Islamic Banks Research Articles

The impact of risk and Fintech on ESG performance: evidence from gulf cooperation council (GCC) banks

ABSTRACT This study investigates the influence of Gulf Cooperation Council (GCC) bank risk on Environmental, Social, and Governance (ESG) performance, emphasizing the roles of Fintech and corporate governance. Using a sample of 48 commercial banks, our research reveals a significant negative influence of bank risk on ESG performance, applicable to both conventional and Islamic banks. Mechanism analysis indicates that Fintech development serves as a mediator, while corporate governance acts as a moderator, driving banks to enhance their ESG performance. Notably, the impact of Fintech on promoting corporate ESG performance is more significant in Islamic banks than in conventional counterparts. Additionally, heterogeneity analysis suggests that the effect of Fintech development on ESG performance is more pronounced for large and state-owned banks.

The Effect of Board Characteristics on the Disclosure of Islamic Social Reporting in Islamic Banks in Asia

This study aims to examine the disclosure of Islamic social reporting in Islamic banks that publish annual reports and are listed on the stock exchange of each country in Asia. This study focuses on Islamic banks that are listed on the stock exchange in 2022. A total of 100 Islamic banks were included in the data set, selected through the purposive sampling method. The independent variables are board size, the proportion of independent commissioners, and the frequency of board meetings. The concept of agency theory suggests that the role of the board is to monitor and evaluate the reporting and disclosure practices of a company, particularly in the context of social reporting within Islamic banking. The characteristics of the board of commissioners have generally been identified as factors with the potential to influence corporate disclosure. The results of this study show that the size of the board of commissioners and the frequency of board meetings have a significant positive relation with the disclosure of Islamic social reporting. Conversely, the proportion of independent board members has been found to exert a significant negative influence on the disclosure of Islamic social reporting.

Curating reflexivity: industry events and the performative politics of alternative finance

ABSTRACT This article examines the role of industry events in curating reflexivity within the financial sector. Through an examination of industry events related to impact bonds and Islamic finance, it identifies three important mechanisms through which reflexivity is curated. First, industry events act as foundational frames, creating historical narratives and origin stories that conjure up a shared sense of social purpose and direction amongst professionals from different backgrounds; second, they act as deliberative spaces where market rationalities are presented, challenged, and negotiated; and third, they act as networking nodes where alternative market subjectivities are cultivated, validated, and shaped. Together, we argue, these three mechanisms perform a politics of reflexivity within alternative finance. In contrast to investigations arguing that alternative finance seeks to silence political confrontation, our work reveals that it is the very performance of dissent and outside voices at such events that creates credibility, and stability.

Analisis Pengaruh Rasio-Rasio Keuangan Terhadap Rasio Beban Operasional-Pendapatan Operasional (BOPO) pada Bank Umum Syariah di Indonesia

This research aims to determine the influence of Islamic banking financial ratios in the form of Return on Assets (ROA) Ratio, Non Performing Financing (NPF) Ratio, Financing to Deposit Ratio (FDR) and Total Asset Turnover (TATO) on the Operational Cost-Operational Income Ratio (BOPO) at Sharia Commercial Banks in Indonesia. This research uses a quantitative approach with sample data totaling 7 (seven) sharia commercial banks out of 13 (thirteen) sharia commercial bank populations registered with the Financial Services Authority. Research data uses secondary data for the annual period in the period 2010 - 2023. By using the ARDL (Autoreggressive Distributed Lag) panel model using the PMG (Pooled Mean Group) method, the research results show that in the panel, it turns out that the Leading Indicator is the effectiveness of the variable in controlling the BOPO Ratio at Sharia Commercial Banks in Indonesia is Return on Assets (ROA), where ROA significantly influences the BOPO Ratio at Bank Muamalat Indonesia, Bank Aceh Syariah, Bank Riau Kepri Syariah, Bank Jabar Banten Syariah, Bank Mega Syariah, and Bank NTB Syariah, with stable positions in the short and long term. Of the 7 (seven) Sharia Commercial Banks that are the objects of research, there are 4 (four) banks that are leading indicators of the effectiveness of sharia banking in influencing the stability of the BOPO ratio, namely: Bank Aceh Syariah, Bank Riau Kepri Syariah, Bank Jabar Banten Syariah, and Bank Mega Syariah through ROA, NPF, FDR, and TATO. Financing to Deposit Ratio (FDR) is also capable of being a Leading Indicator of variable effectiveness to influence the BOPO Ratio at Bank Muamalat Indonesia, Bank Aceh Syariah, Bank Riau Kepri Syariah, Bank BCA Syariah, Bank Jabar Banten Syariah, Bank Mega Syariah, and Bank NTB Syariah, However, its position is unstable in the short and long term.

