Banks and economic growth in developing countries: What about Islamic banks?

Figures & data

Table 1. Descriptive statistics

Descriptive statistics
		All banks					Conventional Banks					Islamic banks
Indicators	Variables	Obs	Mean	St.Dv	Min	Max	Obs	Mean	St.Dv	Min	Max	Obs	Mean	St.Dv	Min	Max
PB	ROA	960	2.004	5.35	−69.71	53.08	528	2.046	2.126	−17.82	14.699	432	1.952	5.352	−69.71	53.08
	ROE	960	13.95	27.46	−61.11	736.66	528	15.640	11.946	−39.38	123.325	432	11.893	27.464	−61.11	736.66
DB	T_DEP	960	7.278	2.380	−3.123	13.003	528	14030.6	45030.75	19.795	443931.6	432	6.223	2.554	−3.123	13.003
	T_INV	960	6.260	1.697	1.160	11.734	528	6.658	1.653	2.111	11.734	432	5.773	1.624	1.160	11.734
	T_INCOM	960	7.548	2.247	.741	13.588	528	18260.34	65633.66	−836	797201.8	432	7237.27	17572.88	.741	13.588
	NBR_BRAN	960	123.594	236.90	1	1540	528	175.772	296.560	1	1540	432	59.821	99.624	1	1540
	NBR_EMPL	960	2314.61	3505.16	7	17213	528	3225.16	4200.59	20	17213	432	1201.70	1872.21	7	17213
CV	LT_ASS	960	8.050	1.911	2.121	13.588	528	8.682	1.642	3.301	13.588	432	7.279	1.911	2.121	13.588
	ID	960	.513	.439	−3.257	3.333	528	.576	.296	−3.257	1	432	.436	.439	−3.257	3.333
	RI	960	5.751	4.600	−4.863	20.286	528	6.030	1.718	−4.863	5.286	432	5.410	4.600	−4.863	20.286
IV	DIR	960	37.595	93.013	−8.5	1622.2	528	30.11	18.774	−7.56	99.4	432	46.743	93.013	−8.5	1622.2
	GFCF	960	21.814	5.474	12.514	39.642	528	21.81	5.554	12.514	39.642	432	21.819	5.474	12.514	39.642
SR	CC	960	−.016	.776	−1.506	1.722	528	−.025	.757	−1.506	1.722	432	−.005	.776	−1.506	1.722
	RL	960	.024	.678	−1.598	1.032	528	.032	.654	−1.598	1.032	432	.015	.708	−1.598	1.032
	RQ	960	.035	.678	−1.512	.795	528	.025	.595	−1.512	.795	432	.047	.633	−1.512	.795
	GE	960	−.004	.664	−1.457	1.137	528	−.019	.635	−1.457	1.137	432	.014	.699	−1.457	1.137
	PS	960	−.597	1.181	−2.81	1.212	528	−.589	1.158	−2.81	1.212	432	−.607	1.210	−2.81	1.212
	VA	960	−.960	.451	−1.856	−.042	528	−.958	.447	−1.856	−.042	432	−.962	.110	−1.856	−.042

