Islamic Financial Instruments Research Articles

Nexus between Islamic Investment, Musyarakah Financing, Islamic Microfinance and Achieving SDGs in Indonesia

Islamic Finance Transformation through analysing the role of musyarakah financing and Islamic microfinance in enhancing Islamic investments in Indonesia has become an important focus to achieve the Sustainable Development Goals (SDGs). This study explores the role of Islamic financial instruments in facilitating investments that not only prioritise financial returns but also social and environmental outcomes. The method used is Fully Modified Ordinary Least Squares (FMOLS) to analyse time series data from 2015 to 2023. The research variables used are Islamic investment, musyarakah financing and Islamic microfinance. The results showed that musyarakah financing has a significant influence on the growth of Islamic investment, thus contributing to poverty alleviation (SDG 1) and increasing financial inclusion (SDG 8). In addition, Islamic microfinance is proven to be effective in empowering the local economy and creating jobs. These findings confirm the importance of Islamic finance integration in sustainable development strategies and offer innovative solutions to complex global challenges

SUSTAINABLE ISLAMIC FINANCE: BIBLIOMETRIC AND VISUALIZED ANALYSIS OF CURRENT EMPIRICAL RESEARCH

This study aims to develop the research gap in sustainable Islamic Finance using a bibliometric analysis of recent empirical research outputs in the area, which comprises publications in scholarly journal articles and book chapters. Data were collected from Scopus for the period 1997 – 2022. This study analyses 285 Scopus scientific documents using Vosviewer, RStudio and Biblioshiny for bibliometric tools to process scientific documents extracted from various sources. Our study shows that the most prominent word in the Scopus scientific papers on Sustainable Islamic Finance is Islamic finance, followed by sustainable development, finance, banking, and investments. The keywords that Scopus scientific documents use little on the topic are ethical investing, climate change, Islamic social finance, waqf, zakat, takaful, green sukuk, and microfinance. There is a clear gap in knowledge around Islamic financial instruments in research that follow our findings and would benefit from further research.

Green Economy and Islamic Economy: Towards Accelerating SDGs

The conventional economic system has led to rapid global development, but there is a need to explore alternative approaches. This paper addresses the limited research on the integration of green and Islamic economics, focusing on their contribution to Sustainable Development Goals (SDGs) and intergenerational prosperity. Employing a qualitative research method, the study reveals that green and Islamic economies complement each other due to their shared objective of societal welfare across generations. Both perspectives view SDGs as initiatives that promote equality and sustainable use of natural resources. Achieving these goals requires substantial funding, which is where Islamic financial instruments come into play, providing essential support for financing SDG-related activities. This research highlights the synergy between these two economic models and their potential to drive long-term, equitable development.

The Development of Islamic Financial Instrument: Opportunities and Challenges

The Development of Islamic Financial Instrument: Opportunities and Challenges

Utilization of Islamic Financial Instruments for Poverty Reduction and Sustainable Households in Nigeria

Predominant poverty has affected many households in Nigeria and little focus of attention is given to the utilization of Islamic financial instruments in addressing the challenges of poverty and sustainable household in the country. The study attempts to fill the gap in the existing literature concerning the utilization of Islamic financial instruments for poverty reduction and sustainable households in the country. Qualitative research method with an emphasis on critical content analysis was utilized. Materials or different sources were used whereby journals, online peer review, and library sources were considered for in-depth analysis of Islamic financial instruments for poverty reduction and sustainable households in attaining vision 2030 in the country. Adequate implementations of various Islamic financial instruments that would create room for inclusion through which low-income families or families in poverty would experience sustainable standard of living through an efficient Islamic financial instrument for their empowerment. Hence, it will expand the scope and understanding of Islamic financial instruments in the context of Nigeria. In so doing, there would be basis for restructuring the economic conditions of households experiencing an abject poverty by ensuring that their living conditions are improved for better. An emphasis on the judicious utilization of Islamic financial instruments especially towards sustainable households in the country is an integral part of expanding the understanding about the efficiency of Islamic financial instruments in the society. Central bank of Nigeria has issued a drafted framework for application of Islamic financial instruments and operation of Islamic banking system and less attention is given to the application of Islamic financial instruments in the country. This paper therefore has tried to provide explanation for the application of utilizing Islamic financial instruments for poverty reduction and sustainable households in the country.

