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The expanding presence of Islamic banking and finance in Malaysia's
financial sector and the country's admirable role in the global Islamic
finance business has called for an interpretation of the contribution of

Unoriginal text: 13 words


[ In order to

overview resulting from autoregressive distributed lag (ARDL)

[ present

modelling approach on quarterly data set for Malaysia covering the

Unoriginal text: 12 words


[ In view of

[ need

[ be achieve

Split infinitive

Unclear antecedent

Islamic finance to the authentic economic activity. In order to 2

empirically investigate the impact of Islamic finance on 1 economic
development and growth in Malaysia, this report present 3 an

period from 1998 to 2013. 4 Secondly, this report showed the

To ]
presents ]

empirical impact of Islamic Banking on Malaysia economic

development through Islamic Finance Recording and Sizing Tool
(IFIRST) database which currently covers the period 2000 to 2005.
The outcome results propose that Islamic finance has initiated to
make important contributions to the real economy effectively. In view
of 5 the extensive contributions of Islamic finance to the Malaysian

Given ]

economy, continuous achievement need 6 to be achieve 7 to further

develop the industry 8. This includes 9 clarification of the legal and
administrative framework to enable healthier growth of the industry,
thus further establish Malaysia's position as the head in the Islamic
finance industry at the global level.
Keywords: Islamic Bank, ARDL, IFIRST, VECM, Toda-Yamamoto
test, bootstrap Granger non-causality tests, Islamic Bank assets

How Islamic Banks Can Help In Economic Development in Malaysia

This report examines the dynamic interactions between Islamic
banking and economic growth in Malaysia to find out how Islamic
banks can help in economic development in Malaysia. Moreover, the
findings from this report can be used by many organization to see
whether the Islamic financial system influences economic growth in

needs ]
be achieved ]


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Islamic finance was considered as a new reality in the global financial
sequence in the 1970s, starting with the formation of the first Islamic
commercial bank, Dubai Islamic Bank in 1975. Since then, the Islamic
finance industry advance to record impressive development. Today,
total Islamic banking asset is predicted to reach US$1.7 trillion,
reporting an annual growth of 17.6% in the period 2009 and 2013
(Ernst & Young, 2013). During the rapid growth of the industry
globally, Malaysia has been at the top with total Islamic asset
accounting for nearly 13% of the global Islamic finance industry and
8% of the global Islamic banking assets (Ernst & Young, 2013;
SESRIC, 2012). The Islamic Financial system in Malaysia has
emerge 10 as a viable and competitive fundamental on the overall
financial system as a driver of economic 11 expansion and
development. Given the high level of the Islamic banking sector


[ emerge


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[ examine


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contribute 16 to economic growth movement is the profit-sharing


principle, which support 17 the equity in income distribution, leading to

[ really ]


[ the economic ]


Split infinitive


[ support

supports ]


[ develop

develops ]


[ the return or a return ]

assets, its increasing market share as well as its effective financial

intermediation performance, both in Malaysia and globally, it is timely

emerged ]

and highly compatible to determine the contribution and improvement

of Islamic finance to the real economy. A well-developed Islamic
financial system and a massive economic growth at the same time pull
our consideration and attention to examine 12 whether or not the
Islamic banking system that currently practiced in Malaysia really 14
contribute in the long-run to economic 15 growth of Malaysia. 13
Literature Review
Goaied and Sassi (2008) studied that the main distinctive
characteristic of an Islamic financial system that enables it to variously

social authority and long-term economic growth. It also develop 18 the

performance and efficiency of capital allocation since return 19 to
capital depends on its capacity output. Moreover, Islamic financial
institutions strengthen and encourage the investment as investment
depositors receive a share of the banks' profit. Overall, due to less
priority on debt financing, the Islamic financial system is expected to
be more stable and substantial than conventional banking system,
therefore, the loss of capital and wealth due to frequent and continual
financial crises and their negative impacts on the economic growth

examining ]


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mechanism are averted, leading to more sustainable economic

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Dangling modifier


[ a long-run or the long-run ]

Discussion and Recommendation


Unclear antecedent

In this report 25 we shall discuss the result from the ARDL approach


[ suggest


[ report , ]

growth and development. 20

Furqani and Mulany (2009) conducted one of the theoretical studies
explore the relationship between Islamic banking and economic
growth in Malaysia, one of the well-known countries in Islamic finance.
They employed counteraction test and vector error correction
modelling (VECM) on a time series data covering the period from
1997 to 2004. Applying total Islamic bank financing as index indicator
of Islamic banking intermediation 21, the results expose that there is
long-run 22 relationship between Islamic and constant investment, with
GDP causes the growth of Islamic banks. The results support the
theoretical postulations that Islamic banks improve investment
productively, will also lead to their development in Malaysia economic
Abdul Manap, Abduh and Omar (2012) examined using an extended
quarterly data from 1998 to 2012, the innovative relationship between
Islamic banking expansion and economic growth as well as between
Islamic banking development and capital establishment in Malaysia.
Using the Toda-Yamamoto and bootstrap Granger non-causality
tests, the results reveal that Islamic financial development causes
economic growth but not the other way round. This suggest 23, 24 that
further development of Islamic finance in Malaysia will contribute to
the economic growth.

