Islamic Finance Industry Research Articles

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.

Analysis of the Decision of Micro and Small Entrepreneurs to Become Customers of Sharia Financial Institutions

ABSTRACT Research Aims: This study aims to analyze the influence of religiosity, Sharia compliance, pricing, promotion, and process, on the decision of micro and small rulers to become customers of the Islamic finance industry. Design/methodology/approach: This study uses a quantitative method, the number of samples in this study is 137 respondents. The sampling method uses Purposive sampling, with the criteria of 1. Micro and Small Entrepreneurs in Temanggung Regency; 2. As a customer of the Islamic finance industry. Data analysis was carried out using the Partial Least Square (PLS) method using smart-pls 3. Research Findings: religiosity and process variables have a significant positive effect on the decision of micro and small rulers to become customers of the Islamic financial industry, while sharia compliance, price, and promotion do not affect the decision of micro and small rulers to become customers of the Islamic financial industry. Theoretical Contribution/Originality: A person's religiosity is embedded in a person, a person's religiosity affects what a person does. The transaction process in the financial industry is very important to pay attention to and can be an element in the field of marketing that influences someone to become a customer. Keywords: religiosity, sharia compliance, price, process and promotion

Profit-loss sharing principle in the Islamic finance industry: Current pattern and future direction

The Islamic banking and finance industry is founded on Islamic principles, with one of its main concepts being Profit-Loss Sharing (PLS). The rapid growth of the industry has led to extensive research on PLS. This study aims to capture the dynamic research landscape on PLS by examining the intellectual network, including the most influential scholars, countries, articles, publishing journals, and frequently discussed topics, as well as suggesting future research directions. We use bibliometric analysis to explore this topic, drawing data from the Scopus database. A total of 421 documents from 1992-2022 were analyzed. The study finds that Malaysia is the most productive country, Kabir Hassan is the most influential scholar, and the Journal of Islamic Accounting is the leading journal in the field. Four main topics are identified: the general theme of PLS, the implementation of PLS in different countries, PLS products, and governance and risk related to PLS. Future research is recommended based on these four topics.

Sustainable and responsible investment (SRI) Sukuk: lessons from Khazanah’s Sukuk Ihsan