Table 2. Unit root test based on levels of variables for all four panels

Augmented Dickey–Fuller ADF
		Conventional and Islamic banks				Conventional banks				Islamic banks
		t-statistic		Critical values		t-statistic		Critical values		t-statistic		Critical values
Indicators	Variables	Statistic	Probability	Statistic	Probability	Statistic	Probability	Statistic	Probability	Statistic	Probability	Statistic	Probability
PB	ROA	−8.957	0.000	−2.864	0.05	−6.462	0.000	−2.866	0.05	−5.180	0.000	−2.868	0.05
	ROE	−7.274	0.003	−2.864	0.05	−5.712	0.000	−2.864	0.05	−4.022	0.000	−2.868	0.05
DB	T_DEP	−8.002	0.000	−3.414	0.05	−5.062	0.000	−2.866	0.05	−4.588	0.000	−2.868	0.05
	T_INV	−7.429	0.002	−3.212	0.05	−3.201	0.000	−2.862	0.05	−5.062	0.000	−2.868	0.05
	T_INCOM	−6.151	0.001	−3.414	0.05	−3.201	0.000	−1.626	0.05	−6.400	0.000	−2.868	0.05
	NBR_BRAN	−6.748	0.000	−2.741	0 .05	−4.324	0.000	−2.866	0 .05	−6.766	0.000	−2.868	0 .05
	NBR_EMPL	−3.558	0.007	−3.414	0.05	−6.201	0.000	−2.866	0.05	−5.746	0.000	−2.868	0.05
CV	LT_ASS	−7.264	0.004	−2.864	0.05	−5.693	0.000	−2.866	0.05	−5.272	0.000	−2.868	0.05
	ID	−6.599	0.008	−2.864	0.05	−7.510	0.000	−2.866	0.05	−8.800	0.000	−2.868	0.05
	RI	−3.512	0.006	−1.614	0.05	−6.150	0.000	−2.864	0.05	−7.166	0.000	−2.868	0.05
IV	DIR	−8.821	0.000	−2.439	0.05	−2.837	0.000	−1.866	0.05	−7.921	0.000	−2.868	0.05
	GFCF	−4.173	0.041	−2.173	0.05	−7,418	0.000	−2,866	0.05	−3.092	0.02	−2.868	0.05
SR	CC	−9.148	0.038	−6.361	0.05	−2.866	0.008	−2.620	0.05	−8.126	0.008	−2.868	0.05
	RL	−3.5	0.006	−2.362	0.05	−6.848	0.000	−2.866	0.05	−6.210	0.000	−2.866	0.05
	RQ	9.509	0.007	−3.41	0.05	−7.064	0.000	−2.866	0.05	−6.466	0.000	−2.868	0.05
	GE	−3.811	0.002	−3.414	0.05	−6.763	0.000	−2.866	0.05	−6.367	0.000	−2.866	0.05
	PS	−3.517	0.006	−3.397	0.05	−6.763	0.000	−2.866	0.05	−6.079	0.000	−2.866	0.05
	VA	−3.989	0.001	−3.414	0.05	−2.983	0.03	−2.866	0.05	−3.896	0.04	−2.866	0.05

Table 3. Person correlation coefficients (All banks)

