The Effect of Islamic banking Contracts on Industry Sector's Value Added in Iran

Abstract

The industrial sector has an undeniable role in the development process and is recognized as the engine of economic growth and capital accumulation. On the one hand, industrial sector expands the employing opportunities for the production factors, increasing the per capita income in society, and, on the other hand, accelerates the process of economic growth through the production and supply of the needs of other sectors of the economy. Islamic banking contracts are among the factors that are of great importance in the issues of production and creation of added value in Islamic economics and can have significant effects on the added value of the industrial sector in Islamic countries. In this study, the effect of Islamic banking contracts, in terms of Musharekat, exchange contracts and Qard-ul-hasanah contracts on value added of the industrial sector in Iran has been investigated during the years 1380 to 1395 (based on seasonal data). In order to estimate the effects of variables, the bounds testing and autoregressive distributed lag modeling (ARDL) approaches have been used. Regression results show that Islamic banking contracts in the short and long term have led to improvements in value added of the industrial sector in Iran,which these effects are equivalent to 0.2473, 0.2405 and 0.286, respectively.