The nexus between halal industry and Islamic green finance: a bibliometric analysis

Purpose This scholarly paper aims to explore the interconnections between the halal industry and Islamic green finance while also offering valuable insights and recommendations to various stakeholders, such as government bodies, national planning boards, financial institutions and researchers, concerning the realm of Islamic green finance. Design/methodology/approach In total, 783 studies have been indexed in Scopus. However, within the field of economics and business, encompassing the period from 2009 to 2022, only 182 documents meet the specified criteria, which use the “halal AND industry” term from the journal source type. This study uses the VoSViewer software to comprehensively map, synthesize and analyze the available data. Findings Notably, research endeavors dedicated to the halal industry have shown a consistent upward trend. The research encompasses five prominent thematic areas, specifically halal certification, consumers of halal products, halal food, the halal industry and the halal food industry. The findings also highlight the existence of a relationship between the halal industry and Islamic green finance, suggesting that Islamic financial institutions possess significant potential to attract investor interest in the halal industry through the application of Islamic green finance, a practice already underway in several countries worldwide. Practical implications The findings of this study can serve as a valuable reference for the government and national planning board, enabling them to effectively incorporate the advancement of the halal industry in tandem with Islamic green finance as a pertinent means of funding, which holds significant relevance in attaining the Sustainable Development Goals. Moreover, finance institutions are presented with a favorable prospect to foster the growth of Islamic financial instruments, thereby bolstering their role in facilitating the development of the halal industry sector. Originality/value This scholarly investigation represents the inaugural bibliometric study delving into the intricate dynamics between the halal industry and Islamic green finance. Significantly, it sheds light on the profound correlation existing between these domains, thereby providing substantial evidence to substantiate their interrelatedness.

Is Islamic Monetary System Possible in Indonesia? Interrelation Study between BI 7 Days Reverse Repo Rate and Nisbah Rate

The purpose of this study is to investigate the interrelationship between Bank Indonesia 7 Days Reverse Repo Rate (BI 7 DRRR) and Profit-Loss Sharing Rate (Nisbah Rate) in Islamic Sharia Banks (Bank Syariah Indonesia). Indonesia had been establishing conventional monetary system ever since and have yet to introduce Islamic approach to its monetary system. Now, in Islamic monetary perspective, interest rate doesn’t exist. Therefore, this research aimed to discover the possibility of Islamic approach in Indonesia’s monetary system, using Nisbah Rate launched by Islamic Sharia Banks as a substitution. The research was conducted using VAR (Vector Autoregression) to study the interrelationship between BI 7 Days Reverse Repo Rate and Nisbah Rate, using data obtained from Islamic Banking Statistics through Indonesia’s Financial Service Authority (OJK) monthly during 2021-2023. The result showed that both BI 7 Days Reverse Repo Rate and Nisbah Rate did cause impact on one another, and thus the possibility of establishing Islamic monetary system is not completely disregarded. This investigation contributes to the ongoing discourse surrounding the integration of Islamic financial principles into conventional monetary frameworks. By highlighting the reciprocal influence between conventional monetary policies and Islamic financial instruments, this study underscores the potential for a hybrid monetary system that accommodates Islamic principles within the Indonesian financial landscape.

