Islamic Finance: A Catalyst for Sustainable Development of Developed and Developing Countries

Abstract

Purpose: Islamic finance includes arranging financial transactions and financial instruments to satisfy traditional Islamic institutions that oppose interest and participation in gambling. Design/Methodology: The study has included a sample for eight years (2011-2018) of 19 developed and developing countries. The study used the global Islamic finance country index and sustainable development index to compel the data concerning the main variables. The data for Economic development and financial development have been collected from the world development indicator database of the World Bank. To moderate the problem of endogeneity generalized method of movement has been used as diagnostic testing. Findings: Results of GMM shows that two variables broad money and the Gross domestic product have a positive relationship with the Islamic Finance country index but the Stock traded turnover ratio, Sustainable development, and Market capitalization has a negative. Research limitations/implications: The stock traded turnover ratio has significantly related to the dependent variable. Broad money has a positive significant relationship with the dependent variable in both countries developed and developing.