Islamic Banking Development and Financial Inclusion in Oic Member Countries: The Moderating Role of Institutions

Kamalu

Ibrahim

2021

JIMF

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This study argues that the effect of Islamic banking development on financial inclusion is enhanced when there exist better quality institutions. A cross section dependency test, cointegration test, causality test, and system GMM (generalized method of moments) are applied to achieve this objective. Employing panel data from 30 Organisation of Islamic Cooperation (OIC) member countries over the period 2013-2018, the analysis suggests that Islamic banking promotes financial inclusion. Furthermore, it documents evidence which suggests negative and significant coefficients of the interaction between Islamic banking development and institutional quality. This means that Islamic banking development works well in promoting financial inclusion in countries with low institutional quality.

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Section: Results and Analysissupporting

confidence: 87%