Influence of Islamic Financial Corporations on Economic Activity: A Case Study of Orphans Fund Development Corporation in Jordan During the Period (2014-2021)

Abstract

This study aims to test the role of Islamic financial corporations on Jordan’s gross domestic product, a representative for economic activity. The Tamweel Amwal Al-Ittam (Orphans Fund Development Corporation, hereafter referred to as “the Corporation”) served as the case study for this research, investigated during the period of 2014-2021. Given the limited availability of annual reports on the Corporation’s website, quarterly data were gathered using E-Views software. Co-integration test and fully modified ordinary least squares (FMOLS) method to verify the study’s hypotheses. Results of the co-integration test indicated a long-term equilibrium relationship among the study variables, representing the Corporation’s investments in lands and buildings, Murabaha and AL-ijarah (Financial Leasing), investment in the stock portfolio, deposits in Islamic banks, total investment of the Corporation, and economic activity. FMOLS results showed that the Corporation’s investments in lands and buildings, Murabaha and AL-ijarah, and investment in the stock portfolio have positive and statistically significant effects on Jordan’s economic activity. The FMOLS results also confirmed that the total investment of the Corporation have a positive and statistically significant influence on Jordan’s economic activity. These results indicate that the Corporation’s real investment directly contributes to the interest of the country’s economic activity. The study recommends adopting policies that promote the growth of Islamic financial corporations. This can be achieved by providing proposals and offering financial and administrative support. It also highlights the importance of utilizing modern Islamic financing methods as an effective option for mitigating unemployment and inflation and providing employment opportunities that stimulate economic activity.