Purpose SRI Sukuk, with its outcome-based emphasis, aims to align the Islamic finance industry with its original ideals and address criticisms related to form over substance. In Malaysia, while the pioneering Sukuk Ihsan was a “social” sukuk, recent SRI Sukuk issuances have predominantly been “green” or “sustainable” sukuk. This paper aims to evaluate the Malaysian SRI Sukuk market, identifying factors favouring “green” sukuk. It also examines whether structural issues in Sukuk Ihsan deterred subsequent issuers from “social” sukuk. The emergence of SRI Sukuk responds to sustainable development goals and the shift towards a low-carbon economy. Sukuk Ihsan, as the first Shariah-compliant pay-for-success structure, poses complexity and risk management challenges to meet performance criteria. Design/methodology/approach The study used a qualitative method in the form of a critical review of literature, interview sessions with experts and stakeholders who are familiar with SRI Sukuk and Sukuk Ihsan and a case study analysis of Sukuk Ihsan. Findings The popularity of “green” sukuk reflects the growing global environmental consciousness. The main factors driving the popularity of “green” sukuk are the maturity of the market and the existence of a strong supporting infrastructure for “green” issuances while the positive profiling benefits and availability of incentives for “green” issuances also contribute to a lesser extent. The recommendations include the promotion of “social” sukuk by regulators through a focus on establishing a similar supporting infrastructure for “social” sukuk as there are for SRI and standard Sukuk. In addition, issuers of “social” sukuk may want to reconsider the inclusion of key performance indicators (“KPI”) into the structure of future “social” sukuk issuances. Research limitations/implications Although all respondents considered Sukuk Ihsan to be a success, some potential areas of improvement were also noted. These include the structuring of future “social” sukuk issuances with a bigger discount to compensate for the additional risk being assumed by the investor; the need to be more careful in the KPI selection process; and one respondent even went so far as to suggest the possibility of totally removing the step-down feature of Sukuk Ihsan. Practical implications Industry implications of Sukuk Ihsan study include findings that require balancing disclosure and economics by providing additional disclosure requirements for SRI Sukuk that may pose risks without corresponding benefits for issuers. KPI selection and investor confidence should also be properly identified, as KPIs are essential for the pay-for-success model to work successfully. For sukuk holders, findings indicate that any approval for waivers during issuance can impact investor confidence negatively. Investor literacy and impact understanding should also be improved for social Sukuk success. Investors should understand the different risk exposures and evolving impact requirements vital for sustainable growth. Social implications The findings provide significant implications for social impact Sukuk issuance. They include providing a substantial case study for future social impact issuances, based on the pioneering impact of Sukuk Ihsan. Furthermore, Sukuk Ihsan’s unqualified success validates the feasibility of socially responsible sukuk. Despite its early introduction, both tranches being fully subscribed reflects robust investor interest. Stakeholders were also proud of their involvement in such an initiative, viewing it as a significant achievement in creating societal impact. Originality/value Although there have been several prior studies done on Sukuk Ihsan, the focus of those studies was on its structure and the novelty of its “step down” returns structure where investors would receive lower returns if certain key performance indicators (“KPIs”) are met by Yayasan AMIR in the execution of its Trust School Programme. Bearing in mind that the first Sukuk Ihsan has a June 2022 maturity date, and the results of its KPIs were announced in December 2021, to the best of the authors’ knowledge, this is the only documented case study that comprehensively reviews Sukuk Ihsan and identifies lessons learned and/or opportunities for improvement for the benefit of potential SRI Sukuk issuers in the future.

Comparison of Sharia Governance Between Bank Muamalat and Bank BTN Syariah

Every business has a management strategy to maintain and develop its business, including Sharia financial institutions. The large potential of the Islamic finance industry has a positive impact on national economic growth, therefore it is important to maintain this stability. Good governance is one of the things that must be paid attention to, as well as the governance of Sharia financial institutions must comply with Sharia principles, to maintain the trust of stakeholders in the Sharia banking and finance industry. Moreover, there are rumors that two large sharia financial institutions will merge . This research aims to compare Sharia governance between Bank Muamalat and BTN Syariah, which have significant differences in background. This research uses qualitative methods with a library study approach, and analyzes and selects relevant library sources. Research result comparison of two Sharia banks that are planned to merge into a larger Sharia bank , although both banks follow Sharia governance principles, they both have different approaches due to different focuses and backgrounds. Bank Muamalat, as a pure sharia bank, has a more comprehensive sharia implementation and structure. Meanwhile, BTN Syariah as a sharia business unit of a conventional bank, focuses more on implementing sharia principles in housing products. Both banks demonstrate a strong commitment to Sharia principles and comply with supervision, the Sharia Supervisory Board (DPS), and applicable laws.

Customer loyalty: a systematic literature review and future directions in the Islamic Financial Industry

Customer loyalty: a systematic literature review and future directions in the Islamic Financial Industry

A Comparative Study of Islamic Banking Growth in Malaysia and Bahrain: A Consideration of COVID-19 Pandemic

