Banking performance and industry growth in an oil-rich economy: Evidence from Qatar

• We investigate whether bank performance measures are contributory to industry growth for an oil-rich country.
• Particular attention is given to an Arab oil-rich country (i.e. Qatar).
• The quantity of finance does not seem to matter for industry growth.
• A competitive, efficient and stable banking system is indeed found to enhance financially-dependent industries to grow faster.
• It is found that industry growth increases by 10% p.a., if we move from the 75th percentile market power to the 25th percentile level among Qatari banks.

This article investigates whether bank performance measures of competition, efficiency, profitability and stability are contributory to industry growth for oil-rich countries. Qatar is chosen as a case study. The real growth of value added for the 42 non-oil sub-sector industries is regressed on the banking performance, together with the quantity-based indicators by taking account of the degree of external finance-dependence over the economically stable period 2000–2006. The results, which survive robustness and sensitivity tests, reveal that a competitive, efficient and stable banking system is indeed a source of enhancing financially-dependent industries to grow faster. Our empirical results serve to provide a useful insight for policy strategies of oil-exporting countries.