In growth of more than 15% per annum.

In the past decade increasing attentionhas been given to Islamic banking system, one major reason of this growingpopularity of Islamic banking system was the resilience of Islamic banking aswitnessed during global financial crises (GFC). Despite the financial turmoilin 2008, that crippled most of the Western institutions, Islamic bankscontinued to grow in size and distinction. Asian Banker Research states thatthe world?s 100 largest wholly Islamic banks, ranked by assets, held more than$580 billion in assets in 2008, a 66% increase from the $350 billion they heldin the previous year, which clearly depicts that Islamic banks came out of thiscrises quite unscathed as opposed to its conventional counterparts.

            The Global Islamic Finance Report (2014) 1 estimated thesize of the global Islamic financial services industry at $1.813 trillion atthe end of 2013 with an estimated annual growth of more than 15% per annum.Presently, Islamic banking growth rate is 50% faster than overall bankingsector in several core markets and Islamic banks are now operating in more than83 countries around the world which includes Muslim countries i.e Bahrain, UAE,Saudi Arabia, Malaysia, Brunei and Pakistan etc. and non-Muslim countries likeUSA, UK, Canada, Switzerland, Australia, South Africa and others. Existing literature lacks the comprehensiveresearch on examining the financing portfolio of whole Islamic banking industry.

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This study will bridge this gapby discussing different macro-level factors that influence the lendingdecisions of Islamic Banks, so that it contributes to the researchers? andpolicy makers? notion.  It is evident from theliterature that numerous studies have focused on determinants of conventionalbank lending while neglecting determinants of Islamic banks financing. Thereare macroeconomic factors that influence the Islamic bank credits. Thus, inthis study we include macroeconomic factors- conventional banks? interest rate,GDP growth rate, inflation and exchange rate, in order to study the impact ofthese variables on Islamic bank lending in 48 countries having establishedIslamic banking setup for the period from 2004 to 2013.WU1  Islamic financial institution in Indonesia firstemerged in early 1980s pioneered by Baitut Tamwil-Salman in Bandung and KoperasiRidho Gusti in Jakarta.

Based on the urgency of the society that needIslamic banking products and services, the first Islamic bank was establishedin 1992 (Bank Muamalat Indonesia) and the government introduced dual bankingsystem. Following the establishment of Islamic bank, Islamic insurance orTakaful was established in 1994. The government commitment to develop Islamicfinancial system started to take shape since 1998, where Islamic banking wasgiven the opportunity to expand and develop widely by allowing conventionalbanks to open Islamic branch, separate from the parent bank, to offer fullrange of Islamic products and services.

Bank Indonesia, subsequently, laid out the blue printof Islamic banking development which comprises of four stages. The first stage(2002-2004) is to set up foundation for development, the second stage(2005-2009) is to strengthen industry structure, the third step (2010-2012) isto meet international standard of service and quality, and the fourth stage(2013-2015) is toward the integration of Islamic financial institutions. Incurrent second stage, bank Indonesia has set up the objective to reach 5%market share by the end of 2008. To accommodate the new market share objective,in early 2006, Bank Indonesia launched Office Channeling allowing Islamic banksto open counter of Islamic services in its parent conventional bank offices.

With these strategies, Islamic banking in Indonesia has developedto be one of the most Shariah compliance systems in a country with dualfinancial system. The development of Islamic banking has a great impact in thedevelopment of other sectors based on Shariah principles, suchas, Takaful, Islamic equity market, Islamic bond, Islamic unit trust, Islamiceducation, Islamic voluntary sectors, and legal frameworks. WU1Butthis is not what you seem to be studying…

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