Assessing the Performance and Economic Impact of Islamic Finance in the Horn of Africa: A Comparative Study.
Article Sidebar
-
Economic Growth, Financial Inclusion, Islamic Finance
Abstract
Islamic finance has developed as an alternative to traditional financial systems, acquiring acceptance throughout the Horn of Africa due to its adherence to ethical and faith-based principles. The study assesses the effectiveness of Islamic finance in supporting economic growth, financial inclusion, and social development using a thorough analysis of financial data, economic indicators, and case studies. The study used a Simultaneous Equations Model (SEM) technique with panel data obtained from five Horn of Africa countries: Ethiopia, Somalia, Kenya, Sudan, and Djibouti from 2013 to 2022. The major findings demonstrate that Islamic finance has a positive and significant impact on economic growth, but a positive but insignificant impact on financial inclusion. This study suggests that governments in the sampled countries continue to strengthen the growth of Islamic financing in order to create greater developmental chances and gains, particularly through more inclusive economic growth. The regional government should provide concrete support for Islamic banking and finance operations through a strong institutional framework and long-term political backing.Islamic finance has enormous potential to foster long-term economic progress in the Horn of Africa. Targeted policy reforms and strategic investment decisions can help to unleash this potential, promoting growth, eradicating poverty, and achieving financial inclusion throughout the region.
Full text article
References
Ahiase, G., Sari, M., Andriana, D., Nugraha, N., Purnomo, B. S., & Heryana, T. (2025). Unveiling the African growth puzzle: Relationship between financial inclusion, debt sustainability and economic growth. International Journal of Social Economics, 52(4), 591–607. Scopus. https://doi.org/10.1108/IJSE-01-2024-0062
Azad, S., & Devi, S. L. T. (2025). Sustainable development and investor confidence: The safe-haven appeal of green-bond issuing firms. Sustainable Development, 33(1), 1249–1268. Scopus. https://doi.org/10.1002/sd.3172
Barua, M., & Deshpande, A. (2025). The Role of E-Wallets in Enhancing Business Operations and Consumer Satisfaction in the Unorganized Sector of Nagpur City. Journal of Neonatal Surgery, 14(5), 140145. Scopus.
Bazzichi, O., & Reali, F. (2025). The Franciscan “Spirit”: From the Monti di Pietà to the Bank of America—The Little Fellow’s Bank. Humanistic Management Journal. Scopus. https://doi.org/10.1007/s41463-024-00205-8
Becha, H., Helali, K., & Hbaieb, O. (2025). The Nature of the Relationship Between Digital Financial Inclusion Index and China’s Regional Economic Growth: GMM-System Empirical Evidence. Dalam Bach Tobji M.A., Jallouli R., Sadok H., Lajfari K., Mafamane D., & Mahboub H. (Ed.), Lect. Notes Bus. Inf. Process.: Vol. 530 LNBIP (hlm. 101–116). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-76365-6_7
Bui, N. T. (2025). The Interaction Model of Digitalization and Financial Inclusion: A Bayesian Analysis of Its Role in Economic Growth. International Journal of Analysis and Applications, 23. Scopus. https://doi.org/10.28924/2291-8639-23-2025-4
Desyatnyuk, O., Krysovatyy, A., Ptashchenko, O., & Kyrylenko, O. (2025). THE ROLE OF FINANCIAL INCLUSION IN FOSTERING ECO-ENTREPRENEURSHIP WITHIN THE DIGITAL ECONOMY. International Journal of Ecosystems and Ecology Science, 15(1), 77–86. Scopus. https://doi.org/10.31407/ijees15.109
Dutta, N., Stivers, A., & Sobel, R. (2025). To Equality: Gendered Outcomes, Economic Freedom & Gender Laws. Kyklos. Scopus. https://doi.org/10.1111/kykl.12449
Fan, S., Balezentis, T., Mbanyele, W., & Streimikiene, D. (2025). Unlocking Informatization’s Potential: The Impact of Smart City Initiatives on Inclusive Green Growth. Sustainable Development. Scopus. https://doi.org/10.1002/sd.3456
Grgi?, I. (2025). Unpacking Contract Farming: Challenges, Solutions, and the Road to Sustainable Development Goals. Dalam Mansour Y., Subramaniam U., Mustaffa Z., Abdelhadi A., Ezzat M., & Abowardah E. (Ed.), Lect. Notes Civ. Eng.: Vol. 556 LNCE (hlm. 409–416). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-981-97-8712-8_51
Imran, M., Khan, M. K., Wahab, S., Ahmed, B., & Jijian, Z. (2025). The paradox of resource-richness: Unraveling the effects on financial markets in natural resource abundant economies. Financial Innovation, 11(1). Scopus. https://doi.org/10.1186/s40854-024-00696-2
Jha, B., Jain, R., & Bansal, S. (2025). Unlocking India’s growth: UPI’s digital impact on GDP. Dalam Multi-Ind. Digit. And Technol. Gov. In the AI Era (hlm. 179–196). IGI Global; Scopus. https://doi.org/10.4018/979-8-3373-1681-9.ch009
Kumar, S., & Kumar, V. (2025). The multifaceted role of MFIs in fostering financial inclusion in India. Dalam Microfinance, Financ. Innov., and Sustain. Entrep. In Econ. (hlm. 57–83). IGI Global; Scopus. https://doi.org/10.4018/979-8-3693-6622-6.ch003
