Determinants of Islamic banking growth: an empirical analysis

Purpose This paper aims to examine the determinants of growth rate in Islamic banking using annual time series data. Design/methodology/approach The author applied several econometrics methods including generalized linear model and survey-based indicators. The author uses the World Bank Enterprise Survey data to supplement the answers. Findings The results support the view that high oil prices, stable domestic prices, higher educated populace and greater presence of capital resources have positive effects on growth in Islamic banking. The findings, however, revealed that instability adversely affects Islamic banking growth. The author found no clear conclusion on the impact of economic growth, greater presence of Muslim population and presence of sharia in the legal system of the country on growth in Islamic banking. The major constraints impeding Islamic banking growth include regulations, tax rates and skilled labor force. Originality/value There is no empirical work that has been done on the determinants of Islamic banking growth by taking into account the following factors: oil price dynamics, sharia compliant, macroeconomic variables, instability and World Bank Enterprise survey. This paper attempts to search for the push and pull factors of Islamic banking growth to fill the gap in determining the Islamic banking growth.