This study was conducted to identify the impact of macroeconomic variables and internal banking factors on the level of credit risk, known as Non-Performing Loans (NPL), in conventional commercial banks in Indonesia. The macroeconomic variables considered included the rupiah exchange rate, interest rates, and GDP (Gross Domestic Product), while the internal bank factors included ROE (Return On Equity), LDR (Loan to Deposit Ratio), and CAR (Capital Adequacy Ratio). A quantitative approach was applied using secondary data from 2019 to 2024 and a panel regression technique with the REM model. The study sample included 10 conventional commercial banks selected using a purposive sampling method. The study findings revealed that interest rates and ROE had a significant negative effect on NPLs, while LDR showed a significant positive impact on NPLs. On the other hand, the rupiah exchange rate, GDP, and CAR did not show a significant effect on NPLs. Overall, all independent variables jointly influence credit risk.

Conventional and cooperative banks in the euro area: A DSGE model approach to banking sector heterogeneity

The implementation of Sustainable Development Goals (SDGs) proposed by the United Nations has encouraged banks to adopt sustainability practices. Although previous research mainly focuses on the performance implications of SDG adoption, there is little data on the impact of sustainability on the risk of banks, especially in comparison with Islamic and conventional banks. This research fills this gap by making a comparative analysis of the effect of SDG adoption on the risk profile of Islamic and conventional banks in the Asia-Pacific region. SDGs are measured by construction an ESE Index from the indicators proposed by the United Nations. The two-step system GMM (Generalized method of moments) method is used to analyze panel data of Islamic and conventional banks in the Asia-Pacific region to compare the relationship between SDGs and the risk of Islamic and Conventional banks. The results show that SDGs are negatively related to the risk of conventional banks as compared to the Islamic banks, as the conventional counterparts are more mature and have good risk management practices. In contrast, Islamic banks already operate under Shariah principles that emphasize ethical investment, risk sharing, and socially responsible financing, which are already aligned with sustainability goals. The present work is relevant to the sustainable banking literature by providing comparative evidence of the effect of SDG adoption on risk in banking models and by employing it in a dual banking framework. The results give important implications for regulators, policymakers, and banking institutions by highlighting the role of SDGs adoption on the risk mitigation of Islamic and Conventional banks so that the financial stability is enhanced within the banking operations.

Abstract—India received $125 billion in inward remittances in 2023, making it the world's largest recipient of migrant worker transfers. The bulk of these flows traverse traditional channels — SWIFT-based bank wires, money transfer operators such as Western Union, and informal hawala networks — that charge between 5% and 12.66% of transfer value and require one to five business days for settlement. Stablecoin rails, operating on blockchain networks such as Tron (USDT) and Stellar (USDC), complete transfers in seconds at fees below one US dollar, offering a structural cost advantage of four to thirteen times over conventional banking. Yet widespread adoption in India faces compounding barriers: an unresolved regulatory framework under the Foreign Exchange Management Act, persistent last-mile cash-out deficits affecting 52% of the rural population, and the Reserve Bank of India's explicit concern that dollar-pegged stablecoin adoption could trigger currency substitution and erode monetary sovereignty. This paper compares stablecoin rails against traditional remittance channels across cost, speed, and accessibility dimensions; examines India's current regulatory environment; and analyses the financial inclusion implications of stablecoin-based remittance for India's 13 million overseas workers and their rural households. The findings suggest that stablecoins offer meaningful efficiency gains for high-value, urban-recipient corridors, but face structural constraints that limit their near-term applicability to India's financially excluded population without targeted regulatory and infrastructure interventions. Keywords: stablecoin, remittance, India, financial inclusion, USDT, USDC, RBI, CBDC, FEMA, dollarisation

