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Islamic Banking Development on Macroeconomic Efficiency
in the MENA Region
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Saeed Mohammad Beigi *   |
| Imam Khomeini Educational and Research Institute |
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Abstract: (20 Views) |
| This study uses a stochastic frontier approach (SFA) and analyses data from 23 MENA countries over the period 2000–2023 to examine the impact of Islamic banking development on macroeconomic efficiency. The findings show that the relationship between Islamic banking development and macroeconomic efficiency is nonlinear and inverted U-shaped: up to a threshold of 35.19% of the Islamic credit-to-GDP ratio, the expansion of this banking system is associated with improved efficiency, but expansion beyond this point leads to a significant decrease in efficiency. At the same time, conventional banking development also shows a U-shaped relationship with efficiency, but no evidence of the inherent superiority of one of the two banking systems (Islamic or conventional) over the other is observed. The analysis of interaction effects suggests that at lower levels of development, the two systems have complementary effects on efficiency, while at higher levels of development, substitution occurs between them. These results require policymakers to: 1. Manage Islamic banking development up to a maximum level of 35% of the credit-to-GDP ratio. 2. Prevent credit ratios from crossing the optimal threshold by continuously monitoring them. 3. Pursue the balanced development of both banking systems without ideological orientation and with an emphasis on functional criteria (financial stability, reduction of transaction costs).Keywords: Islamic banking, macroeconomic efficiency, stochastic frontier analysis, MENA region, Islamic finance. |
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| Keywords: Islamic banking, Macroeconomic efficiency, Stochastic frontier analysis, MENA region, Islamic finance |
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Full-Text [PDF 762 kb]
(12 Downloads)
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Type of Study: Research |
Subject:
Special
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