about contributions of Islamic Banks to the Malaysia real economy by

productively execute the financial intermediation role of merge and
convey funds to the investment activities. Also empirically investigate
the impact of Islamic Banks deposit and financing on industrial output
product and service in Malaysia. This method covering the period
from 1998 to 2013 based on quarterly data set for Malaysia.
Autoregressive Distributed Lag (ARDL) model framework result as
presented by Pesaran, Shin, and Smith (2001). Which is frequently

suggests ]


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used to investigate the long-run links between variable. 26 In similarity

with other known assimilation methods, and is a very useful tool since
it considerably improves the small-sample properties of the evaluation
regardless of the nature of the time sequences, static or not. Resulting

[ variable.

serious 29 effect on the real economy in the short run, in the long


Sentence fragment

run, 30 the Islamic deposits are having a decisive and positive effect on


[ method, ]


[ a serious or the serious ]


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[ propose


[ appearance

the short and long runs, with the long-run contribution being more


Passive voice

substantial. 36 This result recommend 38 that the Islamic banks in


[ depositor, ]


[ the applicable or an applicable ]


Incomplete comparison

from this method 28 we can examine the relationship between Islamic

variable? ]

banking developments and economic growth. 27

The results exposed that while the Islamic deposits are not having

the real economy. In this regards, the result propose 31 that the Islamic
banks should promote shari'ah-compliant investment deposits in form
to attract long-term savers and avoid the time lag in merging funds for
investment objectives.
The above improvement of Islamic finance to the real economic
activities are made possible by the fundamental of equity cooperation

proposes ]

fixed in it. The investor-investee relation between the depositors and

the Islamic banks depend on the concept of risk sharing should point
to better auditing of investments, hence higher productivity output,
more stable and reliable financial sector due to zero of interest rate
risk, among others, and hence, more sustainable economic growth.
These appearance 32 are evident in the various Islamic finance
instruments, such as musharakah (joint venture), mudharaba (profit
sharing) and ijarah (rent out) among other instruments. For particular
detail, mudharaba and musharakah are both long-term financing
preparations and plan, empty of interest, in which profit/loss is
shared 33 among the saver, depositor 34 and entrepreneur based on

appearances ]

applicable 35 ratio.
The results also show that Islamic banks financing movement are
making important 37 contribution to the real economic activities both in

Malaysia are strongly carrying-out the financial intermediation role of

pooling and channelling funds to effective investment movements.

[ an important or the important ]


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[ an important or the important ]


[ recommend


[ end


[ amount


[ 5


[ have


[ 5


[ acknowledge


[ be




Unoriginal text: 8 words


In 50 view of 52 the extensive and big contribution of Islamic finance to


the Malaysian economy, continuous achievement need 53 to be

[ a exceptional


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Malaysian Islamic finance industry to become a global industry, thus


Passive voice

further strengthening the country's position as an exemplary role and


[ In view of


[ need



IFIRST database revealed that global assets of Islamic retail banks

grew from 102 to 354 billion US dollars between end 2000 and end 39

recommends ]

2005. These amount 40 signify an average annualized growth rate of

29% over 5 41 years. Over the same period, the number of Shari'ahcompliant retail financial institutions approximately increase, from 120
to 196. And Malaysia have 42 been the top 3 for this 5 43 years with the
Malaysia Islamic Banks assets attained 20,975 million US dollars.
Resulting from this, Malaysia economic have been acknowledge 44
and admitted to be 45 most sustainable and stable within the growth of
Islamic banking in Malaysia.
The IFIRST rate are well in line with rough estimates experience in
the research quoted global Shari'ah-compliant assets usually range
between 250 billion to over 500 billion US dollars, advance over 200300 Islamic institutions, and growth rates in the sector's asset size
fluctuate between 15 and 30% (Chong and Liu, 2009; The Banker,

ended ]
amounts ]

five ]
has ]
five ]

acknowledging ]

being ]

2008; El Qorchi, 2005). 46 Malaysia has achieved third place

comparing other countries in Islamic asset growth about 35% of
annual growth rate from 2000 to 2005. In term of economic growth,
Malaysia has a 47, 48 exceptional record of constantly high growth with
GDP in real terms accelerated to 5.3 percent in 2005 49 resulting from
rapid growth of asset in Islamic banking. Islamic bank financing is
positively and significantly correlated 51 with economic growth and
capital accumulation of Malaysia.

undertaken to additional develop the industry. On top of the list is the

necessary of a helpful legal and managing framework that needs to
be further precise and polished to support the transformation of the

a leader in promoting Islamic finance the global level. 54

an exceptional ]

Given ]

needs ]