Handbook of Empirical Research on Islam and Economic Life
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Handbook of Empirical Research on Islam and Economic Life

Edited by M. Kabir Hassan

In Islamic jurisprudence, a comprehensive ethic has been formulated governing how business and commerce should be run, how accountability to God and the community is to be achieved, and how banking and finance is to be arranged. This Handbook examines how well these values are translated into actual performance. It explores whether those holding true to the system are hindered and put at a disadvantage or whether the Islamic institutions have been able to demonstrate that faith-based activities can be rewarding, both economically and spiritually.
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Chapter 5: Poverty, finance and institutions: evidence from OIC countries

Muhammad Tariq Majeed

Abstract

This chapter investigates poverty effects of finance and institutions using panel data for Organization of Islamic Conference (OIC) developing countries from 1984 to 2012. The results show that economic growth helps reduce poverty. The role of institutions for the poor of the Muslim world turns out to be more conducive than economic growth. In all of the cross-sectional and panel regressions, the index for institutions remains consistently negative and significant. The role of finance is also important, but it is not robust as it depends on the proxy of financial development. The monetization effect is stronger than the credit effect. The strong hold of law and order and stable governments are the important dimensions of institutional framework which help the poor, while corruption turns out to be one of the major causes of poverty in OIC countries. This study concludes that institutions are the basic prerequisite for helping the poor in OIC countries.

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