Islamic or Conventional Banking

Purpose: The purpose of this research study is to examine the banking preferences of Kuwaiti university students, their preferences between Islamic and conventional, the reasons supporting their choice and, as a measure of satisfaction, the likelihood of them recommending their bank to their friends and family. Design/methodology/approach: We conduct a short survey among undergraduates using a 4-item paper questionnaire physically distributed and collected at a Kuwaiti business school. The large response (n= 503) is analysed and descriptive statistics used to present the results Findings: Results indicate a majority prefer Islamic banking and that the main reason for this is their religion. Those students who opted for conventional banks gave social reasons such as recommendation for their choice. A higher level of satisfaction was recorded for Islamic banking customers. We conclude that Islamic banks have managed to match their ethical and religious appeal with the delivery of efficient and convenient banking services that are valued by the student segment. Practical Implications: Our results are of interest to those offering retail banking services in binary markets where conventional banks compete with Islamic banks in addition to researchers in this domain. For Islamic banks, the significance of maintaining a strong reputation with the underpinning of robust Shariah principles is emphasized. Originality: The paper contributes fresh understanding to the acceptance of and satisfaction with Islamic banks and their products and services among a strategically important segment. It provides evidence suggesting a bright future for Islamic banking in Kuwait and the wider Gulf region.

Customer perspectives on reputable and accountable Islamic finance: a behavioural intention model with a meta-analysis SEM approach

Purpose This research aims to analyses the structural model of customers’ intention towards reputable and accountable Islamic finance, explained through Meta-Analysis Structural Equation Modelling (MASEM) with the Theory of Planned Behaviour approach and extended variables. Design/methodology/approach This study used MASEM to examine the factors systematically influencing behavioural intentions within Islamic finance. By synthesising 89 existing studies, the study identified key variables and their relationships, providing a comprehensive understanding of the underlying mechanisms. A rigorous methodology involving article selection, data extraction and statistical analysis enabled the development of a robust conceptual framework. Findings This study underscores the significant impact of subjective norms and perceived behavioural control on the intention to adopt Islamic finance, mediated by customer attitude. Religiosity, customer awareness and knowledge influence the intention to adopt Islamic finance products, with the Islamic financial institution's reputation and customer attitude serving as mediating variables. Originality/value This research novelty examines Islamic finance accounting, reporting and financial accountability, primarily focusing on customers’ perceived intentions towards Islamic financial practices.

A comparative study of implementation Basel III between commercial and Islamic banks: a bibliometric analysis and systematic literature review

