Islamic Banking Industry Research Articles

Pengembangan Perbankan Syariah Dalam Mendukung Inklusi Keuangan di Indonesia

The purpose of this journal is to examine the evolution of Islamic banking practices as a means of enhancing financial awareness in Indonesia. In order to increase the general public's access to products and financial services that are fair, affordable, and useful, they are referred to as financial inclusion. The Islamic banking system has become a crucial alternative in the Indonesian financial system. Deskriptif analysis is the research method used in this journal. Data are obtained through relevant secondary data sources and research studies. This analysis will show how Islamic banks operate in Indonesia, how Islamic banks maintain their financial integrity, and the problems that arise when they are expanding. Research indicates that the rise in Islamic banks has helped to increase awareness of money in Indonesia. However, numerous challenges are faced by the syariah banking sector. Several of these include inadequate infrastructure, inadequate knowledge about goods and services provided by Islamic banks, and regulations that have not yet fully addressed the root causes of the problem. Due to this, the journal also offers advice on how to resolve the issue and encourage the development of more sensitive Islamic banks in Indonesia.

Analytical Study of the Implementation of AAOIFI’s Ethical Standards in the Algerian Islamic Banking System: Assessment and Recommendations

Purpose ‒ The application of ethical requirements is a key way for all stakeholders in the Islamic financial industry to build trust and promote integrity. This study aims to assess the extent to which the Algerian banking system has adopted the ethical standards for Islamic financial transactions issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Design/Methodology/Approach ‒ This study conducted an analytical reading. It utilised the descriptive approach to present the study's variables and employed the analytical approach to discuss the various concepts and legal regulations that govern the banking sector and to provide recommendations that would help to build a solid foundation for the banking system. Findings ‒ The findings revealed that the Algerian monetary authority is committed to gradually promoting Islamic banking regulations in a thoughtful manner. However, the study also found that there is a lack of clarity regarding the adoption of regulatory laws in Algeria for the ethical standards issued by AAOIFI, even within the 2023 Monetary and Banking Act. Originality/Value ‒ To the best of the authors’ knowledge, this paper is the first study to assess the extent to which the Algerian banking system has adopted the ethical standards for Islamic financial transactions issued by AAOIFI. Research Limitations/Implications ‒ The primary limitation of this research is its exclusive focus on the Algerian banking system and its reliance on secondary data. Practical Implications ‒ This research offers valuable insights for those in decision-making roles. It recommends the establishment of a committee of experts to develop standards tailored to the Algerian Islamic banking environment. The committee should be financially independent and under the supervision of the monetary authority. Additionally, the study suggests the issuance of a code of ethics to govern the professional conduct of Islamic banks (IBs) and Islamic financial institutions (IFIs) in accordance with Sharīʿah.

Ijarah Contracts From The Time Of Rasulullah To The Present Day

The Islamic banking industry in Indonesia continues to experience significant development. With this development, innovation in products and services in Islamic banking is very important to answer the needs in contemporary banking and financial transactions. One of the many products that have been applied and developed is ijarah. However, practitioners and scholars are still discussing different points of view regarding the legal basis of ijarah and its types. This research aims to review the development process of the ijarah principle and its variance from the early Islamic period to the present. This study is a qualitative research with a literature study approach and library research with descriptive analysis. This research concludes that, The concept of ijarah has existed since the time of the apostle of Allah, namely with the wage system given by the Rasulullah for the services received. For its application in the industry, there are 2 main products, namely Ijarah Muntahiya Bittamlik (IMBT) and Ijarah Maushufah Fi Al Dzimmah (IMDF).

Examining the Role of FinTech Services on Customers Retention of Islamic Banks in Pakistan: An Empirical Assessment

The objective of this research is to examine the influence of several variables, such as fintech payments, advisory services, and fin-tech financing, on the retention of customers in Islamic banks. The researcher used quantitative research design and positivistam philosophy to conduct this research. The target population comprises Islamic banking customers, with the sample drawn from 300 individuals holding accounts in the Punjab province of Pakistan. Data collection was facilitated through an adopted questionnaire administered to respondents. The findings reveal a significant impact of FinTech Payments, Advisory Services, and FinTech Financing on customer retention within the Islamic banking industry, showcasing the importance of these elements in shaping customer loyalty. This study stands out for its comprehensive examination of various facets related to FinTech and their direct and indirect effects on customer retention within the unique context of Islamic banking. However, it's crucial to acknowledge a limitation regarding the generalizability of the results beyond the studied population. Despite this constraint, the research offers valuable insights for Islamic financial institutions aiming to bolster customer retention through strategic utilization of FinTech-related elements and the cultivation of trust among their clientele. By embracing these findings, Islamic banks can enhance their customer relationship management strategies and maintain a competitive edge in the evolving financial landscape.