This study examines the factors influencing Islamic banking growth in Malaysia and Bahrain, key components of the broader Islamic finance industry crucial for economic development. Focusing on 14 Islamic banks in Malaysia and 10 in Bahrain over a 10-year period, the research investigates the impact of liquidity, profitability, asset quality, and capital on Islamic banking growth. Three models are introduced, pooling data for both countries and separately analysing Malaysia and Bahrain. The study introduces three models: 1) Model A, which pools all Malaysian and Bahrain Islamic banks; ii) Model B, which represents Islamic banks in Malaysia; and iii) Model C, which represents Bahraini Islamic banks. Newey-West regression is being used for Models A and B, while Pooled Ordinary Leased Square (POLS) is being utilized for Model C. The study reveals that Bahrain's Islamic banking growth surpasses Malaysia's. There are different drivers that influence the growth in each country. Asset quality and capital are significantly influencing the growth of both Malaysian and Bahraini Islamic banks, while Malaysian Islamic banking growth is significantly influenced by profitability. Additionally, liquidity is significantly influencing the growth of Bahraini Islamic banks. However, the growth of Islamic banking does not significantly differ during a crisis or non-crisis period for each country. These findings underscore the necessity for tailored approaches in both nations to enhance Islamic banking growth, contributing to the broader development of Islamic finance.

Ethical discourse of ethical (Islamic) finance: a systematic literature review (1988–2022) and the way forward

Purpose This paper aims to portray the publication pattern, key themes, study trends and future directions for the studies on ethics in Islamic finance. A total of 194 published documents that includes journal articles, books and book chapters and conference proceedings were screened for the period 1988 to August 2022 and categorized based on designated sectors of the Islamic finance industry. This paper also highlights the change in research trends in all three sectors of Islamic finance and suggests possible areas for future research. Design/methodology/approach A comprehensive systematic literature review was conducted using the “advanced search” function of “google scholar” by using the option “find articles” with the keywords “Ethic (s/al)”, “Islamic banks”, “Islamic banking”, “Islamic finance”, “Islamic capital markets” Takaful, Islamic insurance without restricting the time frame, author list and the platform. Furthermore, the search for relevant articles was conducted on other mainstream index databases such as “Web of Science” and “Scopus”. Findings Among the highlights of the findings were an increase in publications on ethical issues after the global financial crisis and an increase in publications in high-impact mainstream business and finance journals. A higher number of studies were documented in the area of Islamic banking and finance followed by Islamic capital markets and Islamic insurance/Takaful. Although a greater number of empirical studies were published than conceptual studies, dominance was resulted due to the replication of the studies in various jurisdictions based on the same concepts or models rather than applying diversified concepts in various jurisdictions. Originality/value This study contributes to the growing literature on ethical and/or Islamic finance as a guide for researchers to identify research gaps and provides a systematic direction for future studies in the area of ethics in Islamic finance.

Prospek Masa Depan Dual Banking System Dalam Konteks Globalisasi Ekonomi Syariah

The primary challenge facing the global banking system is how conventional and Islamic banking systems can operate simultaneously and synergistically within the context of Islamic economic globalization. This study aims to analyze the future prospects of the Dual Banking System, which integrates conventional and Islamic banking, in supporting global economic stability and growth. The methodology employs a qualitative approach with descriptive analysis, incorporating literature review and secondary data analysis from research reports of international institutions focused on the Islamic finance industry. The findings indicate that the Dual Banking System has significant potential to enhance financial inclusion and offer ethical and stable investment alternatives. However, substantial challenges, such as non-uniform regulations and disparate business cultures, remain to be addressed. The implications of this research suggest that with more comprehensive regulatory support and improved financial literacy, the Dual Banking System can become a crucial pillar in fostering a more inclusive and sustainable global economy

Dinar Dirham: Restoration of Shariah Currency Values for Indonesia Economic Prosperity

This study aims to investigate the restoration of Shariah currency values through the implementation of Dinar Dirham for fostering economic prosperity in Indonesia. Employing a mixed-method approach, the research combines qualitative and quantitative methodologies. Qualitative data is collected through literature review and expert interviews to understand the historical significance and contemporary relevance of Dinar Dirham in Islamic economics. Quantitative data is gathered through surveys and financial analysis to assess the potential impact of reintroducing Dinar Dirham on Indonesia's economic landscape. The collected data is analyzed using thematic analysis for qualitative data and statistical techniques for quantitative data. The research results indicate significant interest among stakeholders in reintroducing Dinar Dirham as a means to stabilize the economy and uphold Islamic principles in financial transactions. Qualitative data analysis reveals the strong historical and contemporary relevance of Dinar Dirham in Islamic economics, while quantitative data suggests the potential for increased economic stability through the reintroduction of this currency. The implications of this study suggest that reintroducing Dinar Dirham can enhance economic stability, promote ethical financial practices, and strengthen Indonesia's position in the global Islamic finance industry.

