Financial Development And Economic Growth In Asian Islamic Countries

By the end of 2007,when the global financial crisis broke out,many countries were facing financial difficulties and economic recession and major international banks around the world were facing a serious shortage of funds and their businesses were not operating normally,However,Islamic banks have successfully hedged in this crisis and it had a small impact on the country's economy.People started to pay attention to this phenomenon,and to consider and explore the unique aspects of Islamic finance and its impact on national economic growth,hoping to provide a reliable theory and experience for the vigorous development of Islamic finance.Based on the purpose of this study,this paper aims to explore the principles,characteristics and main business of Islamic finance from both theoretical and practical perspectives,this paper also makes the theoretical deduction and empirical test on the impact of the integration of traditional finance and Islamic Finance on national economic growth.Under the guidance of the research purpose,the logical structure of the paper is as follows:The first chapter is the introduction part of the paper.This chapter focuses on the source of the topic,research significance,background,research objectives,methodology,structure,and innovations.The second chapter is literature Review.Firstly,adopts the method of statistical analysis to analyze the relevant domestic research macroscopically,and grasps the current research trends,hot areas and key issues of Islamic finance in China.Secondly,discusses origin and development,characteristics,products and business from the perspective of Islamic finance,and then literature review is carried out the relationship between finance and economic growth and the comparison between Islamic finance and traditional finance from five aspects.The third chapter discusses the basic theories.This chapter takes the banking industry as the research subject in the field of financial development.It summarizes the basic theories of the traditional and Islamic banking system from four aspects: origin and development,business products,regulatory modes,and risk management,which forms the theoretical basis of this research.The fourth chapter is about the research on the development of traditional banks and Islamic banks in Asian Islamic countries.This chapter uses the case analysis method to conduct a comparative analysis of the development of traditional banks and Islamic banks in five Asian Islamic developing countries with typical Islamic finance.i.e.Pakistan,Turkey,Malaysia,Indonesia,and Bahrain.The Fifth chapter studies the impact of Islamic Finance on economic growth.Based on Yang Xiaokai(1999)Neo-classical investment model,this chapter will do comprehensively research on the impact of traditional finance and Islamic financial development on economic growth and its mechanism by combining Li Jing(2007),Li Jing and Ran Guanghe(2007),as well as Li Yong and Gao Yu(2010)financial development,division of labor and economic growth super-marginal model.Then,taking the five Asian developing typical Islamic countries ‘s Islamic financial model as a sample,based on the relevant financial development and economic growth indicators from 2000 to 2016,the panel econometric model is used to empirically test the impact of the development of traditional banks and Islamic banks on economic growth on Asian Islamic countries..The sixth chapter is the conclusions and policy recommendations.This chapter summarizes the main conclusions of the paper,puts forward the corresponding countermeasures and suggestions,and prospects the follow-up research.The main conclusions of the research study are as follows:Firstly,through the statistical analysis of related literature,it is found that after the financial crisis in 2008,the concern of Islamic finance has risen rapidly in China.Scholars have reached a consensus that both traditional finance and Islamic finance have their own strengths.They can integrate with each other,draw on their strengths and develop together.Secondly,through the comparative analysis of Islamic banks and traditional banks in terms of origin and development,business products,regulatory models and risk management,it is found that their business and banking financial products are roughly the same,however,there are great differences in operating principles and operational risks.In terms of operating principles,the Islamic Bank strictly follows the interest-free principles,compared with the traditional banks that earn profits with the interest difference between the loans and deposits.In terms of operational risk,Islamic banks slightly inferior to traditional banks due to the lack of unified understanding of Islamic doctrine among the people and lack of the operational support from regulatory standards.Islamic banks are less risky than traditional banks in terms of operational risk.Thirdly,through the case studies of traditional banks and Islamic banks in five Asian Islamic countries,it is found that,although Islamic banks are now growing steadily,traditional banks still occupy a dominant position compared with Islamic banks,and the economic situation of different countries,national and political conditions,management models will significantly affect the development of Islamic banks.Fourthly,the theoretical model of the impact of Islamic Finance on economic growth found that in a complete division of economic system with money and banks,with the development and transformation of market economy,the efficiency of commodity exchange,bank loans and the efficiency of Islamic financial transactions all affect economic growth,the higher the efficiency of transactions,the higher the per capita income.When the efficiency of the transaction is improved to a large extent,the traditional finance and Islamic finance will emerge spontaneously from the self-sufficiency economic activities,the investment behavior will emerge from scratch to the state of complete division of labor,the financial system to promote economic growth has become increasingly prominent.The higher the efficiency of profit sharing mechanism and the smaller the operational risk factors in the process of Islamic financial loans,the higher the transaction efficiency of Islamic financial loans,the larger the scale of Islamic finance,and the more significant the effect on economic growth.The efficiency improvement of profit sharing mechanism mainly comes from the effective incentive for the operational efficiency of borrowers,while the reduction of operational risk mainly depends on the consistent understanding of Islamic doctrine and the enhancement of action support for the unification of regulatory standards.Fifthly,the empirical study found that the development of Islamic banks and the development of traditional banks have a significant positive impact on economic growth in Asian typical Islamic developing countries-Pakistan,Turkey,Malaysia,Indonesia,and Bahrain,that is,the integration of traditional banks and Islamic banks will significantly promote a country's economic growth.The development of Islamic banks is more effective.