Testing Efficiency of Sudan’s IslamicBanks for Funding Socio-Economics Development using World Rankings Indices
DOI:
https://doi.org/10.32332/ijie.v4i01.4854Keywords:
Islamic Banks; Socio-Economics Development; World Rankings IndicesAbstract
Islamic banks(IBs) are based on Sharia principles, which call for attention to human development. Islamic modes of finance (Murabaha, Musharaka, …etc.) enables IBs to achieve socio-economic development through financing real projects compared to the conventional ones based on interest lending. The study aims to measure the efficiency of Sudan’s IBs in financing socio-economic development using world rankings indices(WRsIs). The methodology took banking finance as an independent variable while socio-economic development was the dependent variable. Socio-development was measured by WRsIs including human development, press freedom, political rights, civil liberties, and prosperity. Economic development was measured by GDP growth and GDP per capita. Data covering (2011-2021) was collected from the Central Bank of Sudan (CBOS) and World Economic databases. The ordinary least squares method was used to estimate the nexus between variables. The results concluded that except for political rights, the rapid growth of banking finance (11% in 2011 to 43% in 2021) does not significantly positively influence socio-economic development. Because more50% of finance was provided through Murabaha (high return and low risk) but it doesn’t stimulate economic development. The study recommends the CBOS revise policies and practical frameworks of IBs to enhance social dimensions as well as WRsIs.
References
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Robert, K., and Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right, Quarterly Journal of Economics,108(3), 717-38.Retrieved from: http://links.jstor.org/sici?sici=0033-5533%28199308%29108%3A3%3C717%3AFAGSMB%3E2.0.CO%3B2-4. https://doi.org/10.2307/2118406
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Saleem, S. (2007). Role of Islamic Banks in Economic Development. MPRA Paper No. 7332. Retrieved from: https://mpra.ub.uni-muenchen.de/7332/
Saida, S., and Frikha, M. (2016). Banks and economic growth in developing countries: What about Islamic banks? Cogent Economics & Finance,4(1)1-26. https://doi.org/10.1080/23322039.2016.1168728
Schumpeter, J. (1911). The Theory of Economic Development. Cambridge, MA: Harvard University Press. Retrieved from: https://www.hup.harvard.edu/catalog.php?isbn=9780674879904
Schumpeter, J. (1912). Theorie der wirtschaftlichen Entwicklung. Dunker & Humblot, Leipzig. The Theory of Economic Development translated by R. Opie. Harvard University Press: Cambridge. doi: https://doi.org/10.1007/0-306-48082-4_2
Schularick, M. and Taylor, A. (2012). Credit booms gone bust: Monetary policy, leverage cycles, and financial crises, 1870.2008. American Economic Review, 102(2), 1029.1061. doi: 10.1257/aer.102.2.1029. https://doi.org/10.1257/aer.102.2.1029
Stiglitz, J. (2010). Financial innovation: Against the motion that financial innovation boosts economic growth. The Economist. February 23-March 3, Retrieved from: http://www.economist.com/debate/days/view/471.
Zingales, L. (2015). Presidential Address: Does Finance Benefit Society? The Journal of Finance,70(4), 1327.1363. doi: https://doi.org/10.1111/jofi.12295
Almahadin, H. et al. (2021). The Effect of Banking Industry Development on Economic Growth: An Empirical Study in Jordan. Journal of Asian Finance, Economics, and Business,8 (5),0325–0334. doi: 10.13106/jafeb.2021.vol 8.no5.0325.
AL-Tamimi, K. (2013). The Role of Islamic Banks Operating in Jordan in Economic. Journal of Economics and Sustainable Development, 4(8),46-59.