Influential Financial Planners and Islamic Financial Planning: A Social Media-Based Content Analysis

Financial planning has been increasingly significant where income levels are rising, the financial industry is becoming more complicated and financial products are becoming more complex. With higher income levels and fund excesses, people demand financial assistance services to manage their financial matters. The activities of financial planners continue to grow in line with the varying demand of customers. Conventional financial planning had developed during the 1970s, while the Islamic financial industry had just emerged. From an Islamic perspective, a financial planning framework would require Shariah-compliant products and services and a deep understanding of Islamic values and principles governing economic activities. This study aims to understand to what extent Islamic financial planning has been communicated and shared by financial planners/advisors and to understand their preferences and financial priorities in providing financial advice. This qualitative paper explores the social media of chosen financial planners and Islamic financial planners. Financial planners share their thoughts and ideas on their social media. Several influential financial planners were selected through some stages. Understanding their social media content will provide a picture of their financial planning. Discussion of Islamic financial planning is scant. The paper explores and offers a novel approach of whether financial planners and so-called Islamic financial planners have different financial planning. Using the particular framework of Islamic financial planning, Islamic financial planners are expected to have different financial planning emphasizing Islamic values and principles.

The Determinants of Financial Stability of Islamic Banks in ASEAN

Financial stability is one of the drivers of economic growth, while Islamic banking currently dominates in global economic competition compared to other Islamic finance industry. Therefore, it is necessary to investigate the aspects that can affect the financial stability of Islamic banks. The purpose of this study is to analyze how capital structure, profitability, efficiency, and technology affect the financial stability (Z-Score) of Islamic banks in the ASEAN region. The study employs a panel data regretion. It utilizes documentation techniques such as the financial reports of each bank and other publicly available data. Sample selection is done through purposive sampling, resulting in a sample of 19 Islamic banks in ASEAN. The research concludes that capital structure significantly and positively influences stability, while efficiency has no impact on stability, and the financial soundness of ASEAN's Islamic banks is significantly impacted negatively by technology and profitability. Based on the findings of this research, the Islamic banks are required to pay more attention to the management of funds obtained from profitability as well as fund management for technology needs so as not to affect the financial stability of Islamic banks in ASEAN.

KAEDAH PENDALILAN MASLAHAH MURSALAH DAN APLIKASINYA DALAM KEWANGAN ISLAM KONTEMPORARI

This study aims to investigate the application of Maslahah Mursalah reasoning in contemporary Islamic finance. The motivation for this study arises from the modernization of Islamic banking practices, which have adapted conventional financial systems through structural and operational changes. Consequently, it is necessary to evaluate these practices from a Shariah law perspective. One of the principles of Usul al-Fiqh that is relevant for addressing modern issues not addressed in earlier times is the principle of Maslahah Mursalah. Maslahah Mursalah is a significant principle for determining the compliance of an action with Shariah. Furthermore, this principle is accepted as valid by renowned scholars among the four Sunni schools of thought. The objective of this study is to analyze the implementation of Maslahah Mursalah reasoning in current Islamic financial practices. A qualitative approach is employed, which includes a literature review of books, journals, and relevant circulars. The gathered materials will be analyzed using document analysis methods. The findings of this study indicate that several practices in Islamic finance are implemented based on the justification of Maslahah Mursalah. These practices include issues such as the inclusion of a 'promise to purchase' in Murabahah to Purchase Order (MPO) contracts, the determination of Ibra' (rebate) in financing contracts, and the combination of contracts in Islamic financial products. Therefore, it can be concluded that the principle of Maslahah Mursalah plays a significant role as a primary reference for contemporary Islamic finance issues. Consequently, it is recommended that operators in the current Islamic financial industry have a thorough understanding of the principle of Maslahah Mursalah.

