A critique of the role of Islamic banking in economic growth and financial stability of gulf cooperation council (GCC) economies
Sep 12, 2017
Published in: International Journal of Economic Research
Publisher: Serials Publications
This paper presents insights into the relationships between Islamic banking, economic growth and financial stability in GCC economies. The paper gives a critique on the impact of Islamic banking in the growth and stability of the economies of Gulf region. The critique analysis is given based on some of the previous published work by the authors on the relationships between Islamic banking, financial stability and economic growth in selected countries of Gulf region. The paper primarily is based on the analysis of four countries of GCC where Islamic banking has footprints. The countries are United Arab Emirates, Qatar, Kingdom of Saudi Arabia and Bahrain. The results of two empirical parts are presented through the paper. It explores that the contribution of Islamic banking in each country is according to the advancements of its financial systems and norms. In some countries, the relationship between Islamic banking and economic growth is supply-leading and in others is demand-following. It also shows that Islamic banking is a stable and less volatile during global financial crisis in 2008 in all countries under the study. The results of the critique viewpoints are encouraging the authorities and policy makers in the GCC countries to do further investments and projects using Islamic banking financing modes since they approved its stability under different financial crises and shocks.