	roa	roe	lt_ass	dr	inf	dir	Gfcf	cc	rl	reg_qual	gov_eff	stability	voice	lt_dep	ltinv	lnet_incom	nbr_bran	effectif
roa	1.0000
roe	−0.0785^* 0.0150	1.0000
lt_ass	0.0405 0.2104	0.0319 0.3240	1.0000
dr	−0.1340^* 0.0000	0.0197 0.5411	0.0442 0.1707	1.0000
inf	0.0097 0.7652	0.0636^* 0.0488	0.0170 0.5995	−0.0601 0.0627	1.0000
dir	0.0341 0.2913	0.1177^* 0.0003	0.0838^* 0.0094	−0.1664^* 0.0000	0.0072 0.8235	1.0000
gfcf	0.0000 0.9996	−0.0208 0.5201	0.0643^* 0.0463	0.1142^* 0.0004	0.2374 0.0000	0.0032 0.9221	1.0000
cc	0.0511 0.1134	−0.0666 0.0392	0.3064^* 0.0000	0.0208 0.5197	−0.4407^* 0.0000	0.1199^* 0.0002	0.4178^* 0.0000	1.0000
rl	0.0221 0.4937	−0.0814^* 0.0117	0.3426^* 0.0000	−0.0005 0.9879	−0.3846^* 0.0000	0.1278^* 0.0001	0.3949^* 0.0000	0.9165^* 0.0000	1.0000
reg_qual	0.0010 0.9765	−0.0820^* 0.0110	0.3030^* 0.0000	−0.0114 0.7232	−0.3599^* 0.0000	0.1326^* 0.0000	0.3446^* 0.0000	0.8948^* 0.0000	0.9300^* 0.0000	1.0000
gov_eff	−0.0077 0.8118	0.0730^* 0.0237	0.3035^* 0.0000	0.0037 0.0000	−0.4292^* 0.9094	0.1292^* 0.0000	0.3597^* 0.0001	0.9513^* 0.0000	0.8870^* 0.0000	0.9432^* 0.0000	1.0000
stability	0.0467 0.1484	−0.0500 0.1219	0.2885^* 0.0000	0.0403 0.2124	−0.4359^* 0.0000	0.0955^* 0.0031	0.4318^* 0.0000	0.8815^* 0.0000	0.8641^* 0.0000	0.7450^* 0.0000	0.8043^* 0.0000	1.0000
voice	−0.0008 0.9812	−0.0082 0.8007	0.2552^* 0.0000	0.0004 0.9896	0.1259^* 0.0001	0.1646^* 0.0000	−0.0372 0.2500	0.4576^* 0.0000	0.4851^* 0.0000	0.4935^* 0.0000	0.4861^* 0.0000	0.3185^* 0.0000	1.0000
lt_dep	0.0069 0.8308	0.0582 0.0712	0.9333^* 0.0000	0.0553 0.0867	0.0571 0.0768	0.0789^* 0.0144	0.0236 0.4649	0.2793^* 0.0000	0.3023^* 0.0000	0.2526^* 0.0000	0.2714^* 0.0000	0.2737^* 0.0000	0.2675^* 0.0000	1.0000
ltinv	0.0682^* 0.0345	0.0200 0.5360	0.9203^* 0.0000	−0.0142 0.6592	−0.0708^* 0.0282	0.0516 0.1098	0.1001^* 0.0019	0.3898^* 0.0000	0.4327^* 0.0000	0.3838^* 0.0000	0.3745^* 0.0000	0.3738^* 0.0000	0.2497^* 0.0000	0.8224^* 0.0000	1.0000
lnet_incom	0.0561 0.0821	0.1345^* 0.0000	0.7073^* 0.0000	0.0734^* 0.0229	0.0871^* 0.0070	0.0648^* 0.0448	0.0197 0.5427	0.2456^* 0.0000	0.2109^* 0.0000	0.1403^* 0.0000	0.1928^* 0.0000	0.2694^* 0.0000	0.2517^* 0.0000	0.7283^* 0.0000	0.6340^* 0.0000	1.0000
nbr_bran	0.0037 0.9098	0.0590 0.0677	0.3506^* 0.0000	−0.0558 0.0842	0.2939^* 0.0000	0.0483 0.1351	0.2752^* 0.0000	0.2004^* 0.0000	−0.1763^* 0.0000	0.1046^* 0.0012	−0.1327^* 0.0842	−0.2849^* 0.0000	0.1932^* 0.0000	0.3663^* 0.0000	0.3088^* 0.0000	0.3292^* 0.0000	1.0000
effectif	0.0026 0.9362	0.0762^* 0.0183	0.4919^* 0.0000	−0.0537 0.0965	0.2717^* 0.0000	0.0801^* 0.0131	0.2472^* 0.0000	0.1615^* 0.0000	−0.1327^* 0.0000	−0.0575 0.0750	−0.0833^* 0.0098	−0.2344^* 0.0000	0.1679^* 0.0000	0.5043^* 0.0000	0.4285^* 0.0000	0.4478^* 0.0000	0.8920^* 0.0000	1.0000

^* Two variable are autocorrelated.

Table 4. Person correlation coefficients (Conventional banks)