Exploring the Role of Islamic FinTech Innovation Trialability and Compatibility in Enhancing Islamic Financial Inclusion: A Data-driven Approach

The promotion of Islamic financial inclusion (IFI) is a challenge for Islamic banking industry in Pakistan. Although, Islamic banks are trying to enhance IFI, however, a satisfactory level is not achieved. Therefore, the objective of this study is to examine the role of trialability and compatibility in enhancing IFI. A questionnaire survey was preferred in this study to collected data from clients of Islamic banks in Punjab, Pakistan. 317 valid questionnaires were received and used to obtain findings. Structural Equation Modeling (SEM) was used through Smart PLS to test the study hypotheses. Findings of the study identified that trialability and compatibility has a positive role to promote IFI. Furthermore, compatibility has a positive effect on IFI, however, trialability does not influence IFI directly, it has indirect effect through Islamic FinTech adoption (IFA). Findings of the study provided various important insights for the policymakers to promote IFI.

Analisis Perbandingan Kinerja Keuangan Perbankan Syariah Yang Melantai di Bursa Efek Indonesia : Studi Kasus Perbandingan Kinerja Keuangan Bank Syariah Indonesia dan Bank BTPN Syariah

"The Islamic banking industry in Indonesia has experienced rapid growth in recent years. Bank Syariah Indonesia (BSI) and Bank BTPN Syariah are two leading Islamic banks in Indonesia. However, in the post-pandemic era, there has been limited research comparing the financial performance of these two banks. Therefore, this research aims to analyze the financial performance comparison of Islamic banking institutions that have publicly listed their shares on the Indonesia Stock Exchange, namely Bank Syariah Indonesia and Bank BTPN Syariah. The objective of this research is to compare the financial performance between Bank Syariah Indonesia and Bank BTPN Syariah and provide recommendations for investors interested in investing in the Islamic banking sector. This research uses a descriptive-comparative method with a quantitative approach. The data used is secondary data obtained from the financial reports of both banks for the last two years (2021-2022). The measured variables include return on equity (ROE), return on assets (ROA), and price-to-earnings ratio (PER). The data obtained is analyzed using statistical analysis techniques such as t-tests, F-tests, and regression analysis."

The Relationship between Age and Level of Income with Understanding of Islamic Digital Banking

The rapid growth of information and communication technology development has driven the Islamic banking and finance industry to digitalize all transactions and Islamic banking products to go fully online. However, there is a hindrance in developing Islamic digital banking which is the lack of understanding about Islamic digital banking among Malaysia community from different age and level of income. This study aims to investigate the relationship between age and level of income of Malaysian community with the level of knowledge about Islamic digital banking. This study employed a quantitative survey questionnaire of 100 respondents. The Statistical Product and Service Solutions (SPSS) software version 27 has been used in this study in analysing the data through descriptive analysis. The general finding of this study showed that the young generation and people with lower income have more intention to adopt this new application compared to the older generation and people with higher income. By analyzing these relationships, the research could help Islamic banks tailor their services and products to various demographic groups, enhancing accessibility and understanding. Additionally, the findings might inform policymaking to create a more inclusive financial system, particularly in predominantly Muslim countries. Overall, the study appears to connect the fields of demographics, technology, economics, and cultural studies, potentially providing essential insights for the development and growth of Islamic digital banking.

Credit Risk and Its Consequences on Bank Performance

Determining the stability and soundness of the financial system has depended heavily on credit risk. Due to the Islamic banking systems increasing importance, fierce competition between Islamic and conventional banks has started to emerge, which is having an impact on both banking systems' credit riskiness and performance. It can be said that credit risk is the dominant risk that bank should encounter first and it have been proved from the implementation of Basel I in handling credit risk at first. Therefore, the objective of this study is to discuss the consequences of credit risk on bank performance. The study using qualitative as a method of analysis. Expected findings of this study revealed that the consequences of credit risk will affect the bank performance especially regarding the non-performing loan, credit interest and leverage ratio. This study will help researchers and banks to focus on credit risk management and to emphasize the importance of credit risk management towards bank performance.