Purpose This study aims to compare up-to-date research on Basel III implementation between commercial and Islamic banks in both developed and developing countries. The research examines the five main variables (capital, liquidity, lending growth, size of banks and performance) used in studies listed in the Scopus database, using bibliometric analysis and a systematic literature review (SLR) as methodologies to map the research landscape and synthesize the results of existing literature on the subject. The findings clarify that most differences in the results of previous studies relate to the impact of Basel III on capital and the size of banks, whether at the country level or based on the type of bank. However, most studies illustrate a positive effect of implementing Basel III regulations on lending growth and liquidity, regardless of the type of bank or the level of the country. Overall, the impact of Basel III on performance shows a positive result for all studies on commercial banks in developed and developing countries, except for one study that found a negative effect. Design/methodology/approach This study used a bibliometric analysis and SLR as a methodology to map the research landscape domain and compare current trends of Implementation Basel III between commercial and Islamic banks in the literature. Findings The finding clarified that most differences in the results of previous studies were regarding the impact of Basel III on capital and the size of banks, whether at the level of the country or the type of bank. However, most studies illustrate a positive effect of implementing Basel III regulations regarding lending growth and liquidity, whether by type of banks or level of the country. Overall, the impact of Basel III on performance shows a positive result for all studies on commercial banks in developed and developing countries, except for one study that found a negative effect. Originality/value By using bibliometric analysis and an SLR, this study uniquely synthesizes existing literature while highlighting notable disparities in outcomes based on bank type and country context. In addition, it emphasizes the need for tailored regulatory frameworks that account for the specific characteristics of different banking institutions, particularly small and medium-sized banks. This nuanced approach not only contributes to the academic discourse but also offers practical insights for policymakers and practitioners, addressing gaps in current research and proposing future directions for investigation.

Islamic banking finance and private sector investment in dual banking systems: the impact of institutional quality

Islamic banking finance and private sector investment in dual banking systems: the impact of institutional quality

Exploring the Role of Knowledge on Adoptability of Islamic Banking and Financing Options for Micro, Small and Medium Enterprises: The Mediating Role of Trialability

Knowledge is the act of knowing something with familiarity gained through experience or education. Prior studies have discovered that knowledge has a significant relationship with the adoption of Islamic Banking and Financing Options (IBFOs) amongst Small and Micro Enterprises (SMEs). However, this study explores the role of knowledge on adoptability of Islamic Banking and Financing Options (IBFOs) for Micro, Small and Medium Enterprises (MSMEs), with the mediating role of trialability. While trialability has been suggested as an adoption factor, it has not been considered important in adoption studies and has thus received debates. A structured questionnaire survey consisting of a Likert scale from 1 to 5 was conducted with 300 MSME owners or managers. The findings revealed that trialability has a partial mediation between knowledge and adoptability of IBFOs. This implies that when IBFOs are offered on a trial basis, it will have an impact on the level of knowledge MSMEs will have about IBFOs with the adoptability of IBFOs. As a result, the banking and financing sector should consider offering IBFOs on a trial basis to enhance the knowledge of MSMEs and lead to its adoptability. This research contributes to literature by offering trialability as a mediating variable in the adoptability of IBFOs. The authors recommend testing trialability as a mediating variable in determining the adoptability of any other product or service or even testing it as a moderating variable.

The Influence of Financial Literacy and Islamic Business Ethics on Investment in Islamic Financial Instruments: The Mediating Role of Risk Attitude and the Moderating Role of Religious Knowledge

Current challenges in the Islamic banking sector highlight the urgent need to understand the factors influencing ethical and informed investment decisions. This study aims to analyze the impact of financial literacy and Islamic business ethics on investment in Islamic financial instruments, focusing on the mediating role of risk attitude and the moderating role of religious knowledge. Data were collected through a primary method by distributing questionnaires to 300 bank customers and students in Aceh, Indonesia. The model employed is Structural Equation Modeling-Partial Least Squares (SEM-PLS) using Smart PLS software. The findings reveal that financial literacy significantly positively impacts investment decisions and risk attitudes. Islamic business ethics also significantly influence both investment decisions and risk attitudes. Religious knowledge positively affects investment decisions, while risk attitude has a positive impact on investments. However, the moderating effects of risk attitude and religious knowledge on investment are not significant. Risk attitude serves as a crucial mediator in the relationship between financial literacy and investment, as well as between Islamic business ethics and investment. The study underscores the importance of financial literacy, Islamic business ethics, religious knowledge, and risk attitude in shaping investment behavior in the Islamic finance sector, and highlights the need for integrating ethical practices to enhance investment outcomes.