	roa	roe	lt_ass	dr	inf	dir	Gfcf	cc	rl	reg_qual	gov_eff	stab	voice	t_dep	ltinv	net_Inc.	nbr_bran	eff
roa	1.0000
roe	0.6104^* 0.0000	1.0000
lt_ass	−0.0456 0.2956	0.0022 0.9592	1.0000
dr	0.0534 0.2202	0.0896^* 0.0395	0.0187 0.6685	1.0000
inf	−0.1042^* 0.0166	0.0564 0.1958	0.0576 0.1860	−0.1143^* 0.0086	1.0000
dir	−0.0085 0.8446	0.0658 0.1311	0.1665^* 0.0001	0.0664 0.1277	0.1610^* 0.0002	1.0000
gfcf	−0.0063 0.8847	0.0941^* 0.0306	−0.0004 0.9923	0.1472^* 0.0007	−0.2345^* 0.0000	−0.0894^* 0.0400	1.0000
cc	0.0331 0.4472	0.1237^* 0.0044	0.2853^* 0.0000	0.0547 0.2097	−0.4460^* 0.0000	−0.1243^* 0.0042	0.4493^* 0.0000	1.0000
rl	−0.0616	0.1748^*	0.3685^*	0.0005	−0.3854^*	−0.1499^*	0.4201^*	0.9129^*	1.0000
	0.1574	0.0001	0.0000	0.9902	0.0000	0.0006	0.0000	0.0000
reg_qual	−0.0797	0.1910^*	0.3544^*	0.0004	−0.3592^*	−0.0878^*	0.3706^*	0.8969^*	0.9256^*	1.0000
	0.0674	0.0000	0.0000	0.9920	0.0000	0.0437	0.0000	0.0000	0.0000
gov_eff	−0.0417	0.1718^*	0.3047^*	0.0141	−0.4293^*	−0.0701	0.3884^*	0.9497^*	0.8782^*	0.9412^*	1.0000
	0.3388	0.0001	0.0000	0.7466	0.0000	0.1077	0.0000	0.0000	0.0000	0.0000
stab	0.0319	0.1051^*	0.2366^*	0.0637	−0.4377^*	−0.1562^*	0.4466^*	0.8818^*	0.8739^*	0.7555^*	0.8078^*	1.0000
	0.4648	0.0157	0.0000	0.1441	0.0000	0.0003	0.0000	0.0000	0.0000	0.0000	0.0000
voice	−0.0900^*	−0.0580	0.3030^*	−0.1430^*	0.1066^*	−0.0560	−0.0299	0.4358^*	0.4499^*	0.4637^*	0.4608^*	0.2895^*	1.0000
	0.0387	0.1834	0.0000	0.0010	0.0143	0.1989	0.4934	0.0000	0.0000	0.0000	0.0000	0.0000
t_dep	0.0243	0.0353	0.4653^*	0.0119	0.0420	0.0947^*	0.0021	0.0625	0.0711	0.1164^*	0.1080^*	0.0148	0.2085^*	1.0000
	0.5782	0.4176	0.0000	0.7853	0.3360	0.0295	0.9609	0.1512	0.1027	0.0074	0.0130	0.7339	0.0000
ltinv	0.0405	−0.0412	0.9412^*	−0.0290	−0.0300	0.1471^*	0.0264	0.3586^*	0.4286^*	0.3896^*	0.3541^*	0.3232^*	0.2964^*	0.5094^*	1.0000
	0.3531	0.3444	0.0000	0.5062	0.4914	0.0007	0.5456	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
net_Inc.	0.0421	0.0611	0.4482^*	0.0095	0.0457	0.0639	−0.0152	0.0592	0.0635	0.0920^*	0.0926^*	0.0276	0.2021^*	0.8470^*	0.4496^*	1.0000
	0.3339	0.1612	0.0000	0.8276	0.2949	0.1426	0.7269	0.1742	0.1452	0.0345	0.0335	0.5263	0.0000	0.0000	0.0000
nbr_bran	−0.0107	0.1248^*	0.3330^*	−0.1158^*	0.3580^*	0.0729	−0.3421^*	−0.2817^*	0.2795^*	−0.1627^*	−0.1850^*	−0.4059^*	0.2521^*	0.3042^*	0.2821^*	0.2671^*	1.0000
	0.8055	0.0041	0.0000	0.0077	0.0000	0.0943	0.0000	0.0000	0.0000	0.0002	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
eff	−0.0322	0.1410^*	0.4505^*	−0.1000^*	0.3847^*	0.1265^*	−0.3411^*	−0.2924^*	0.2698^*	−0.1429^*	−0.1779^*	−0.4111^*	0.2454^*	0.3895^*	0.3787^*	0.3433^*	0.9104^*	1.0000
	0.4598	0.0012	0.0000	0.0216	0.0000	0.0036	0.0000	0.0000	0.0000	0.0010	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000

^* Two variable are autocorrelated.

