The Impact of the Tawarruq Lending to Saudi Arabias Investment - Assignment Example

The research will commence with a review of related literature. This is where we identify the gaps in the study that need to be filled. The literature review will also provide us a knowledge of the depth of current and previous researches on the topic. The review will also include desk research of recent news about the conduct of the business and the related figures.Data mining for the necessary figures will follow. We will particularly mine the data for the over-all tawarruq level of lending (the amount of lending per year) for the last 10 years, the figures for investment, consumption, interest rate and exchange rate for the last 10 years.

To establish the relationship between these variables, we will use a simple regression of the time series analysis. An econometric software, Eviews 4 will be particularly used to test the relationship. The possible outcomes are significant or not significant and whether the direction is positive or negative. D. Goals and Objectives. This paper wishes to trace the practice of the tawarruq lending system in Saudi Arabia and its impact on wealth creation primarily the investment variable. Lending is a path to consumption or investment and it is said to create wealth if it goes to the latter.

In this paper, we particularly examine the effect of tawarruq system in relation to the amount of lending to the overall investment of the country. We wish to see if the system helps boost investment. We also desire to see the effect of the lending to macroeconomic variables which are affected by the developments in the financial market namely, consumption, interest rate,  exchange rate, and banks’ profits. We wish to see if consumption has increased as the tawarruq lending has increased.

We will also see its impact on the interest rate and exchange rate. It is essential that we establish to see the relationship between these variables so as policymakers can make appropriate measures regarding the conduct of the tawarruq system.