Kontribusi Green Sukuk pada Implementasi Tujuan Pembangunan Keberlanjutan di Indonesia

The main goal of the Islamic financial industry is falah, which is always involved in matters beneficial to the community. The Islamic finance beginning to emphasize broader social responsibility issues, such as environmental concerns. To maintain economic sustainability and protect the environment, the world faces two challenges in an increasingly complex global era. Sukuk generally refers to a certificate that has the same value as a portion or the entirety of assets to obtain returns and services within the ownership of specific assets and projects or special investment activities. SDGs aim to reduce the impact of damage through the emphasis on achieving it through collaboration between countries and sectors. library research Sustainable development not only prioritizes economic growth but also how economic activities can ensure the healthy and non-excessive use of natural resources to achieve optimal results. However, there are several issues that hinder its implementation. In a situation like various factors that hinder sustainable economic growth in Indonesia.

Board characteristics and profitability in sharia-compliant and non-sharia-compliant firms: beyond mere ceremony?

PurposeThis study compares the profitability of sharia-compliant firms (SCFs) and non-sharia-compliant firms (NSCFs) and explores the causal links among board of directors (BODs) characteristics (size, gender, meeting frequency, tenure, turnover and compensation), sharia compliance, capital structure and profitability. Specifically, sharia compliance and capital structure serve as moderators.Design/methodology/approachA total of 72 SCFs and 65 NSCFs were investigated during 2011–2019, resulting in 1,644 data. A t-test was used to compare profitability, and causal relationships were explored through panel data regression.FindingsSCFs outperform NSCFs in profitability in 24 of 36 t-tests. Surprisingly, 87 out of 864 instances of sharia violations were found in SCFs. Despite purifying sharia-compliant stocks from violations, the board negatively affected sharia compliance. Furthermore, sharia compliance contradicts the board’s tendency to increase profitability, implying a ceremonial screening, which reveals the board’s reluctance to incorporate sharia compliance into their management style. In contrast, boards in NSCFs rely more on their internal strengths and capacities to influence profitability, as they understand the adverse impact of debt.Practical implicationsThe findings of this study are beneficial for evaluating Islamic loopholes for both boards that are apathetic to sharia compliance and regulators who are not transparent in Islamic financial screening.Originality/valueAcademic literature concentrates on comparing Islamic banks with conventional banks, while the comparison of corporate governance and management styles in SCF vs. NSCF is minimal. Additionally, a novel measurement, the Stapel scale, is proposed for finding the purity of Islamic stocks, which is most suitable when regulators and firms conduct Islamic loopholes.

From Piety to Profit: Shariah Scholars and the Rise of Islamic Finance - Ryan Calder, The Paradox of Islamic Finance: How Shariah Scholars Reconcile Religion and Capitalism (Princeton, Princeton University Press, 2024, 347 p.)

From Piety to Profit: Shariah Scholars and the Rise of Islamic Finance - Ryan Calder, The Paradox of Islamic Finance: How Shariah Scholars Reconcile Religion and Capitalism (Princeton, Princeton University Press, 2024, 347 p.)

The role of Sharia compliance in moderating the indirect influence of board diversity on roe mediated by Zakat disclosure

