Role of Institutional Support in Economic Development: Investor Perspective. A Case of Government of Pakistan (GOP) Ijarah Sukuk

Abstract

The study aims to investigate the role of Ijarah Sukuk in the economic development of the Pakistani business environment an initiative taken by the Government of Pakistan (GOP) by issuing Shari’ah-compliant investments at a national level during a period of deep financial crisis in the country. A modified questionnaire was used in this study to answer research questions and test the evolving hypothesis. Questionnaires containing 30 items were distributed and collected from 379 respondents as representative of Sukuk investors. The data collected was analyzed using Smart PLS. The findings suggest that within the recently reorganized Islamic Market of Pakistan, the variable with the greatest influence and strongest predictive power is Shari’ah Compliance. It is followed by market structure and subsequently the quality of underlying assets. However, once Shari’ah-compliant securities are introduced, investors are anticipated to seek the advantages offered by well-structured markets, such as yields, market liquidity, and the balance of Islamic Securities in both long and short-term Sukuk. This study represents a pioneering effort in Pakistan, as it examines the impact of fundamental investor characteristics and Shari’ah compliance on investment decision-making in the nascent Islamic Market. The findings of this study hold potential value for countries at the early stages of establishing Islamic banking cultures. Moreover, the results will prove beneficial for policymakers as they seek to expand the range of Islamic instruments available to investors through the utilization of Islamic modes of financing. Additionally, the study sheds light on how the market environment, regulatory measures, and other investor-oriented factors can be optimized to create a more viable and attractive environment for investors.