Islamic Financial Instruments and Their Utility in Preserving the Environment

Islamic Financial Instruments and Their Utility in Preserving the Environment

STATE AND PROSPECTS FOR THE DEVELOPMENT OF ISLAMIC FINANCE INSTRUMENTS (SUKUK) IN RUSSIA AND ABROAD

The search for new sources of financing investment projects in modern Russia in the context of external sanctions and the implementation of geopolitical threats actualizes the problem of incorporating Islamic finance instruments into the structure of the financial market. The early twentieth century development experience of a number of foreign countries shows the steady growth of the assets of Islamic banks, investment funds and the volume of issuance of investment certificates (sukuk), which constitute the main segments of Islamic finance in the world. Islamic financial assets are widely represented in the Gulf countries, Southeast Asia, the Middle East and South Asia, and Africa. The implementation of the principles of Islamic finance in the Russian Federation is hampered by legal, cultural, historical and political factors. While there are certain Islamic financial products in Russia, there is no issue of sukuk at all. In this regard, the purpose of this paper is to study the principles of Islamic finance and the functioning mechanism of the market for the investment certificates (sukuk), possibilities and limitations of their implementation in the modern Russian economy. The author defines sukuk as an Islamic financial instrument used for securitization of assets, and identifies its differences from traditional bonds. Alternative approaches to solving the problem of compliance of sukuk with Sharia principles are analyzed. The prerequisites for realizing the potential of sukuk in modern Russia are determined and the obstacles to their issuance are formulated. It is concluded that the adoption of the Federal Law of 04.08.2023 N 417-FZ "On Conducting an Experiment to Establish Special Regulation in Order to Create the Necessary Conditions for Carrying out Partnership Financing Activities in Certain Constituent Entities of the Russian Federation and on Introducing Amendments to Certain Legislative Acts of the Russian Federation" and its implementation, taking into account its provisions of pilot projects in a number of Russian regions, will make it possible to intensify the process of incorporation of project financing instruments into the structure of the financial markets of modern Russia.

Financial fusion: Bridging Islamic and Green investments in the European stock market

Given the historic decoupling nature of Islamic and green financial instruments with conventional financial markets this study investigated the interconnectedness of the European financial market with green and Islamic financial instruments amidst the unprecedented global dynamics and mounting uncertainties. Considering data from January 02, 2015, to October 03, 2023 and using TVP-VAR and Wavelet Coherence, our empirical findings challenge conventional assumptions about the behaviour of Islamic and green financial instruments in times of economic distress. While traditional financial instruments may falter, both Islamic and green financial instruments emerge as resilient options during market crises as indicated using quantile TVP-VAR as robustness measure. Both Islamic and Green bonds display remarkable potential for stability and resilience for European investors. For investors navigating the complexities of financial markets, especially during economic distress, our findings offer valuable guidance. Incorporating Islamic and green financial instruments, alongside diversified bond portfolios, emerges as a robust strategy. We strongly advocate the inclusion of both sukuk and green bonds in investment portfolios. Our result research also holds significant implications for policymakers.

The Impact of Islamic Financial Deepening on Economic Growth in Indonesia

Indonesia is starting to pay attention to this trending issue to boost national economic growth because Indonesia is still below other countries regarding the development of its financial sector, especially in Islamic finance. This study employs a quantitative research approach, utilizing multiple linear regression analysis, to investigate the influence of various aspects of Islamic finance on Gross Domestic Product (GDP) as an indicator of economic growth in Indonesia. This research is expected to be able to examine in more detail the role model of Islamic financial deepening in Indonesia and how it affects economic growth. Through a comprehensive discussion, we examine the potential impact of Islamic financial instruments, including Murabahah, Mudharabah (Islamic deposit), total assets of Islamic banking, Islamic stock market capitalization, and Islamic stock transaction volume, on economic growth. Findings suggest that while certain components, such as government bonds (sukuk), have a significant positive influence on GDP through infrastructure financing and investor confidence, others, like corporate bonds (sukuk), may have limited direct impact due to their focus on specific corporations rather than broad-based economic growth. This research contributes to the understanding of the role of Islamic finance in Indonesia's economic development and informs policymakers, practitioners, and academics on optimizing its contributions while ensuring financial stability and inclusion.