Table 5. Person correlation coefficients (Islamic banks)

roa

1.0000

roe

0.1518^* 0.0015

1.0000

ltass

0.0707 0.1426

0.0103 0.8313

1.0000

dr

0.1760^* 0.0002

−0.0559 0.2465

−0.0335 0.4869

1.0000

inf

0.0212 0.6603

0.0742 0.1238

−0.0808 0.0933

−0.0495 0.3045

1.0000

dir

0.0375 0.4375

0.1297^* 0.0069

0.1503^* 0.0017

−0.1877^* 0.0001

−0.0081 0.8672

1.0000

gfcf

0.0023 0.9627

0.9444 0.0034

0.1448^* 0.0025

0.1051^* 0.0289

−0.2425^* 0.0000

0.0203 0.6742

1.0000

cc

0.0670 0.1648

−0.0566 0.2405

0.3830^* 0.0000

0.0051 0.9166

−0.4363^* 0.0000

0.1581^* 0.0010

0.3810^* 0.0000

1.0000

rl

0.0523 0.2780

−0.0635 0.1876

0.3587^* 0.0000

−0.0044 0.9269

−0.3895^* 0.0000

0.1607^* 0.0008

0.3670^* 0.0000

0.9211^* 0.0000

1.0000

reg_qual

0.0255 0.5976

−0.0560 0.2454

0.3126^* 0.0000

−0.0144 0.7650

−0.3635^* 0.0000

0.1771^* 0.0002

0.3182^* 0.0000

0.8939^* 0.0000

0.9359^* 0.0000

1.0000

gov_eff

0.0018 0.9700

−0.0481 0.3187

0.3660^* 0.0000

.0044 0.9266

−0.4306^* 0.0000

0.1786^* 0.0002

0.3287^* 0.0000

0.9536^* 0.0000

0.8974^* 0.0000

0.9454^* 0.0000

1.0000

stability

0.0606 0.2087

−0.0399 0.4086

0.3779^* 0.0000

0.0273 0.5718

−0.4383^* 0.0000

0.1151^* 0.0167

0.4148^* 0.0000

0.8815^* 0.0000

0.8539^* 0.0000

0.7361^* 0.0000

0.8021^* 0.0000

1.0000

voice

0.0287 0.5512

0.0082 0.8652

0.2427^* 0.0000

0.0903 0.0609

0.1508^* 0.0017

0.2363^* 0.0000

−0.0462 0.3382

0.4826^* 0.0000

0.5245^* 0.0000

0.5266^* 0.0000

0.5148^* 0.0000

0.3516^* 0.0000

1.0000

lt_dep

0.0137 0.7759

0.0418 0.3857

0.9011^* 0.0000

−0.0341 0.4791

−0.0394 0.4136

0.1404^* 0.0035

0.0667 0.1666

0.3540^* 0.0000

0.3180^* 0.0000

0.2481^* 0.0000

0.3232^* 0.0000

0.3721^* 0.0000

0.2660^* 0.0000

1.0000

ltinv

0.0936 0.0518

0.0198 0.6820

0.0000 0.9018^*

−0.0819 0.0889

−0.1732^* 0.0003

0.0932 0.0530

0.2033^* 0.0000

0.4646^* 0.0000

0.4644^* 0.0000

0.4182^* 0.0000

0.4420^* 0.0000

0.4591^* 0.0000

0.2097^* 0.0000

0.7523^* 0.0000

1.0000

lnet_Inc.

