IESTC WORKING PAPER SERIES

​#    ​​​Title ​  Authors
​​ ​​​November, 2019 ​
​ 04-2019 Innovation, Islamic Finance and Economic Development Abdul Ghafar Ismail

 

Abstract

This study investigates the impact of Islamic finance upon economic development whenever the innovation is characterized by an ecosystematic approach and pull factors. The approach leads towards an Islamic finance in circular economy. Our analysis is based on the mapping between the ecosystematic approach and innovation in Islamic finance. In these circumstances, our results shows that first, an ecosystem of innovation is made up of enabling policies and regulations, accessibility of finance, informed of human capital, supportive market, energy, transport and communication infrastructure, a culture supportive of innovation and entrepreneurship and networking assets which together support productive relationships between different actors and other parts of the ecosystem. Second, innovations that are new to the Islamic finance world are primarily found in several countries. They are based on research and development at the frontiers of global knowledge. In developing countries far removed from the international technological frontier, innovations will tend to be new to the market or new to the firm. Innovations new to the market in developing countries refer to the international diffusion and absorption of technology. The domestic firm introduces innovations which have already been developed elsewhere, but which are new to the market in their own country. Innovations new to the firm refer to knowledge flows within the domestic economy. The innovation is already present in the market, but is now adopted by a given firm.


Keywords : Islamic finance, ecosystem, innovation, economic development JEL Classifications