Purpose This study aims to examine the implementation of core banking systems (CBSs) in Islamic banking windows (IBWs) in Bangladesh, where conventional and Islamic banking coexist. It explores how IBWs balance operational efficiency with Shariah compliance when choosing between a standalone Islamic banking CBS (IB-CBS) and an Islamic banking module (IB-Module) within a conventional banking CBS (CB-CBS). The research analyses the technological, operational and governance aspects of CBS adoption. Design/methodology/approach This study uses a qualitative research design that integrates survey responses from Islamic banking professionals with data on CBS adoption across IBWs in Bangladesh, further supported by semi-structured interviews with senior IBW executives. This triangulated approach enhances the credibility of the findings and ensures that operational realities are accurately captured. The thematic analysis focuses on Shariah compliance, operational efficiency, system integration and governance oversight. Findings Despite practitioners’ preference for IB-CBSs for Shariah compliance and flexibility in product development and innovation, most IBWs adopt IB-Modules due to institutional priorities, vendor dynamics and cost considerations. Middleware and application programming interface (API) driven integration is identified as potential solutions for reconciling efficiency with compliance in the implementation of IB-CBSs. Research limitations/implications The study’s limitations include a small sample size, reflecting limited access to senior IBW executives and its focus on Bangladesh, which may limit generalisability across different jurisdictions. Nonetheless, the triangulated methodology enhances validity and provides a foundation for future comparative research. Originality/value To the best of the authors’ knowledge, this study is the first to systematically examine the adoption of CBS in IBWs. By integrating practitioner insights, it identifies how CBS design influences both operational efficiency and Shariah compliance in dual-banking contexts, while also highlighting limitations in current systems. By focusing on the “engine room” of IBWs – the CBS – the study addresses a critical gap and advances the understanding of Islamic banking infrastructure, providing insights for regulators, practitioners and policymakers on strengthening compliance, efficiency and market credibility in Islamic banking.

Purpose This study aims to examine how income, assets and funding diversification affect bank systemic risk contribution in conventional and Islamic banks in Indonesia. Design/methodology/approach Fixed effects-panel least squares regression analysis of quarterly Indonesian banking data (2016–2022), measuring systemic risk contribution (ΔCoVaR) across three diversification strategies in conventional and Islamic banks. Findings The empirical results reveal that income diversification increased systemic risk contribution in Indonesian banks, while funding diversification reduced it, and asset diversification showed no effect. Surprisingly, Islamic banks mirrored conventional banks’ risk patterns, attributable to Indonesia’s unique banking system, where their origins as Sharia business units within conventional banks later spun off or converted into standalone Islamic banks. The COVID-19 pandemic structurally transformed diversification effects, reversing protective benefits and amplifying systemic risk. Two-step System GMM robustness checks confirmed the reliability of these findings. Research limitations/implications The study period excludes earlier crises; future research should incorporate multiple crisis periods and cross-country data to strengthen generalizability. Practical implications Effective regulatory oversight should include careful evaluation of banks’ diversification strategies, proactive support for funding diversity and ensure protective measures are strong enough to withstand extreme financial shocks. Originality/value To the best of the authors’ knowledge this is the first study to simultaneously analyze all three diversification dimensions on systemic risk contribution effects in both conventional and Islamic banking systems, with novel findings about Islamic banks’ nonmoderating role and COVID-19’s amplifying impact.

