Islamic Finance Growth a Catalyst for Financial Development

This research study explores the subject of Islamic finance development in the GCC countries and the part it plays in the overall development of the financial sector. It investigates the development and the contribution of Islamic finance in a sample of six countries representing the Gulf Corporation Countries (GCC), namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. This study also highlights the background of Islamic finance in the banking industry and its present position in the GCC countries. The approach used in this study is quantitative utilizing panel data regression for analysis. The findings suggest a relationship between the presence of Islamic finance and the betterment of the financial development index. The results support other research studies showing that having Islamic finance in the financial systems is beneficial to the functioning and the development of the overall financial system of the GCC countries because of its stability and efficiency. This study indicates that macroeconomic factors and the regulatory quality of countries simultaneously influence the development of the financial system. According to the study, there is a positive correlation between Islamic finance and economic growth in GCC countries. Also, the study suggests that Islamic finance contributes significantly to financial development. The study found that the main challenge faced by the Islamic finance industry is the regulatory requirement imposed on the sector. Thus, the governments in the GCC should develop policies and regulations that will enable and encourage the financial sector's flourishing. The study concluded that the presence of financial systems like an Islamic financial system contributes significantly to the functioning and development of the overall financial system due to the efficiency, stability, and contribution it makes.