Work

Islamic finance development and climate change adaptation readiness in LMICs: The moderating role of corruption control

Year: 2025

Type: article

Abstract: • Explored the link between Islamic finance development and climate change readiness in LMICs. • Examined corruption control as a moderator of this relationship. • Applied panel-corrected standard errors (PCSE) to enhance robustness. • Established Islamic Finance as a potential alternative financing mechanism for climate adaptation • Found that strong corruption control strengthens the positive effect of Islamic finance. • Provided recommendations for sustainable finance in emerging LMICS. As Low and Middle-Income Countries (LMICs) continue to face a huge climate adaptation finance gap, this study explores the impact of Islamic finance development on climate adaptation readiness in LMICs and the moderating role of control of corruption. This study employs the Panel-Corrected Standard Errors (PCSE) technique to examine how Islamic finance development impacts climate adaptation readiness in LMICs. Our findings indicate that Islamic finance development bolsters climate adaptation readiness in LMICs. The results also demonstrate the efficacy of corruption control in moderating the relationship between Islamic finance development and adaptation readiness. This study recommends that policymakers in LMICs consider Islamic finance for climate adaptation finance and ensure robust governance scrutiny that prevents corruption in climate finance.

Source: Finance research letters

DOI: 10.1016/j.frl.2025.109023

Authors: Abdulbaki Teniola Ubandawaki, Angie Abdel Zaher, Saheed Olanrewaju Issa

Institutions: American University in Cairo, Universiti Putra Malaysia

Language: English

Topic: Islamic Finance and Banking Studies

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Climate action, Peace, justice, and strong institutions, Partnerships for the goals

Open Access status: hybrid

Estimated APC paid: $3,730