Eksplorasi Implementasi Prinsip Character, Capacity, Capital, Collateral, dan Condition Dalam Pembiayaan Murabahah di BPRS Bhakti Sumekar Sumenep

The rapid development of the Islamic finance industry does not mean that it does not experience several problems, including financing with murabahah contracts which contain many complex and diverse risks. Risk management is an effort to optimize profits in the Islamic financial industry business and minimize the risk of default for customers. The researcher is interested in researching the application of the 5C principle in murabahah financing at BPRS Bhakti Sumekar Sumenep which aims to find out how the implementation of the 5C principle in murabahah financing at BPRS Bhakti Sumekar Sumenep and what are the factors that cause problematic murabahah financing at BPRS Bhakti Sumekar Sumenep. The research method used by the researcher is descriptive qualitative research with data sourced from primary and secondary data, as well as data collection techniques used in the form of observation, interviews and documentation, while data analysis techniques used are in the form of data reduction, data presentation and conclusion drawing. The application of the 5C principle in murabahah financing at BPRS Bhakti Sumekar Sumenep assesses the seriousness and integrity of the debtor, measures the debtor's business activities and income, measures the amount of capital ownership in business activities, calculates the collateral owned by the customer and looks at and assesses the condition or circumstances of the customer, while the factors that cause problematic murabahah financing at BPRS Bhakti Sumekar Sumenep are in the form of unstable economic conditions, the physical condition of the customer and the factors of business activities are not supportive.

KAEDAH PENDALILAN QIYAS DAN APLIKASINYA DALAM KEWANGAN ISLAM SEMASA

Qiyas plays a crucial role in the formulation of Sharia law, being one of the primary sources of evidence used in the science of usul al-fiqh. Although usul al-fiqh, the science that discusses the process of deriving legal rulings, is a necessity for those involved in the issuance of legal rulings, it is observed that in the current context, the literature on usul al-fiqh has not received adequate attention, especially in the domain of Islamic finance. Therefore, one of the suitable sources of usul al-fiqh for resolving modern issues that were not addressed in ancient times is the source of qiyas. Qiyas is essential in determining the element of similarity from the perspective of the ‘illah (effective cause) of the law between an issue explicitly mentioned in the Sharia texts and a new issue. Furthermore, this source is accepted as evidence by the reputable scholars among the four Sunni schools of thought. This study aims to analyze the application of qiyas as evidence in contemporary Islamic financial practices. The study employs a qualitative approach, involving a literature review encompassing books, journals, and relevant circulars. The collected materials are analyzed using document analysis methods. The findings of the study indicate that several practices in Islamic finance are implemented based on the justification of qiyas. These practices include issues related to fiat currency, the requirement for a minimum amount of physical assets in sukuk, the zakat on jewelry (gold and silver), and the zakat on publicly listed company shares. Therefore, it can be concluded that qiyas plays an important role as a primary reference for contemporary issues in Islamic finance. It is recommended that current Islamic finance industry practitioners thoroughly understand the source of qiyas.

Switching intention of conventional bank customers to Sharia bank based on push-pull-mooring theory

PurposeThis study aims to see the variables of customer satisfaction level, attractiveness of alternatives, subjective norms and level of religiosity of conventional bank customers in West Java and their effect on switching intentions.Design/methodology/approachA causality description technique with a quantitative approach is used in this research. The analytical technique used is partial least square-structural equation modeling with a sample of 320 respondents from conventional bank customers in West Java.FindingsThe results revealed that the level of customer satisfaction and subjective norms were in the medium category, whereas the level of alternative attractiveness, religiosity and switching intentions was in high level. The level of customer satisfaction harms switching intentions, whereas the level of alternative attractiveness and religiosity variables have a positive effect on switching intentions. In contrast, the subjective norm variable does not affect switching intentions. Therefore, customer satisfaction, the attractiveness of alternatives and religiosity are essential points to cause someone to have the intention to switch.Practical implicationsFor stakeholders, especially the government or the Islamic banking industry, to improve the climate of the Islamic finance industry in Indonesia, in particular, to increase knowledge and insight from the public regarding the intention to switch conventional bank customers to Islamic banks.Originality/valueThe use of the religiosity variable as an independent variable on switching intentions is still rarely done. Hence, the authors combine this variable with customer satisfaction, alternative attractiveness and subjective norms. The update in this study also places conventional bank customers included in the millennial generation and generation Z categories who live in the province of West Java as research subjects.

