Economicgrowth is the ability for an economy to increase its capacity of production ofgoods and service from time to time.
The increase of demand and supply marksthe expansion of the economy thus creating a higher income. The economic growthcan be measured in terms of gross national product (GNP) or gross domesticproduct (GDP). However, this term can be calculated to be in nominal or realterms which depending on the levels of inflation. Based form the video, theMalaysian Islamic Finance system is helping to increase the economy by poolingor channelling funds through reasonable investment.
Islamic finance or bankingstrives to achieve global socio-economic development as well as greater justiceas Islamic financial system is a method to catalyst higher economic growth andhuman well-being. Islamic finance facilitates a way by replacing debt financingto risk sharing instead, Islamic finance can reduce poverty and socialinequalities which is the important objective that has to be focused by theauthority. Islamic banks responsible to handle fund to investor using Islamicteaching of finance.Fromthe video, the economic growth concept that can be portrayed is Malaysia as aleader in Islamic finance is utilizing the system to invest into property todevelop and induce economic performance. The investment then be used to createprofit and to be used to end poverty and inequalities.
The Islamic financingmethod are designed to be compliance of the Sharia law such as Mudharabbah,Musharakah, Ijarah, Istisna and Salam which is different modes of Islamicfinance. Furthermore, financial intermediation is perfect indicator of economicgrowth and development. During the global financial crisis, Islamic financeinstitution were less affected, protected by their fundamental operatingprinciples of risk sharing and the avoidance of leverage and speculativefinancial products. This has led to a greater appreciation of the role ofIslamic finance in supporting economic growth across the globe. With itsin-built principle that support financial stability, inclusiveness and economicdevelopment Islamic finance lends itself well to catalysing and promotingeconomic. (BNM, 2015) Exemplary role of Malaysia as globalleader in Islamic finance keeps increasing the presence of Islamic banking andfinance within Malaysia’s financial sector.
This exceptional performance callsfor evaluation for the contribution to real economic activity from Islamicfinance industry. Empirical investigation has been carried out to measure theimpact of Islamic finance on major macroeconomic indicator’s performance. Theresults show that Islamic finance helps to improve economy by contributing tothe real economy by carrying intermediation role of flowing funds to profitableinvestment activities (Kassim, 2016). However, theimportant aspect is to keep continuous efforts in helping to expand the Islamicfinance industry such as refinement of the legal and regulatory framework inorder to keep improving healthy levels of growth to further toughen Malaysia’sthrone as the head of global level in Islamic finance industry.