Liu, M., Ma, Q.-P., & Huang, J. (2025). The Impact of Digital Inclusive Finance on Export: Evidence from an Emerging Market. Dalam Tsounis N. & Vlachvei A. (Ed.), Springer Proc. Bus. Econ. (hlm. 143–160). Springer Nature; Scopus. https://doi.org/10.1007/978-3-031-76658-9_9
Manal, A. (2025). The Role of Renewable Energy in Driving Economic Transformation and Sustainable Development in Saudi Arabia. International Journal of Energy Economics and Policy, 15(1), 364–373. Scopus. https://doi.org/10.32479/ijeep.16391
Mhella, D. J. (2025). The classical and neoclassical perspectives: A theoretical framework for studying the advent and growth of mobile money—The Tanzanian experience. Review of Development Economics, 29(1), 105–144. Scopus. https://doi.org/10.1111/rode.13056
Mirhashimli, L., Hasanova, A., & Choriev, A. (2025). The major integration features of banking system. Dalam Mammadova G. & Sapaev I. (Ed.), BIO. Web. Conf. (Vol. 151). EDP Sciences; Scopus. https://doi.org/10.1051/bioconf/202515104008
Mohammed, A.-L., Yakubu, I. N., & Bunyaminu, A. (2025). The Interplay Between Financial Inclusion and the Sustainable Development Goals Index in ASEAN-5 Countries. Dalam Sustain. Dev. Goals Ser.: Vol. Part F77 (hlm. 129–138). Springer; Scopus. https://doi.org/10.1007/978-3-031-80744-2_8
Mongkito, A. W., Suriadi, L. O., Balaka, Muh. Y., Harafah, L. O. M., Tamburaka, I. P., & Nusantara, A. W. (2025). The Role of Zakat in Poverty Alleviation and Farmer Welfare; the Theoretical Review. Journal of Global Innovations in Agricultural Sciences, 13(1), 285–296. Scopus. https://doi.org/10.22194/JGIAS/25.1427
Nguyen, T. T. T., Tran, H. T. T., & Nguyen, N. B. (2025). The impact of financial inclusion on poverty in the ASEAN-8 countries. Asian Economic and Financial Review, 15(1), 44–58. Scopus. https://doi.org/10.55493/5002.v15i1.5282
Nowfal, S. H., Nanduri, S., Gracy Theresa, W., Keerthi Samhitha, B., Vinoth, R., Veerapandi, A., & Bommisetti, R. K. (2025). The Role of Agricultural Cooperatives in Enhancing Credit Access, Market Information, and Smart Farming among Rural Farmers. Research on World Agricultural Economy, 6(1), 654–672. Scopus. https://doi.org/10.36956/rwae.v6i1.1536
Osuma, G. (2025). The impact of financial inclusion on poverty reduction and economic growth in Sub-Saharan Africa: A comparative study of digital financial services. Social Sciences and Humanities Open, 11. Scopus. https://doi.org/10.1016/j.ssaho.2024.101263
Paulus, A. B., Kumar, D., & Pontinha, V. M. (2025). The case for value-based care in kidney transplantation: Insights into geography, growth, and financial models. Current Opinion in Organ Transplantation, 30(2), 87–95. Scopus. https://doi.org/10.1097/MOT.0000000000001204
Pillai, S. V. (2025). Urban agriculture: A sustainability guide for developing countries. Social Responsibility Journal, 21(4), 725–750. Scopus. https://doi.org/10.1108/SRJ-07-2024-0433
Qamruzzaman, M. (2025). The effects of natural resources, education, and financial inclusion in achieving environmental sustainability in resources-abundance nations. Discover Sustainability, 6(1). Scopus. https://doi.org/10.1007/s43621-025-00853-2
Saienko, V., Skomorovskyi, A., Iermak, V., Sereda, O., & Bulavynets, O. (2025). THE ROLE OF FINANCIAL INCLUSION IN DRIVING ECONOMIC GROWTH. African Journal of Applied Research, 11(1), 472–483. Scopus. https://doi.org/10.26437/ajar.v11i1.864
Ul-Durar, S., Iqbal, M., Naveed, S., Massacci, A., & Saleem, I. (2025). Sustainable financial inclusion through social progress and regularity quality interaction – Implication for least developed countries. Research in International Business and Finance, 76. Scopus. https://doi.org/10.1016/j.ribaf.2025.102811
Waghode, R. T., Yadav, S. S., Ghooi, R., Razak, S. A., & Menon, K. C. (2025). Work, Motherhood, and Nutrition: Investigating the Association of Maternal Employment on Child Nutritional Status in South Asia—A Systematic Review. Nutrients, 17(6). Scopus. https://doi.org/10.3390/nu17061059
Wahyudi, H., Tubarat, C. P. T., Rodliyah, N., Kusnadi, A., & Leny, S. M. (2025). The Nexus of Crowdfunding and e-Wakaf to Islamic Fintech in Indonesia in the Era of Industrial Revolution 5.0. Journal of Ecohumanism, 4(1), 208–219. Scopus. https://doi.org/10.62754/joe.v4i1.4657
Wang, C., Liu, P., Ibrahim, H., & Yuan, R. (2025). The level of decoupling between digital inclusive finance and carbon emissions and its spatial correlation network characteristics. International Journal of Environmental Science and Technology, 22(3), 1369–1384. Scopus. https://doi.org/10.1007/s13762-024-05733-2
Zhang, Y.-F., & Zhao, H. (2025). The effect of E-commerce on digital inclusive finance: Evidence from the E-commerce boom in rural China. Cogent Economics and Finance, 13(1). Scopus. https://doi.org/10.1080/23322039.2025.2460082
Authors
Copyright (c) 2025 Rami Hariri, Nadine Mansour
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
