Globalization, institutional quality, and financial development: perspectives from the Islamic Takaful market

Muye, I. M., Karbhari, Y. ORCID: https://orcid.org/0000-0003-4513-0928 and Hassan, A.F.S 2025. Globalization, institutional quality, and financial development: perspectives from the Islamic Takaful market. Taghizadeh-Hesary, Farhad, Mohd Thas Thaker, Hassanudin, Bhatti, M. Ishaq and Pitchay, Anwar Allah, eds. Islamic Financial Markets and Institutions: Challenges, Financial Stability, and Inclusivity, Contributions in Economics, Singapore: Springer, pp. 115-135. (10.1007/978-981-96-8650-6_6)

Full text not available from this repository.

Abstract

This study examines the effect of capital account (or financial) openness, trade openness, and institutional quality on the growth and development of the fast-emerging Islamic Insurance (Takaful) industry. We examined 24 different markets in the ASEAN and MENA region and utilize a dynamic panel GMM estimation technique to inform our study. We find that capital account openness, institutional quality, and per capita real GDP are all positive and statistically significant determinants of Takaful growth. However, we find trade openness to be negative but significant suggesting this may be due to ineffective trade policies. Our results suggest that it is quality institutions that promote Takaful growth. When testing the simultaneous openness hypothesis of Rajan and Zingales (Journal of Financial Economics, 69:5–50, 2003), we find a negative and significant effect indicating that simultaneous opening of trade and capital account is unnecessary for Takaful development. This implies that the “sequencing theory” of McKinnon (1991) proposing capital account liberalization should follow trade liberalization to enable financial sector development appears to be more appropriate.

Item Type:	Book Section
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Publisher:	Springer
ISBN:	978-981-96-8649-0
Last Modified:	04 Sep 2025 11:00
URI:	https://orca.cardiff.ac.uk/id/eprint/180859

Actions (repository staff only)

Edit Item