Purpose The connection between financial sector development and sustainable activities leads financial institutions to focus on improving their sustainability by using Environmental, Social and Governance (ESG) principles. Whereas the inconsistencies and exaggerations created concerns about transparency and greenwashing risk. This study aims to assess the quality of ESG reporting among Islamic Banks (IBs) and Conventional Banks (CBs) in the United Arab Emirates (UAE) during the period 2021–2024. Design/methodology/approach The study uses artificial intelligence (AI), machine learning (ML) and natural language processing (NLP) techniques such as topic modeling, and sentiment analysis to evaluate the degree of disclosure, examine theme shifts over time and identify potential instances of greenwashing. Findings The overall result of the study indicates that CBs perform better than IBs in terms of the quality of their ESG reporting, especially when it comes to the variability in the disclosure of climate change risks, regulatory compliance, and green investment activities. On the other hand, IBs are more consistent, with lower scores in the quality of their ESG reporting, and place a greater emphasis on social responsibility, ethical finance and Shari’ah law compliance. Based on the sentiment analysis results, it seems that IBs are more committed to sustainability over the long run, as they have a slightly more emotional and opinion-based tone in their ESG disclosures. The findings further indicate an emphasis on positive ESG disclosures, with limited attention to underlying challenges, which may influence perceptions of greenwashing. Practical implications The study offers valuable insights for regulators, educators and industry, underscoring the need for unified ESG standards to enhance disclosure consistency and comparability among banks. It also shows how AI can strengthen monitoring, reduce ESG-related fraud and support proactive regulation against greenwashing. Originality/value The original contribution of this pioneering study lies in its development of an AI-based framework that applies NLP and sentiment analysis to compare ESG disclosures of IBs and CBs, introducing the Islamic ESG lens – a Shari’ah-compliant approach to ethical reporting.

The FiniMark Trust developed FinScope Zambia, which carried out a survey report (2020) in collaboration with the Bank of Zambia to assess the levels of financial inclusion in Zambia. The Bank of Zambia uses such survey reports to assess the levels of depth of financial inclusion in Zambia. This study aimed to assess how financial inclusion affects economic growth in Zambia. The specific objectives of the study were to assess the impact of financial inclusion on economic growth in Zambia, to identify the channels through which financial inclusion influenced economic growth in Zambia, and to evaluate the effectiveness of the National Financial Inclusion Strategy interventions in fostering economic growth in Zambia. The researcher adopted a mixed approach and employed qualitative and quantitative research designs. The study employed purposive sampling techniques to mobilize the quantitative and qualitative data. The purposive method was used to identify and select a homogenous sample of Lusaka Province citizens that met the predetermined criterion of importance. The research comprised questionnaires and interview schedules. The questionnaires were used because they are the main means of collecting quantitative primary data. The questionnaires enabled the quantitative data to be collected in a standardized manner, ensuring that the data were consistent and coherent for the analysis. From the findings, the study concludes that 130 respondents, representing 59.1%, have very easy access to banking services, and 57 respondents, representing 25.9%, have somewhat easy access to banking systems. Further, the study shows that mobile banking is covering a big market share compared to conventional banking. The growth in agency services on mobile money platforms has facilitated improvements in financial inclusion. The rise in mobile money accounts has been particularly impactful, facilitating financial transactions for previously unbanked and underserved populations. This study has shown that there is a link between financial inclusion and economic growth. That financial inclusion significantly contributes to economic growth by strengthening the financial system and positively impacting GDP per capita. The research indicates that an inclusive financial sector propels economic development. This relationship works by providing broader access to financial services, which fosters investment, entrepreneurship, and consumption. However, the study indicates that only 33 respondents, representing 15%, had savings accounts; 43, representing 19.5%, had access to credit facilities; and 30, representing 13.6%, had insurance products. The study further shows that 163 respondents, representing 74.1%, had no access to finances for agricultural productivity. The study found that 213 respondents, representing 96.8%, showed that access to formal savings has influenced their consumption patterns. The study further concludes that SMEs with access to financial services are better positioned to invest in their businesses, create jobs, and contribute to overall economic diversification. Furthermore, the broader adoption of digital financial services has been shown to stimulate economic activity, particularly among low-income populations, by reducing transaction costs and increasing efficiency.