Forms of Implementing Corporate Social Responsibility in Indonesian Sharia Banks

Corporate Social Responsibility or what is often referred to as Corporate Social Responsibility (CSR) is almost implemented by all companies, in this case, the Islamic Banking industry where the company is committed to quality development and community welfare. CSR can be implemented in the form of corporate social activities as stipulated in Law Number 40 of 2007 concerning the implementation of CSR/corporate social responsibility. This research has several objectives, one of which is to find out the forms of CSR (Corporate Social Responsibility) carried out by Islamic banks. In addition, this research also shows the areas that are the focus of the company in the CSR program.

Alternative model of Islamic deposit insurance for the Islamic banking system

Purpose This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance. Design/methodology/approach The analysis in this paper adopts a qualitative content analysis approach to review the existing literature on Islamic deposit insurance and propose a new model. Findings The proposed model includes a revised scheme. In the event of a bank failure, the funds used to reimburse depositors of the failed bank are divided into two distinct categories. The first category includes nonrepayable premiums that have been previously paid by the failed bank and managed by the Islamic deposit insurance agency or Islamic deposit insurance corporation. The second category comprises qard hasan, an interest-free loan provided by the Islamic deposit insurance agency or Islamic deposit insurance corporation using the deposit insurance funds from the collective pool of premiums of other banks. Practical implications The proposed model ensures that well-managed banks are not unfairly burdened by the failures of their poorly managed counterparts, thus preventing a sense of unfairness and inefficiency. Implementing the proposed model may result in higher business practices and risk management standards, ultimately leading to better depositors’ protection and banking system’s stability. Originality/value This paper offers a significant contribution to the limited literature on Islamic deposit insurance. The proposed model enriches the discourse and offers valuable insights for the future development of Islamic banking.

Islamic Social Reporting, Intellectual Capital, and Corporate Governance Influence on Maqashid Sharia Performance: A Case Study of Sharia Banks in Indonesia and Malaysia (2017-2022)

This research aims to determine the influence of Islamic Social Reporting (ISR), Intellectual Capital (IC), and Corporate Governance (CG) disclosures on the performance of Maqashid Sharia in Sharia Commercial Banks in Indonesia and Malaysia for the 2017-2022 period. This research includes quantitative research obtained from the annual reports of Sharia Commercial Banks in Indonesia and Malaysia which are published on the respective banks' websites. Sampling used a purposive sampling method with criteria determined by researchers so that a sample of 23 banks from 29 Sharia Commercial Banks was obtained in the 2017-2022 observation period. The type of data used is secondary data with the method used is multiple linear regression analysis to determine the direction and influence of the relationship between the dependent and independent variables. Multiple regression analysis was carried out on time series data during the period 2017-2022 in the Islamic banking industry. By using data processing software SPSS version 22. The research results show that partially Islamic Social Reporting has a positive and significant effect on the performance of the Maqashid Sharia Index, while Intellectual Capital and Corporate Governance have a negative and insignificant effect on the performance of the Maqashid Sharia Index.

The Role of Stress Tests in Enhancing Bank Transparency: A Comparative Study of Islamic and Conventional Banks

Abstract The global financial crisis highlighted the crucial role of stress tests in evaluating a bank’s resilience to severe economic shocks. Accordingly, the purpose of the study was to examine the contribution of stress tests to credit risk in terms of hedging banking opacity and improving financial resistance against negative shocks in MENA countries, observed for the period from 2012 to 2022. Furthermore,, this study explores the impact of stress tests on enhancing bank transparency, particularly within the contexts of Islamic and conventional banking systems using the Panel-VAR and GMM approach. A conceptual framework is established to explain the connection between stress testing and bank transparency, emphasizing on the mechanisms through which stress tests can promote greater disclosure and accountability. A comparative analysis of stress testing practices across both banking sectors reveals similarities and distinctions in scenario selection, modeling techniques, and disclosure practices. In-depth case studies of Islamic and conventional banks illustrate the practical application of stress testing in fostering transparency. These results show that stress tests produce information about credit risk exposure and about the real conditions of financial institutions. Therefore, more transparency on bank losses and risks would have also enabled bank regulators to focus more attention on financial institutions and react early to take “corrective measures”. Policy recommendations are drawn to enhance the effectiveness of stress testing in promoting transparency and financial stability within both Islamic and conventional banking sectors. This study contributes to a deeper understanding of stress testing’s role in fostering a more resilient and stable financial system.