This study aims to examine the moderating role of Sharia compliance on the relationship between the diversity of the Board of Directors, Board of Commissioners, and Sharia Supervisory Board and Return on Equity (ROE), with Zakat Disclosure as a mediating factor. The research is grounded in agency theory, stakeholder theory, and legitimacy theory, focusing on how board diversity and Sharia compliance influence corporate governance and financial performance, specifically in the context of Islamic banking. The study utilizes a sample of Islamic commercial banks listed with Bank Indonesia. Data from the banks' annual reports and financial statements between 2013 and 2023 are analyzed using a panel data regression model. Multi-Group Analysis (MGA) is employed to test the moderating effects of Sharia compliance on the indirect relationships between board diversity and ROE, mediated by zakat disclosure. The results show that Sharia compliance moderates the relationship between the diversity of the Board of Directors and ROE, with zakat disclosure acting as a mediator. However, Sharia compliance does not moderate the relationship between the diversity of the Board of Commissioners and Sharia Supervisory Board with ROE, as mediated by zakat disclosure. The research provides insights for Islamic banks, highlighting the importance of Sharia compliance and board diversity in enhancing financial performance through zakat disclosure. The findings can inform regulators and practitioners in improving corporate governance practices within Islamic financial institutions. This study contributes to the literature by offering new evidence on the role of Sharia compliance in the governance-performance relationship, particularly the indirect effects through zakat disclosure, and how this dynamic operates within the unique framework of Islamic banking.

The Possibility of Financial Distress and Its Determinants: Evidence from the Banking Sector of Bangladesh

The banking sector of Bangladesh has shown poor performance for over a decade now. The non-performing loans increased over the years. This prompts the question of whether the banks are capable of maintaining financial stability and continue as a going concern. This is further fueled by the number of financial scandals which took place over the years, such as the Hallmark scandal, irregularities in Islami Bank Bangladesh Ltd., BASIC Bank Limited etc. that further highlights the signs of possible financial distress. These incidents call for an investigation of bank-specific determinants that might have a significant effect in leading a bank towards bankruptcy. This study has used the data of 30 listed commercial banks in Bangladesh, from the year 2014 to 2020. The bankruptcy risk is measured using the Altman Z-score, which has been extensively used as a suitable bankruptcy risk measurement tool. Statistical analysis has been conducted, using random-effects regression model and correlation, to test the relationship and impact of bank-specific factors. Capital adequacy ratio has shown significantly positive impact on the bankruptcy risk, while age has shown significantly negative impact on bankruptcy risk. Non-performing loan has also shown negative relationship with Z-score, which is contrary to the conventional belief.

Determinants of Net Profit Margins in Foreign Islamic Banks: Evidence from Malaysia

Determinants of Net Profit Margins in Foreign Islamic Banks: Evidence from Malaysia

Exploring encounters and prodigies of Islamic banks in non-Muslim states: towards enhancing regulatory frameworks of Islamic banking system

Purpose The primary aim of this study is to explore challenges and prospects of Islamic banking system in non-Muslim states to foster regulatory frameworks of the system. Design/methodology/approach Content analysis as an integral part of qualitative research was used. Secondary data through the exploration of cursory literature was taken into consideration. Findings The findings identified three prime challenges, namely, regulatory, operational and institutional, which are impeding the smooth activities and performances of Islamic banks in using innovative Islamic products and services that can favourably compete with products and services of conventional banking system in non-Muslim states. In addition, strengthening the adoption and performance of Islamic banking in non-Muslim states can efficiently and effectively address the identified and multifarious regulatory, operational and institutional challenges to achieve financial inclusion and overall economic growth. Research limitations/implications Challenges encountered and prodigies or potentials of operating Islamic banking system by most of non-Muslim countries remains a pivotal aspect that needs research attention in the recent. Practical implications Nonetheless, the limitation of this study is that the study relies on the use of secondary data. However, it has provided a substantial direction for future studies in empirically exploring the variables of this study. Social implications Indeed, 19th century was a remarkable turning point in the development and expansion of Islamic banking system in the Muslim world. Many predominant Muslim countries such as Malaysia, Indonesia, Saudi Arabia, Bangladesh, Pakistan, among others have been efficiently and effectively operating Islamic banking system within the framework of Islamic legal provisions. Many non-Muslim countries such as Australia, the UK, USA, etc., have also adopted Islamic banking system. Originality/value It is noted that policy directions of the study among others should address the regulatory frameworks that is Shari’ah-compliant in the operation of Islamic banking system in non-Muslim states. It is therefore suggested that the policymakers, Islamic financial experts and regulators should use the innovation that could bring competitiveness into the operation of Islamic banking system in non-Muslim states.