This research enhances the literature on bank capital structure by combining financial intermediation theory with technological innovation to analyse the impact of FinTech adoption and liquidity management on leverage choices in South African banks. Utilising panel data spanning 2015 to 2024 and applying the Generalised Method of Moments (GMM) to tackle endogeneity and dynamic persistence, the research presents new findings from an overlooked emerging market setting. The results show a diverse effect of technology on leverage. Conventional banking systems, represented by automated teller machines (ATMs), show a positive relationship with the total debt ratio (TDR), suggesting a capital-intensive nature of tangible assets. Conversely, digital technologies such as mobile banking and a composite FinTech Index display a notable negative correlation with leverage, indicating that digital transformation improves efficiency, strengthens internal funding capacity, and reduces dependence on external debt. Moreover, increased liquidity levels are negatively correlated with leverage, suggesting that well-capitalised banks with robust liquidity rely less on debt funding. By examining FinTech and liquidity dynamics, the research contributes to both theory and practice, emphasising digital innovation as an alternative to external funding and stressing the importance of sound liquidity management amid evolving regulatory environments such as Basel III.

This research assessed the factors that determine and affect the adoption of mobile money among rural community savings groups in the districts of Pemba and Monze in the Southern Province of Zambia. Mobile money services have played a positively disruptive role, enabling financial inclusion as well as provision of low-cost alternatives to conventional banking channels. Despite this, mobile money’s integration into the informal financial structures continues to exhibit characteristics of disorganization. By using a mixed-methods study design, this research collected quantitative data from 70 savings groups in Pemba and Monze, augmenting it with qualitative data from focus group discussions and key informant interviews. The goal was to compare the financial performance of savings groups across different levels of adoption of mobile money. The research identifies the economic and social benefits from increased digital integration by combining statistical analysis with the lived perspectives of community members. The data reveals that members in groups that had adopted mobile money achieved an average savings of ZMW 180 which is nearly double the ZMW 95 managed by those relying on physical cash. The qualitative findings indicated that the key limitation savings group members face in adoption of mobile money in their operations is a digital mistrust citing an increase in the number of cases of mobile money fraud and scammers. Many of the group members are tied their traditional "three-key" locked boxes despite having mobile money agents within their proximity because they perceive current mobile platforms as lacking the collective security features necessary to protect their shared assets. These quantitative findings show that the use of mobile money is a channel for convenience as well as a catalyst for stronger financial mobilisation. The qualitative findings insights suggest that rural savings groups to require capacity building on safe utilisation of digital tools as well as a tailored product by service providers.

Purpose The purpose of this study is to examine the impact of micro, small and medium enterprises (MSMEs) financing on the stability of Saudi Arabia’s dual banking system. Design/methodology/approach This study uses the correlated random effects (CRE) model, which is selected based on the Mundlak test. The CRE model is more appropriate for small sample data sets. MSME financing data is sourced from the annual reports of Saudi Arabia’s three full-fledged Islamic banks (FIBs) and six hybrid conventional banks (HCBs) over the six-year study period from 2018 to 2023. Findings The findings show that MSMEs financing has a statistically significant positive impact on the overall banks Ln Z-Score (stability) and a negative impact on nonperforming loans (credit risk) emphasizing the positive impact of MSMEs financing on the dual banking system stability. However, when the authors disaggregate and estimate separately for FIBs and HCBs, the authors find that micro and small-sized enterprises (MiSEs) financing positively impact the stability of FIBs, but only small-sized enterprises financing reduces their credit risk. For HCBs, however, only medium and microsized financing have statistically significant positive impact on their stability and a negative impact on their credit risk, respectively. These findings are economically significant and remain robust when the authors estimate for both on-and-off-balance sheet, and MiSEs and SMEs financing for overall banks. Practical implications The findings offer some important policy insights for policymakers and regulators of developing countries with dual banking systems in general and Saudi Arabia in particular that MSMEs financing enhances the stability of dual banking system and reduces their credit risk. This favorable impact is more evident for FIBs. The fact that Saudi Arabia FIBs having larger portfolios of MSMEs financing relative to their conventional counterparts have impacted their stability favorably which implies that policies favoring MSMEs financing can enhance both the financial sector and the underlying real sector in which MSMEs operate by reducing income inequality, enhancing financial inclusion and fostering entrepreneurship, which will consequently lead to long-term financial stability and to sustainable economic growth and societal development. Originality/value To the best of the authors’ knowledge, this is the first study that empirically examines the impact of MSMEs financing on the stability and credit risk of a dual banking system. The study provides new evidence substantiating that bank MSMEs’ financing can be a win-win proposition.