Comparative analysis of accounting standards in the Islamic banking industry: a focus on financial leasing

Purpose This study aims to evaluate Islamic bank compliance with the accounting and auditing organisation for Islamic financial institutions (AAOIFI), assess the impact of multiple accounting standards in Islamic banking, examine the need for private accounting standards and assess international financial reporting standards (IFRS) compatibility with Islamic banking and analyse financial leasing accounting in Islamic banking compared to IFRS 16. Design/methodology/approach A combination of comparative theoretical analysis, physical examination, and semi-structured interviews has been used as a research methodology. These methods are interconnected and complement each other to provide a comprehensive approach to address the research questions. Findings Islamic banks in various countries show varying compliance with AAOIFI accounting standards. Some fully comply, while others adopt a hybrid approach combining AAOIFI and IFRS. Differences in accounting treatments can result in conflicts, asset inflation and financial statement discrepancies. Challenges and criticisms faced by AAOIFI standards include violating the matching principle and lacking faithful representation. Collaboration among academics, standards-setting bodies and organisers is crucial for guiding the reporting of Islamic financial statements. Practical implications The research identifies gaps in implementing Islamic accounting standards and proposes strategies to enhance compliance, improve performance and increase transparency in Islamic financial institutions. It highlights the importance of a harmonised and universally accepted accounting framework for Islamic banking, considering the compatibility between IFRS and Islamic principles. Social implications Social implications have arisen regarding the global acceptance of Islamic finance, which leads to an increase in socially Islamic finance exchange. Originality/value This research examines the consequences of using multiple accounting standards in the Islamic banking industry and discusses the need for private accounting standards and compatibility with IFRS.

The influence of islamic banking digital service quality on intention to continue using islamic banking: a case of Indonesia

Research aims: Technological advances impact every aspect of daily life, including in Islamic banking. To keep its customers, the Islamic banking industry continues improving the quality of its digital services. Using the DBSQual model, this research aims to examine the quality of Islamic banking digital services, which encompasses seven dimensions: application architecture, application efficiency, responsiveness, user-friendliness, security, reliability, and personalization, towards the intention to continue using Islamic banking.Design/Methodology/Approach: The population of this research was Islamic bank customers in Indonesia. The sample was then selected based on the criteria of Islamic bank customers using mobile banking services. Data collection was carried out by distributing questionnaires developed from previous research. To validate the questionnaire, consultations were conducted with four survey accounting experts. Also, a pilot study was performed. Hypothesis testing was then done using the Structural Equation Modelling technique based on Partial Least Square (PLS-SEM).Research findings: The results demonstrated that three dimensions of digital service quality significantly influenced the intention to continue using Islamic banks, namely application efficiency, security, and reliability. Meanwhile, the dimensions of application architecture and responsiveness had no effect.Theoretical contribution/Originality: This study covers the gap related to empirical studies that examine the role of digital service quality development on intentions to continue using Islamic banking services.

Sharia Marketing Strategy Education in Increasing Customer Trust in Pawn and Gold Installment Products at Bank Syariah Indonesia KCP Pandeglang

Marketing strategy education plays a very important role in the success of the company, which must be reviewed and developed in accordance with the development of the market and the market environment. The purpose of this study is to determine sharia marketing strategies in increasing customer trust and find out the factors that hinder the growth of customer trust in pawn financing products and gold installments at Bank Syariah Indonesia KCP Pandeglang. This research is a type of field research that involves interview, observation and documentation data collection techniques. Data analysis using an inductive approach, the subject of this study is Bank Syariah Indonesia KCP Pandeglang. The results of this study show that the marketing strategies used by Bank Syariah Indonesia KCP Pandeglang including shiddiq, amanah, tabligh, fathonah, syaja'ah are very good in building customer trust. However, behind all that, the facts of this study show that Bank Syariah Indonesia KCP Pandeglang still has many obstacles, especially in marketing, such as the lack of public understanding of the Islamic banking system and public ownership interest in gold bars. In relation to marketing pawn financing products and gold installments, Bank Syariah Indonesia KCP Pandeglang implements Islamic principles, such as Godly, Ethical, Realistic and Humanist. This is evident from the implementation of the 4S principles (Smile, Greetings, Polite, Courteous as a form of ethics and humanism. As well as prioritizing open information as a form of realistic unity.

Manajemen Aset dan Liabilitas dalam Bank Syariah: Analisis Komprehensif Institusi Keuangan Berprinsip Syariah

The Islamic banking industry in Indonesia, since the establishment of Bank Muamalat Indonesia in 1991, has experienced rapid growth, reaching its peak in 2019. This growth is evident not only in financial aspects but also involves a broader performance assessment, including Sharia principles and organizational governance. The assets of Islamic banks have achieved remarkable milestones, strengthening Indonesia's position as a key player in the global Islamic banking arena. New approaches such as the Sharia Maqhasid Index (SMI) highlight the attainment of Sharia goals, while fund management and the phenomenon of mergers between BRIS, Mandiri Syariah, and BNI Syariah forming Bank Syariah Indonesia (BSI) underscore the urgency of assessing asset liability management in the context of sustainability in Indonesia's Islamic banking sector.

