Islamic banking activities in attracting and supporting investments: the case of Sarajevo Business Forum

Abstract

Bosnia and Herzegovina is a society and economy in transition and has been very dependent on its trade and business ties with European countries. Following the World financial crisis in 2008 and 2009, investments from the Western countries to B&H dropped significantly. Research has shown that activities of Bosna Bank International, the first and only Islamic bank in the country, improved the business climate and helped both domestic and foreign investments through its activities, specially organizing the Sarajevo Business Forum, an annual, international investment and business conference, in order to diversify the sources of foreign direct investments to the country. This study aims to determine how Islamic banking activities help and support domestic and foreign investments. The study analyses the feedback of the Sarajevo Business Forum event participants and evaluates the positive and negative effects of the event organized by BBI since 2010 in Sarajevo, capital of B&H. Based on a review of the literature on investments and economy, an online survey was distributed to the SBF event participants. The respondents were divided in two groups: domestic/international participants and press & media participants. Analysis of the respondents’ answers, as well as other available data demonstrated how the activities of an Islamic bank in a country can and does help and support both domestic and foreign investment activities. The research focused on the first ten editions of the conference. Theoretical research was conducted in order to provide a theoretical background and literature review. Empirical data was collected through a case study on the Sarajevo Business Forum (SBF), annual international investment and business conference explored how the presence of an Islamic bank, whose main shareholders are foreign Islamic banks, and its activities, namely the Sarajevo Business Forum influenced investments in a transition economy, that is B&H. The questionnaire questions focused on the experiences of the investors at SBF, whether networking opportunities and other activities helped them secure support for the realization of their investment. Data collected was further analysed using statistical methods, including descriptive and inferential statistics, determining the profile of the respondents, the characteristics of their investment and the respondents’ experiences with SBF and Islamic banking overall. Semi-structured interviews were conducted with identified SBF success stories, that is to say with investors who claimed to have successfully invested as a result of their participation at SBF, or project owners who received investments due to BBI and SBF activities, allowing us greater insights and understanding. This study fulfils the academic gap in the field of impact of Islamic banking in attracting investments, implying its overall positive contribution to economic growth and development. The results are transferable to any other transition economy sharing similar III characteristics who has or wishes to introduce Islamic banking as a tool for increasing domestic and foreign investments. The results indicate that activities of an Islamic bank can contribute to additional investments and that Islamic banks can be generators of additional investments in their countries, as in the case of the Sarajevo Business Forum. On this basis it is recommended that other Islamic banks worldwide also look into various business and investment potentials of their countries and partner up with both public and private sector in order to help attract and foster investment activities and support sustainable development of their communities. Potential limitations of this research thesis include lack of responses from many participants and their willingness to disclose their business insights and details on their investments. New circumstances, such as the worldwide Covid-19 pandemic (2020-2022) and the Russia-Ukraine war (2022-), immensely impacted the global economic movements and activities in all economies and therefore influenced the potential positive effects of the SBF events and the results of this research. Future work could focus on investigating the other similar cases of other Islamic banks, analysis and comparison to this research paper.