This study examines the legal gaps in regulating data proportionality in ASEAN digital banking, particularly in Indonesia, the Philippines, and Malaysia. The main legal issue lies in the absence of clear standards governing the limitation, justification, and classification of personal data, which leads to excessive and potentially invasive data processing practices in digital banking systems. This research aims to examine the concept of data proportionality in digital banking and to assess the adequacy of legal frameworks governing data proportionality in Indonesia, the Philippines, and Malaysia in order to identify existing regulatory gaps. This study employs a normative legal research method with a comparative approach. The findings reveal that although all three countries have established data protection frameworks, none comprehensively integrate data proportionality into digital banking regulations, resulting in fragmented and ineffective legal protection. Indonesia lacks detailed standards and risk-based mechanisms, while the Philippines and Malaysia show regulatory gaps in governing conventional digital banking services. These weaknesses contribute to increased risks of privacy violations and legal uncertainty. Therefore, this study suggests the need for regulatory reform, including clearer data classification, proportionality standards, and mandatory risk assessments, to ensure a balance between digital banking innovation and the protection of consumer privacy rights.

PhonePe is a prominent platform that has made a substantial contribution to the expansion of the Unified Payments Interface (UPI), which has revolutionized online purchasing in India. The rapid adoption of UPI has resulted in a significant increase in the volume of transactions, while the demand for cash payments has decreased. In contrast, the zero-MDR (Merchant Discount Rate) policy has impeded the ability of banks to achieve direct profitability, even in scenarios involving a significant volume of transactions. PhonePe has generated revenue in addition to UPI transactions by providing value-added services, including insurance, mutual funds, and merchant solutions. Transaction-based fees are being replaced by service-based revenue, as evidenced by the growing ecosystem of digital financial services. The proliferation of UPI through enterprises like PhonePe demonstrates that India's conventional banking revenue frameworks face both novel obstacles and opportunities.

ABSTRACT The surge in fintech has had a significant impact on the lending industry, hence creating a gap as to its effect on loan default. Fintech has made financial services more accessible, but it has equally raised questions about the potential risk of loan default. This study examines the relationship between fintech and loan default in South Africa (SA). Using data from the World Bank—Global Financial Inclusion Database and South African Reserve Bank (SARB) from 2010 to 2022, the Dynamic Autoregressive Distributed Lag (ARDL) long-run simulation is employed with the fully modified ordinary least squares (FM-OLS) as the robustness test. Digital usage, bank account ownership, borrowed money, and remittances are employed as control variables. The findings indicate that fintech adoption, encompassing mobile money platforms, peer-to-peer lending, and other technology-driven financial services, positively influences loan default in SA, highlighting a critical trade-off in enhanced financial accessibility. Contrary to trends in other African countries, fintech negatively affects remittances in SA due to the dominance of traditional institutions, such as conventional banks and money transfer operators, which benefit from an extensive network of branches and ATMs. These findings are robust, providing evidence of the significance of the relationship between the response and explanatory variables.

Bank efficiency is one of the vital indicators to measure a bank’s performance. An efficient bank indicates the bank’s good performance and contributes to the country’s financial health and economic growth. This study aims to investigate the trend of academic literatures in the field of bank efficiency in Islamic and conventional banks using bibliometric analysis. The dataset is collected using LENS.ORG and analysed using VOSviewer. The bibliometric analysis is based on three keywords search which are efficiency, data envelopment analysis (DEA), and Islamic and conventional banks. Three major clusters were linked with efficiency. VOSviewer, through the generated network and density visualization suggested possible area that can be further studied in the future, such as comparing the performance of rural Islamic and conventional banks and incorporating corporate finance, governance, and crises in the studies of bank efficiency.

