Document Type : Science - Research (Islamic Banking)

Authors

• mohammad saeid panahi boroojerdi ¹
• ahmadali rezai ²

¹ Department of Islamic Economics, Faculty of Economics, Allameh Tabatabaei University, Tehran, Iran

² PhD student, Islamic Economics, Institute of Higher Education of Islamic Humanities, Al-Mustafa International University, Qom, Iran

Abstract

Introduction: Sustainable development is one of the fundamental policy objectives in Islamic countries and requires addressing economic and social inequalities. Islamic banking, grounded in ethical and justice-oriented principles, can play a key role in this regard. This study examines the impact of Islamic banking on sustainable development indicators in Islamic countries.

Methods: The statistical population includes 12 Islamic countries where Islamic banking is active and measurable. These countries were selected based on three criteria: (1) a minimum share of 15% of Islamic banks' credit from total credit, (2) diversity in Sharia-compliant contracts such as Qard al-Hasan and Musharakah, and (3) access to reliable data. Countries performing poorly in two or more criteria—such as Tunisia, Algeria, and Morocco—were excluded. The study period spans from 2010 to 2023, focusing on the impact of the ratio of Islamic banking credit on human development indices and income distribution.

Results: The results indicate that an increase in the share of Islamic banking credit in the overall banking system has a more positive effect on income distribution in the lower deciles of society, with diminishing effects in higher deciles. Additionally, components such as the share of participatory banking, Qard al-Hasan financing, and sustainable finance each have distinct roles in reducing inequality and enhancing human development indicators. Islamic banking has been particularly effective in improving health, education, and income levels among lower-income groups.

Conclusions: The findings suggest that Islamic banking can significantly contribute to achieving sustainable development in Islamic countries, especially by reducing income inequality and improving human development indicators.

Keywords

• Islamic Moral Economy
• Sustainable Development
• Islamic Banking
• Quantile Panel Regression
• Islamic Countries

Main Subjects

• Science - Research (Islamic Banking)