Bandlamudi, K., and Taidala, V. (2017). Role of Commercial Banks in The Economic Development of India. International Journal of Management and Applied Science, (4),1-4. Retrieved from http://www.iraj.in/journal/journal_file/journal_pdf/14-358-14982087631-4.pdf
Campbell, R., et al. (2020). Economics: Principles, Problems, & Policies. McGraw-Hill Series in Economics. Retrieved from:https://www.amazon.com/Economics-Principles-Problems-McGraw-Hill-Standalone/dp/0078021758
Central Bank of Sudan. (2021). Annual Report 2021. Retrieved from: http://www.cbos.gov.sd
Boukhatem, J., and Moussa, F. (2018). The effect of Islamic banks on GDP growth: Some evidence from selected MENA countries. Borsa Istanbul Review, 18(3), 231-247. doi:
https://doi.org/10.1016/j.bir.2017.11.004
Demirgüç-Kunt, A., Levine, R. (1996). “Stock market development and financial intermediaries: Stylized facts”. World Bank Economic Review, 10, 291–322.
https://doi.org/10.1093/wber/10.2.291
Gerschenkron, A. (1962). Economic Backwardness in Historical Perspective. A Book of Essays. Cambridge, Mass. Belknap Press. Retrieved from: https://www.econbiz.de/ Record/economic-backwardness-in-historical-perspective-a-book-of-essays-gerschenkron-alexander/10004367996
https://doi.org/10.2307/2492526
Goldsmith, W. (1969). Financial Structure and Development. New Haven, CT: Yale University Press. Retrieved from:https://www.worldcat.org/title/financial-structure-and-development/oclc/12366
Ishak, K., Bengkalis, S., and Syariah, D. (2019). The Role of Islamic Finance in Economic Development. Working paper.131-143. Retrieved from: htt://commons.ln.edu.hk/ cgi/viewcontent.cgi?article=1036&context=ljbfe
Johnson, K. (2013). The Role of Islamic Banking in Economic Growth. CMC Senior Theses. Paper 642. Retrieved from: http://scholarship.claremont.edu/cmc_theses/642
Legatum Institute. (2022). The Legatum Prosperity Index™ 2021: Creating the Pathways from Poverty to Prosperity. Legatum Institute, London. Retrieved from: https://www.prosperity.com/globe/united-kingdom
https://doi.org/10.17951/h.2014.48.2.41
Levine, R. (2005). Finance and growth: Theory and evidence. Handbook of economic growth, Edition 1, chapter 12,865-934 Elsevier. doi: 10.1016/S1574-0684(05)01012-9
https://doi.org/10.1016/s1574-0684(05)01012-9
Lucas, E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics.,22(1), 3-42.
Mhadhbi, K., Terzi, C., and Bouchrika, A. (2017). Banking sector development and economic growth developing countries: A bootstrap panel Granger causality analysis. University of Gabes, Tunisia. HAL-01528104.Retrieved from: https://hal.archives-ouvertes.fr/hal-01528104/document. https://doi.org/10.1007/s00181-019-01670-z
McKinnon, I. (1973). Money and Capital in Economic Development. Washington, DC: Brookings Institution. https://www.brookings.edu/book/money-and-capital-in-economic-development/.https://doi.org/10.2307/1960040
Mian, A. and Su., A. (2014). House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again. University of Chicago Press. https://doi.org/10.7208/chicago/9780226277509.001.0001.
Miller, H. (1998). Financial markets and economic growth. Journal of Applied Corporate Finance, 11(3),8-15.