An Islamic banking window is a relevant topic for financial markets, banking institutions, and risk analysis because it directly concerns how conventional banks integrate alternative financing activities without weakening financial soundness in dual-banking environments. Previous research has mainly examined Islamic windows in countries such as Indonesia, Malaysia, and Qatar, while bank-level evidence on their relationship with financial stability in Algeria has remained scarce and fragmented. The purpose of this article is to examine whether Islamic financing provided through an Islamic window is associated with changes in the financial stability of Gulf Bank Algeria, the first conventional bank in Algeria to introduce this activity. The analysis is based on annual bank-level data for the period 2008 to 2020 drawn from Gulf Bank Algeria’s annual reports and the Algerian regulatory framework, covering Islamic financing, net result, liquidity risk, capital risk, credit risk, return on assets, equity to total assets, and the bank’s Altman Z-score. The calculations rely on descriptive financial ratio analysis, trend analysis of the bank’s Altman Z-score, and multiple regression estimated by ordinary least squares using EViews 12, with additional diagnostic tests for residual normality, serial correlation, and heteroskedasticity. The first result shows a clear deterioration in financial stability over time, as the bank’s Altman Z-score remained above 2.99 from 2008 to 2014 but declined to 1.75 in 2016 and 1.63 in 2017, indicating a shift from the low-risk zone to the distress zone. The second result indicates that Islamic financing is negatively and significantly associated with financial stability, with an estimated coefficient of minus 0.3986 and a probability value of 0.0199, showing that a one percent increase in Islamic financing is associated with a decrease of about 0.39 percent in the bank’s Altman Z-score. The third result shows that the net result is positively and significantly associated with financial stability, with a coefficient of 0.5956 and a probability value of 0.0214, while liquidity risk, capital risk, and credit risk are not statistically significant, and the overall model retains substantial explanatory power with an adjusted coefficient of determination of 0.7890 and an overall significance probability of 0.004364. These results provide a basis for bank managers, regulators, and researchers to assess the conditions under which Islamic window activity contributes to or weakens financial resilience in conventional banks, and they open the way for future comparative work on other Algerian banks, full-fledged Islamic banks, and alternative regulatory designs in dual-banking systems.

The purpose of this study was to examine the impact of political turmoil, bank characteristics, and audit quality on the financial stability of banks in terms of Z-Score. This study employed the fixed and random effects models on the whole sample, Islamic banks, and conventional banks, respectively. The total panel observation of this paper was 2,873 from 221 institutions. The findings showed that although audit quality positively affects conventional banks, it negatively affects the stability of Islamic institutions to a significant extent. The result also highlighted the positive relationship between financial stability and other explanatory variables such as bank size, profitability, liquidity, and the Capital Adequacy Ratio (CAR) in all models. However, leverage had a negative impact on financial stability except in the Islamic banks context, where a positive correlation existed between leverage and financial stability. Political instability was a major cause of financial instability in any model, although it affected the Islamic institutions the most. In the Islamic bank’s context, the random effects model was most appropriate, while the fixed effects model was suitable for the entire sample comprising regular banks. These results provide regulators and policymakers with special recommendations on how to make banks more stable in different banking conditions.

This study examines credit growth, Capital Adequacy Ratio (CAR), Non-Performing Loans (NPL), and Loan-to-Deposit Ratio (LDR) impact on Return on Assets (ROA), and ROA's influence on stock returns, with inflation as moderating variable in Indonesian conventional banks from 2020-2024. Using purposive sampling, 39 banks from the Indonesia Stock Exchange yielded 166 unbalanced panel observations analyzed through Fixed and Random Effect Models in EViews 12. Results show varying statistical support. At 5% significance, credit growth positively drives ROA while NPL negatively affects it, confirming asset quality and lending volume as profitability determinants. LDR shows a strong negative influence on stock returns, establishing liquidity ratio as the primary market signal, while CAR shows no significant effect on ROA. At 10% significance, inflation exhibits a weak negative moderating effect on the ROA-stock return relationship, providing marginal statistical evidence. ROA does not significantly impact yearly annual stock returns nor mediate relationships between independent variables and returns. This suggests liquidity metrics may carry greater weight than profitability signals, though constrained by the model's limited explanatory power. Findings indicate bank managers should prioritize NPL control and maintain optimal LDR thresholds to preserve profitability and investor confidence, while emphasizing risk metrics in communications. Regulators should strengthen liquidity oversight through enhanced LDR disclosure requirements. Limitations include post-pandemic focus and limited variables. Future research should examine NPL threshold effects, incorporate macroeconomic and operational efficiency measures, and compare cross-country data between crisis and stable periods.