The Nexus of Crowdfunding and e-Wakaf to Islamic Fintech in Indonesia in the Era of Industrial Revolution 5.0

This study analyses the contribution of digitalisation in Islamic finance through the application of Islamic crowdfunding and e-wakaf instruments in supporting the development of Islamic fintech in Indonesia, especially in the era of the Industrial Revolution 5.0. Digitalisation in the Islamic finance sector plays a strategic role in expanding access to financial inclusion and facilitating more effective community involvement in sharia-based economic activities. Using the Robust Least Squares (RLS) method, this study utilises secondary data for the period 2018 to 2023 to evaluate the impact of Islamic crowdfunding and e-wakaf on the growth of Islamic fintech. The results show that Islamic crowdfunding significantly expands access to alternative funding, especially for small and medium enterprises (SMEs), while e-wakaf improves transparency and efficiency of waqf asset management through digital technology. These two instruments simultaneously contribute positively to the strengthening of the Islamic fintech ecosystem in Indonesia, creating a strong foundation for broader and sustainable financial inclusion. The findings provide important perspectives for the development of innovative policies and strategies in advancing the Islamic financial sector in the digital era.

Financialisation of Islamic finance: a Polanyian approach on the hegemony of market logic over Islamic Logic

ABSTRACT The significant rise of finance in emerging economies evidenced that financialisation is not limited to advanced economies. While financial capitalism spreads to every corner, financialisation appears in emerging economies in the form of variegated finance capital. Despite its theoretically counter-hegemonic construct, Islamic financial markets do not stand out of this permeation. This paper, hence, aims to explore the role of Islamic finance in making inroads into financialisation in the countries where Islamic finance has reached a significant presence. Based on Krippner’s approach to financialisation, this paper examines the financialisation of Islamic finance by concluding that the strength of finance capital resulted in variegating or grafting a morally backed financial system into the neoliberal logic. The discursive analysis supported by empirical analysis suggests that due to the observed dis-embeddedness of Islamic finance away from its genuine novelty, it has become a hybrid product of the neo-liberal agenda. This is evident in its debt-encouraging financial instruments, which worsens the gap between the real and financial economy. The contribution of this paper is evident in its contractual-level analysis, which focuses on the operational and working mechanism of Islamic banking and finance and how it has been led astray by the finance capital.

THE INFLUENCE OF GREEN BANKING IMPLEMENTATION, ISLAMIC SOCIAL REPORTING AND COVID-19 CRISIS ON PROFITABILITY WITH BANK SIZE AS A MODERATING VARIABLE IN ISLAMIC GENERAL BANK PERIOD 2016-2023

This study uses bank size as a moderating variable to examine the effects of the Covid-19 crisis, Islamic social reporting, and the deployment of green banking on profitability in Indonesian Islamic commercial banks. In this work, panel data regression and moderated regression analysis are used as data analysis methods. Eleven Indonesian Islamic commercial banks that were registered with the OJK between 2016 and 2023 used as the study's sample. The study's findings show that Islamic commercial banks' profitability is significantly and favorably impacted by ISR. Profitability (ROE) is significantly impacted negatively by the Covid-19 situation, but not ROA. In the meantime, Islamic commercial banks' profitability is unaffected by green banking. The association between green banking and profitability may be moderated by the moderating variable of bank size. This research highlights how crucial risk management, responsibility, and openness are in a period of unpredictable economic times. In the context of Islamic banking, the impact of ISR procedures and reactions to financial crises like COVID-19 is quite significant. Islamic banks should see an improvement in their financial performance in the future by strengthening their ISR management and comprehending the implications of green banking.