Mustafa, O. A. O. (2020c). Impact of liquidity shortage risk on the financial performance of Sudanese Islamic banks. International Journal of Islamic Economics and Finance, 3(2), 251-280. doi: 10.18196/ijief.3229 https://journal.umy.ac.id/index.php/ijief/article/ view/8744. https://doi.org/10.18196/ijief.3229
Mustafa, O. A. O. (2020a). Does Economic Growth Responses to Changes in Financing Policies? Signals from Sudan Economy (1997-2018). Archives of Business Research. doi: http://dx.doi.org/10.14738/abr.86.8327. https://doi.org/10.14738/abr.87.8327
Mustafa, O., A., and Nasreldin, K. (2020b). The Role of Banking Finance in Developing Housing Sector: Case study of Real Estate Commercial Bank- Sudan (2011- 2018). Journal of Economic, Administrative and Legal Sciences,4(9),115-130. doi: https://doi.org/10.26389/ajsrp.o010220
Mustafa, O. A. O. (2021a). History of Banking in Sudan (Conventional and Islamic): A Critical Review (1903-2019). International Finance and Banking.8(1), 29-51. doi: https://doi.org/10.5296/ifb.v8i1.18740
Mustafa, O. A. O. (2021b). Measuring the Efficiency of the Monetary Policy Using Monetization Deepening Indicators: Central Bank of Sudan Experience. International Journal of Economic Studies,5(19),356-379. https://democraticac.de/?p=78496
Mustafa, O. A. O. (2019). Assessment of the Financial Performance of Islamic Commercial Banks in Sudan under Credit Risk and Inflation Pressures (1995-2017). Journal of Islamic Banking and Finance,7(1), 14-26. doi: https://doi.org/10.15640/jibf.v7n1a2
Onour.I, and Abdalla, A. (2011). Efficiency of Islamic Banks in Sudan: A non-parametric approach. Journal of Islamic Economics, Banking, and Finance, 7(4), 79-92. https://ibtra.com/pdf/journal/v7_n4_article5.pdf
Reporters Without Borders. (2022). RSF’s 2022 World Press Freedom Index: a new era of polarization. Retrieved from: https://rsf.org/en/rsfs-2022-world-press-freedom-index-new-era-polarisation. https://doi.org/10.1163/2210-7975_hrd-5556-20180021
Robinson, J. (1952). The Generalization of the General Theory in The Rate of Interest and Other Essays. London: Macmillan.
Robert, K., and Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right, Quarterly Journal of Economics,108(3), 717-38.Retrieved from: http://links.jstor.org/sici?sici=0033-5533%28199308%29108%3A3%3C717%3AFAGSMB%3E2.0.CO%3B2-4. https://doi.org/10.2307/2118406
Rushchyshyn, N., et al. (2021). The impact of banking sector development on economic growth: Comparative analysis of Ukraine and some EU countries. Investment Management and Financial Innovations,18(2), 193-208. doi:10.21511/imfi.18(2).2021.16. https://doi.org/10.21511/imfi.18(2).2021.16
Saleem, S. (2007). Role of Islamic Banks in Economic Development. MPRA Paper No. 7332. Retrieved from: https://mpra.ub.uni-muenchen.de/7332/
Saida, S., and Frikha, M. (2016). Banks and economic growth in developing countries: What about Islamic banks? Cogent Economics & Finance,4(1)1-26. https://doi.org/10.1080/23322039.2016.1168728
Schumpeter, J. (1911). The Theory of Economic Development. Cambridge, MA: Harvard University Press. Retrieved from: https://www.hup.harvard.edu/catalog.php?isbn=9780674879904
Schumpeter, J. (1912). Theorie der wirtschaftlichen Entwicklung. Dunker & Humblot, Leipzig. The Theory of Economic Development translated by R. Opie. Harvard University Press: Cambridge. doi: https://doi.org/10.1007/0-306-48082-4_2
Schularick, M. and Taylor, A. (2012). Credit booms gone bust: Monetary policy, leverage cycles, and financial crises, 1870.2008. American Economic Review, 102(2), 1029.1061. doi: 10.1257/aer.102.2.1029. https://doi.org/10.1257/aer.102.2.1029
Stiglitz, J. (2010). Financial innovation: Against the motion that financial innovation boosts economic growth. The Economist. February 23-March 3, Retrieved from: http://www.economist.com/debate/days/view/471.
Zingales, L. (2015). Presidential Address: Does Finance Benefit Society? The Journal of Finance,70(4), 1327.1363. doi: https://doi.org/10.1111/jofi.12295
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Testing Efficiency of Sudan’s IslamicBanks for Funding Socio-Economics Development using World Rankings Indices. (2022). International Journal of Islamic Economics, 4(01), 1-17. https://doi.org/10.32332/ijie.v4i01.4854
