The impacts of Sukuk on financial inclusion in selected Sukuk markets: an empirical investigation based on generalized method of moments (GMM) analysis

Abstract

PurposeThe current developments in the Islamic capital market raise questions about its one of the main objectives of developing the Islamic capital market is to achieve financial inclusion. Despite its policy significance, the empirical literature offers little evidence of the Sukuk-financial inclusion nexus. Thus, this study aims to contribute to the literature by empirically investigating the impacts of Sukuk financing on financial inclusion in most Sukuk-issued financial markets countries.Design/methodology/approachIn this study, the author used a two-step generalized method of moments (GMM) technique to explore the impact of Sukuk financing on financial inclusion in 18 countries using data from 1995 to 2017.FindingsThe study's empirical suggest that Sukuk increases financial inclusion and supports the view that Islamic capital markets' development alleviates financing obstacles and also reflects the critical role of the Islamic capital market as a vital contributor to increasing financial inclusion.Practical implicationsThe study recommends that Sukuk could be used as a tool to tackle the issue of financial exclusion.Social implicationsThe Sukuk market development creates new job markets through innovative projects. These jobs lead to increased income for the working class, leading to higher employment and stimulating investment and financial inclusion.Originality/valueThis is one of the first studies to investigate the Sukuk-financial inclusion nexus empirically. Additionally, the study has used advanced panel techniques in the context of Sukuk and financial inclusion linkage.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-06-2022-0424