Investigating the Institutional Quality Integration with Islamic Banking ‎Development in Promoting Entrepreneurship


  • HADIA SOHAIL University of Management and Technology, Lahore
  • NOMAN ARSHAD University of Education, Lahore



Islamic financial intermediation, New business density, Panel quantile regression


Empirically, conventional finance has proven insufficient while providing the ‎required finance for startups and entrepreneurs. While handling the risks, ‎entrepreneurs tend to avoid the high-cost nature of the debt, which limits their ‎true potential leading to sub-optimal resource utilization. For this, Islamic finance ‎provides a participative and equitable alternative for new ventures with proven ‎merits, but a lack of regulation hinders its penetration among entrepreneurial ‎aspirants. This study investigates how Islamic finance assists entrepreneurial ‎decisions and the role of institutional quality in aligning Islamic law with ‎commercial law requirements. This study selected the unbalanced panel data of 37 ‎countries between 2011 and 2020 and used panel quantile regression to estimate ‎the quadratic Islamic financial development effects and the moderation of ‎institutional quality. The results showed that generally, Islamic financial ‎development has a U-shaped relation with entrepreneurship, but with the ‎improvement in institutions, the U shape is flipped to inverted-U shape. This study ‎points toward the potential of Islamic financing when coupled with better ‎regulations for the economies which are developing the nascent Islamic financing ‎system.


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How to Cite

SOHAIL, H. ., & ARSHAD, N. . (2022). Investigating the Institutional Quality Integration with Islamic Banking ‎Development in Promoting Entrepreneurship. International Journal of Islamic Economics and Governance, 3(1), 43–61.