Ma`rifat Eqtesadi

The theoretical literature on the relationship between Islamic banking and the real sector of the economy suggests that Islamic banking imposes strict limitations on debt-based financing and speculative transactions unrelated to productive activities. In contrast, all Islamic partnership contracts are intrinsically tied to real economic undertakings that contribute to economic growth. Hence, due to the foundational principles and operational mechanisms of Islamic banking, a closer and more direct linkage between Islamic monetary and banking instruments—particularly Islamic contracts and sukuk—and the real economy is anticipated compared to conventional monetary instruments. Nevertheless, empirical studies in this domain have yielded mixed and sometimes contradictory findings. To synthesize and critically assess this heterogeneous body of evidence, the present study employs a meta-regression analysis (MRA) approach. After screening the relevant literature using a systematic selection protocol, 9 studies encompassing 31 regressions and 89 coefficients were identified for inclusion in the meta-analysis. The overall results, after correcting for publication bias, indicate that Islamic banking has a small but positive effect on economic growth. Moreover, the findings show that the heterogeneity of the results in the primary studies can be explained by factors such as the choice of indices used to measure Islamic banking performance, the period under study, and the inclusion (or exclusion) of control variables such as economic freedom and inflation.