THE FOURTH INDUSTRIAL REVOLUTION IN ISLAMIC FINANCE: THE CASE OF DIGITAL CURRENCIES OF CENTRAL BANKS

Advances in artificial intelligence, robotics, neural networks, artificial limbs and systems, automation, virtual and augmented reality, machine learning, and other fields hold great promise for improving efficiency and knowledge acquisition. Decentralization is one of the trends in the modern global finance market. The growth and active development of the Islamic finance and banking industry, the growth in the number of Muslims in the world and other factors determine the interest of researchers in digitalization issues. This paper is devoted to the study of the possibilities, approaches and views on the use of digital currencies from the point of view of Islamic finance. Methods of analysis and synthesis, comparative analysis are used. The approaches of various countries of the Muslim world to the introduction of digital currencies are analyzed, ongoing projects are considered. In the Islamic world, there has not yet been a consensus on the permissibility and scope of the possible use of digital currencies. The authors conclude that, in general, digital currencies can be harmoniously used within the concept of Islamic finance. This is facilitated by such factors as the transparency of decentralized finance and digital currencies, the contribution to the protection of the wealth of society, the focus on social benefits, which is in line with the good goals of Islamic finance and its social value.

Comparative Analysis of the Efficiency of Islamic and Conventional Banking Systems: A literature review

The article aims to conduct an Efficiency Comparison between Islamic and Conventional Banking Systems by synthesizing a literature review within the realm of Financial Management. Employing a literature study methodology, the author meticulously examines prior research findings to construct a robust conceptual framework. This approach comprehensively outlines the pertinent theoretical landscape, elucidates recent advancements, and establishes a robust foundation for discourse, drawing from contemporary references accessed through Google Scholars and Mendeley citation searches.Through the analysis of previous studies, the article references significant disparities in the efficiency systems of Islamic banks and conventional banks across their distinct features, each presenting unique advantages. This underscores the need for further analysis of components like sharia compliance, capital structure, and social values, which play pivotal roles in enhancing the efficiency of Islamic banking.

Application of Sharing Risk in Musharakah Contracts

This study provides new empirical evidence regarding the application of sharing risk in Islamic banking in Indonesia. The focus of this research is to analyze the application of sharing risk in musyarakah financing, formulating sharing risk in musyarakah financing. The research method used is descriptive research which is analyzed qualitatively. Data sources were obtained from employees of Bank Syariah Indonesia account maintenance unit, Risk unit and collection unit, as well as documentation. Data analysis was done by data reduction, data presentation and conclusion drawing. The results showed that: 1) the implementation of risk sharing in musharakah financing at Bank Syariah Indonesia has not been fully fulfilled; 2) The risk sharing formulation can be implemented by proposing several improvements including the existence of a communication room where every customer's business development will be reported per period with the concept of joint business, then if a risk occurs it should be included in the communication room so that it can be discussed with both parties to formulate the best steps; Our evidence suggests that regulators further strengthen the Islamic banking system through musharakah contract reform and focus on the risk sharing system, especially the contracting parties.

The connection between robust legal instruments and the exceptional performance of the Islamic banking industry

This study investigates the pivotal role of robust legal instruments in driving the outstanding performance of Malaysia’s Islamic banking industry. Our primary objective is to discern the correlation between the regulatory framework’s legal strength and the industry’s achievements. To achieve this, we embark on a comprehensive exploration of the historical progression of Islamic banking in Malaysia. We scrutinize the dynamics and milestones that have shaped the industry, with particular emphasis on its impressive growth. We then delve into the development of the regulatory frameworks, analyzing how the availability of strong legal instruments has contributed to the sector’s triumph. This study finding the presence of robust legal instruments has been a catalyst for the ascension of Malaysia’s Islamic banking industry. Coupled with accommodating regulations and responsive regulatory institutions, these legal foundations have underpinned the sector’s remarkable success. This study underscores the critical importance of having sufficient legal instruments to nurture the Islamic banking industry. We recommend that governments aspiring to bolster Islamic banking’s performance consider the provision of such legal frameworks. Consequently, this research carries significant implications for policymakers and industry stakeholders alike, offering insights into the essential ingredients for fostering a thriving Islamic banking sector.