Islamic financial accounting standards in Pakistan: a comparison with AAOIFI

Purpose This paper aims to compare the Islamic financial accounting standards (IFAS) prevailing in Pakistan declared by the Securities and Exchange Commission of Pakistan (SECP) with accounting standards of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Design/methodology/approach Both standards related to Islamic financial accounting have been thoroughly reviewed, compared and discussed to find out the differences and similarities, along with the depth needed to meet the needs of Islamic finance. Findings AAOIFI accounting standards provide a comprehensive view of complex transactions, whereas SECP standards have limitations. The proposed recommendations aim to bridge the gap by conducting periodic reviews and revisions of IFAS prevailing in Pakistan to keep up with the dynamic nature of the Islamic finance industry. Practical implications The regulators should establish institutional arrangements for adapting AAOIFI accounting standards, enabling efficient and effective upgrading of existing accounting standards for Islamic financial institutions and alignment with international best practices. Originality/value There is a dearth of studies related to Islamic financial accounting in the context of Pakistan; this is one that contributes to this area.

The Influence of Sharia Accounting Knowledge and Family Environment on Interest in A Career in Sharia Financial Institutions

The interaction between family environment and sharia accounting knowledge can have a big impact on the larger socioeconomic environment. Increased awareness and education about the principles and benefits of Sharia banking have led to greater acceptance and adoption among Indonesians. This research aims to examine the effect of sharia accounting knowledge and family environment regarding interest in a career in sharia financial institutions. The method used a quantitative method using primary data using retrieval techniques samples using the Slovin method. obtained from a total of 66 respondents from the Sharia programme in Accounting Department at Pamulang University. The analysis in this research uses multiple linear regression analysis. This study reveal that Sharia Accounting Knowledge influences Career Interest in Sharia Financial Institutions. Family environment influences career interest in sharia financial institutions. The findings show that Sharia Accounting Knowledge and Family Environment simultaneously rely on Career Interests in Sharia Financial Institutions. This research line with theory of planned behavior which assumes that background education and knowledge influence action somebody and also proves that knowledge of Sharia economics and environmental of Family influence in a way positive career in the field service of Islamic finance institution The rapid growth of Sharia banking in Indonesia also need government support, increased public awareness, and sharia accounting knowledge are factors combined have positioned Indonesia as a key player in the global Islamic finance industry.

Strengthening a sustainable Islamic financial industry through digital banking

Strengthening a sustainable Islamic financial industry through digital banking

The Application of Value-Based Intermediation Through Waqf in Islamic Banking

The Islamic financial industry has experienced an exponential transformation that has contributed greatly to the national economic growth. Malaysian Islamic finance is considered one of the most comprehensive Islamic financial systems in the world. Bank Negara Malaysia (BNM) has introduced a new concept of Value-Based Intermediation (VBI). This banking practice focuses on profit and supports social values for a sustainable economy, community, and environment. This study discusses the involvement of Bank Muamalat Malaysia Berhad in waqf development, focusing on business activities in line with VBI. This qualitative study applied document analysis and semi-structured interviews and found that Bank Muamalat Malaysia Berhad is an Islamic banking institution that bases its existence on commercial profits and is able to implement activities related to waqf development, such as cash waqf collection and waqf project financing consistent with VBI.