0.0141 0.7699

0.0399 0.4080

0.6445^* 0.0000

−0.0084 0.8616

0.0681 0.1577

0.1265^* 0.0085

−0.0238 0.6212

0.1262^* 0.0086

0.1237^* 0.0101

.1417^* 0.0032

0.1644^* 0.0006

0.0909 0.0590

0.3053^* 0.0000

0.5559^* 0.0000

0.6033^* 0.0000

1.0000

nbr_bran

0.0166 0.7302

0.0191 0.6923

0.3385^* 0.0000

−0.1687^* 0.0004

0.1371^* 0.0043

0.2155^* 0.0000

0.1954^* 0.0000

−0.0428 0.3754

0.0304 0.5291

0.0245 0.6123

−0.0252 0.6021

−0.0670 0.1644

0.1059^* 0.0277

0.3833^* 0.0000

0.3133^* 0.0000

0.3653^* 0.0000

1.0000

effectif

0.0249 0.6054

0.0481 0.3189

0.5430^* 0.0000

−0.1792^* 0.0002

−0.0320 0.5069

0.2520^* 0.0000

−0.0809 0.0933

0.1212^* 0.0117

0.1397^* 0.0036

0.1405^* 0.0034

0.1422^* 0.0031

0.1171^* 0.0149

0.0268 0.5791

0.5575^* 0.0000

0.4834^* 0.0000

0.4612^* 0.0000

0.7074^* 0.0000

1.0000

^* Two variable are autocorrelated.

Table 6. Estimation results for the three samples (CBs 66, 54 IBs and 120 banks)

Regression Results
	All banks					Conventional banks				Islamic banks
Indicators	Ind vbles	β	Std. Error	T	Sig	β	Std. Error	T	Sig	β	Std. Error	T	Sig
Bank profitability: BP	ROA	−.004	.001	−2.806	.005^*	.061	.004	−2.088	.523	.437	.307	−4.65	.002^**
	ROE	.007	.002	−3.098	.002^*	.006	.022	−2.027	.601	.024	.043	−2.02	.031^*
Bank development: DB	T_INC	−.036	.034	−1.055	.291	.057	.0002	−1.005	.002^**	.340	.540	−1.12	.061
	T_INV	.11	.023	4.901	.000^***	.001	.032	5.120	.004^**	.110	.005	4.117	.084
	NBR_BRAN	.009	.001	5.825	.000^***	.052	.070	4.826	.003^**	.042	.007	3.418	.000^***
Control variables: CV	LT_ASS	.077	.040	1.930	.053	.365	.031	3.390	.000^***	.820	.010	4.521	.070
	RI	−.003	.021	−.165	.868	−.360	.012	−0.614	.090	−.36	.012	−0.61	.005^**
	ID	.008	.001	4.218	.000^***	.800	.009	3.549	.000^***	.270	.016	2.061	.067
Interest variables: IV	GFCF	.006	.002	−2.591	.009^*	.062	.008	−4.451	.008^*	.600	.010	−5.05	.064
	DIR	−.005	.001	−4.242	.000^***	.050	.004	−3.849	.002^**	.543	.009	−5.96	.070
State rate: SR	CC	−.363	.055	−6.525	.000^***	−.373	.505	−7.259	.010^*	−.44	.169	−6.52	.020^*
	RL	−.379	.076	−4.933	.000^***	−.924	.066	−3.938	.009^**	−.542	.404	−6.57	.001^**
	REG_QUAL	.805	.086	9.293	.000^***	.857	.086	9.293	.097	.659	.075	8.343	.010^*
	VOICE	−.168	.064	−2.609	.009^*	−.173	.063	−2.946	.079	−.821	.540	−3.10	.002
Dummy variables: DV	IBS	.478	.239	2.001	.046^*	.314
	CBS	.110	.199	0.56	.579
	C	7.682	.122	62.891	.000^***
	Observations	960	960	960	960	528	528	528	432	432	432	432	432
	No. countries	10	10	10	10	10	10	10	10	10	10	10	10
	R2	.987				.917				.891
	Breusch–Pagan LM test (p-value)	629.36 (0.000)				332.97(0.000)				149.11(0.000)
	Hausman test (p-value)	13101.86 (0.000)				2289.60(0.000)				1453.42 (0.000)
	Durbin–Watson DW	1.833				1.639				1.737
	Prob (F-stat)	.000				.000				.000

Note: Breusch–Pagan LM test for random effect. Hausman test is the Hausman specification test.

^*Significance at the 1% level.

^**Significance at the 5% level.

^***Significance at the 10% level.

Figure 1. Individual effect of Islamic and conventional bank on economic growth.

Notes: IBs with blue color.
CBs with green color.
The vertical caption is: individual effect.