The development of Islamic finance in many Muslim-majority countries, including Indonesia, has been relatively slow. In various countries, the share of Islamic finance in total financial assets remains small. This raises questions about the factors that significantly influence the development of Islamic finance. This study aims to identify the impact of institutional quality, economic freedom, and technological advancement on the development of Islamic finance.
This research makes a significant contribution to the Islamic finance literature by highlighting that the main determinants of Islamic finance development are the quality of national institutions, economic freedom, and technological advancements. The results of the study indicate a positive relationship between institutional quality, economic freedom, and technology on the development of Islamic finance (sharia).
Institutional quality, as measured through control of corruption, shows a positive impact on the development of Islamic finance. The study finds a negative relationship between control of corruption and the development of Islamic finance, supporting the idea that overall institutional performance significantly contributes to the growth of Islamic finance.
Furthermore, the study assesses that economic freedom, which encompasses the rule of law, government size, business freedom, and market openness, also positively impacts the development of Islamic finance. Empirical findings indicate that economic freedom positively contributes to the development of Islamic finance, supported by strong economic growth.
The research also finds that technological advancement has a positive contribution to the development of Islamic finance. Effective governance is crucial to ensuring that the impact of technology on the growth of Islamic finance can be maximized.
Overall, this study makes several important contributions. First, it fills a knowledge gap by discussing the development of Islamic finance from the perspective of national institutions. Second, it provides recommendations for countries to promote the development of Islamic finance by improving the quality of national institutions, which include legal certainty, a healthy industrial environment, business freedom, and market openness.
Source Journal : https://www.sciencedirect.com/science/article/pii/S2199853124000738
Link Artikel : https://unair.ac.id/pengaruh-kualitas-institusi-economic-freedom-dan-teknologi-pada-perkembangan-keuangan-islam/