Islamic banking has emerged as a significant and rapidly growing sector within the contemporary financial system, offering an alternative to conventional interest-based banking by adhering strictly to Shariah principles. The core objective of Islamic finance is to promote ethical, equitable, and interest-free economic transactions, avoiding prohibited elements such as riba (interest), gharar (uncertainty), and maysir (gambling). This research critically examines the application of key Islamic financial contracts—Murabaha, Diminishing Musharakah (Musharakah Mutanaqisah), Ijarah, Salam, Istisna, and Tawarruq—focusing particularly on the concepts of liability (Dhaman) and ownership (Milkiyah), which form the foundation of all Shariah-compliant financial transactions. The study reveals that while these contracts are designed to comply with Shariah, practical implementation often deviates from Islamic legal requirements. In Murabaha, lack of actual possession and guarantee by the bank transforms the transaction into a form resembling interest-based lending. In Diminishing Musharakah, although joint ownership is established, banks sometimes fail to assume real possession and responsibility, disrupting the balance of risk and reward. Ijarah contracts are frequently executed before banks acquire full ownership of the leased asset, violating Shariah conditions. Salam contracts often involve deferred payment or installment-based collection, undermining the contract’s validity, while in Istisna, responsibility for defects and ownership transfer is sometimes improperly allocated. Tawarruq transactions similarly suffer from lack of actual possession, reducing transparency and risking non-compliance with Shariah. The findings highlight critical gaps in the practical application of Islamic banking principles, particularly concerning the transfer of ownership and assumption of liability, which can lead to unethical profit-making practices if unregulated. The study recommends implementing clear policies regarding possession and liability, ensuring transparency through documented procedures, strengthening Shariah supervisory mechanisms, and providing comprehensive training for both bank personnel and customers. These measures aim to enhance the compliance, transparency, and ethical foundation of Islamic banking, thereby ensuring that financial operations are genuinely aligned with Shariah principles and promote equitable economic justice.

Type of the article: Research ArticleAbstractHousehold savings are a fundamental driver of financial stability and economic growth, particularly in developing economies such as Indonesia. Given the presence of a dual banking system that includes both conventional and Islamic banks, understanding the saving behavior of Islamic bank customers is essential for improving financial inclusion and economic resilience. This study aims to empirically investigate the impact of service quality, customer satisfaction, customer value, customer loyalty, and income on household saving behavior in Indonesia’s Islamic banking sector. A structured questionnaire was administered to a sample of 260 Islamic bank customers, and the data were analyzed using Structural Equation Modelling (SEM). The findings reveal that customer loyalty is significantly influenced by service quality (β = 0.23), customer satisfaction (β = 0.41), and customer value (β = 0.15), explaining 31% of the variance in loyalty (R² = 0.31). Additionally, household savings are directly affected by service quality (β = 0.82), customer satisfaction (β = 0.16), customer value (β = 0.06), customer loyalty (β = 0.17), and income (β = 0.08), with the overall model accounting for 55% of the variance in saving behavior (R² = 0.55). These results underscore the critical role of banking service quality and customer-related factors in fostering saving habits within Islamic banks. The study offers actionable insights for policymakers and financial institutions aiming to enhance customer engagement and strengthen savings mobilization strategies in Islamic banking.AcknowledgmentThe authors are thankful to the Deanship of Graduate Studies and Scientific Research at University of Bisha for supporting this work through the Fast-Track Research Support Program.