Influence of ESG on Credit Growth: Moderating Effects of Islamic Bank and Size in MENA

This study examined how ESG has influenced credit growth across MENA countries/regions and investigated the extent to which bank size and Islamic banking influence this relationship. Using panel data from 42 listed banks across 10 MENA countries (367 bank-year observations from 2010–2023), the analysis employs quantile regression to capture heterogeneous effects across different levels of credit growth. The findings showed that ESG disclosure has a significant positive influence on credit growth across most quantiles, except at the (25th) quantile where the effect was insignificant. Bank size moderated this relationship, it weakens the ESG effect at the (10th) quantile but enhances it at the (25th, 50th, 75th) quantiles. Although the relationship remained positive at the (90th) quantile, the impact slightly declined, suggesting diminishing marginal gains for larger banks. Islamic banks strengthened the ESG disclosure and credit growth relationship at (10th and 25th, 90th) quantiles but weakened it at the median quantiles. Overall, the results demonstrate that the effect of ESG disclosure on credit growth is heterogeneous and highly dependent on bank characteristics, offering meaningful implications for policymakers and banking practitioners in adapting ESG strategies to enhance credit growth across different quantiles.