American Journal of Economics and Business Administration

Islamic Finance Development and Economic Growth Nexus: The Case of the United Arab Emirates (UAE)

Abdelghani Echchabi and Dhekra Azouzi

DOI : 10.3844/ajebasp.2015.106.111

American Journal of Economics and Business Administration

Volume 7, Issue 3

Pages 106-111

Abstract

Islamic Banking presently knows a great success and new Islamic banks are opening every day all over the world. This Shari’ah (It is the bod of Islamic law, it literally means “way” or “path”) compliant banking is expected to withstand the financial crises and to enhance economic growth. In this paper, the purpose is to analyse the relationship between Islamic banking development and economic growth in the UAE from Q1: 2004 to Q4: 2011 using co-integration and Granger causality tests. This study reveals that no relationship does exist between Islamic banking development and economic growth in the UAE. Such a result can be attributed to the small component of Islamic banking in the global banking sector and to its declining profitability in the period of study. The study enriches the literature on Islamic finance development and economic growth, which is still an under-researched area, especially in the MENA region.

Copyright

© 2015 Abdelghani Echchabi and Dhekra Azouzi. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.