Abstract

In the modern age, any economic quantity that is positively collated along with overall state economic growth is considered better pro-cyclical. If it is not positively correlated, economic growth could be in a recession. This shows that pro-cycling of economic growth is important to boost the economy. Various factors affect the pro-cyclical economic growth, but among affect the pro-cyclical of the economic growth, but the growth has a positive and significant association with the Shariah bank financing. Therefore, this research investigates whether the Shariah bank financing patterns are pro-cyclical for economic growth in the ASEAN countries. This is because every Islamic finance product has a particular role in promoting growth. For this purpose, Quarterly data were collected for nine countries for 2010Q1-2021Q4. The panel data results indicated that other than Istisna financing, all different types of financing funding had a positive and significant impact on economic growth, while Salam financing has the highest growth potential. This research discovered growth-based weights for popular Islamic finance alternatives, which policymakers can utilise to identify a certain type of financing that should be supported to boost economic growth. Moreover, the study could also add a body of literature in the previous studies to become a new research area in the future. The research could also be considered a pioneer study in the extant literature and significantly affects economic growth.