THE IMPACT OF ISLAMIC LOANS BY ECONOMIC SECTORS ON MALAYSIA’S ECONOMIC GROWTH
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Universiti Malaysia Sarawak (UNIMAS)
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This study examines the impact of Islamic loans disbursed across Malaysia’s manufacturing, construction, and services sectors on the country’s economic growth from 1997 to 2022. Employing a quantitative time-series analysis, the research evaluates the short and long-term relationship between sector specific Islamic loan disbursements and Malaysia’s GDP. Key Shariah-compliant financing instruments, such as Murabahah, Musharakah, and Ijarah, are explored for their contributions to sectoral development and their alignment with the principles of risk-sharing and ethical investment. The findings reveal dynamic trends in Islamic loan disbursement, with manufacturing and construction sectors showing significant positive correlations with GDP growth in both the short and long run. The services sector, while integral, demonstrated mixed results, highlighting potential shifts in economic priorities. The study underscores the strategic importance of Islamic finance in fostering sustainable economic development and provides actionable insights for policymakers and financial institutions to optimize the allocation of resources across high-impact sectors. These findings contribute to a deeper understanding of Islamic finance’s role in Malaysia’s economic landscape and its alignment with broader sustainability goals.