The development of Islamic banks in Kazakhstan

The purpose of the research this article examines the functioning and future prospects of Islamic finance in Kazakhstan, addressing a relatively underexplored topic in the academic literature. The authors' aim is to examine the historical development of Islamic finance, identifying the obstacles that have hindered its progress, especially given the limited progress made in the last decade.Research methodology – includes applied research methods, scientific abstraction and systematic approach. The authors derive their conclusions and recommendations from an assessment of the strengths, weaknesses and threats of Islamic finance aimed at reducing the negative impact on the country's economy and financial system.Originality/value of the research - the authors carefully examine Islamic law and the use of Islamic financial instruments. Based on their analysis, recommendations are made to promote the introduction of Islamic financial instruments in the financial sector of Kazakhstan.Findings. Our findings of the study highlight the problems associated with the country's conservative approach to Islamic finance and the presence of various restrictive barriers, both prudential and social. The study can help legislative and executive authorities in developing a program for the development of Islamic finance in Kazakhstan. They can also use these recommendations to improve or create more specific legislation in this area.

Financial inclusion through Islamic financial instruments: A catalyst for small and medium enterprises (SMEs)

The term Islamic finance is used to refer to financial activities conforming to Islamic Law (Sharia). One of the main principles of the Islamic finance system is the prohibition of the payment and the receipt of riba (interest) in a financial transaction. The term riba covers all forms of interest and is not limited to usury or excessive interest only. The most critical and significant implication of banning interest is the indirect prohibition of a “pure” debt security. The key point to bear in mind is that Islamic law does not recognize money and money instruments as a commodity but merely as a medium of exchange. Hence any return must be tied to an asset, or participation and risk-taking in a joint enterprise (such as partnerships). A pure debt security is replaced with an “asset-linked” security, direct financing of a real asset, and different forms of partnerships of which equity financing is the most desirable. In addition to prohibition of riba, there are several other important provisions which may affect financial transactions. These include the prohibition of ‘gharar’ (uncertainty or asymmetrical information), ‘maysir’ (gambling, speculation), hoarding, as well as trading in prohibited commodities (for example, pork and alcohol).

Socio-demographic correlation to zakat participation during the Covid-19 pandemic in Indonesia

The Covid-19 pandemic that has occurred in various countries including Indonesia is a concern for various parties. It seems that it is starting to be felt in various professional backgrounds including in the economy. One of the Islamic financial instruments that can help improve current economic conditions is zakat. This study aims to determine various socio-demographic variables (zone, domicile, age, gender, occupation, latest education, income per month, average expenditure per month). This research was conducted with a descriptive quantitative approach with a total sample size of 396 people with techniques and data through an electronic questionnaire within a period of 1 month. Further data were analyzed by cross tabulation and correlation Pearson (r value). Based on the results of the study, it is known that there are 3 variables, namely: domicile, occupation, and income per month with the frequency of giving zakat during the Covid-19 pandemic.

Sukuk Development in Indonesia: VosViewer Application

The concept of sharia-based finance is currently growing rapidly. One form of Islamic financial instrument that has been widely issued by both corporations and countries is sukuk. Sukuk is one of the most innovative product forms in the development of the contemporary Islamic financial system. It can be concluded that sukuk is an alternative source of funding, especially for governments and corporate companies. The growth of sukuk has increased sharply compared to other Islamic financial instruments, the growth reached 84% per year if analyzed from 2001 to 2007. Thus, sukuk has developed into one of the most important mechanisms in improving finance in the international capital market through an Islamic acceptable structure. This study aims to determine the development of Sukuk in Indonesia research trends published by leading journals on Islamic financial economics. The data analyzed consisted of 47 indexed research publications. The data was then processed and analyzed using the VoSviewer application to find out the bibliometric map of Sukuk in Indonesia research development.

Understanding Sukuk Market Development: An Overview of Opportunities and Challenges

Sukuk, as integral Islamic financial instruments, have witnessed substantial growth in recent years, signifying a significant evolution in the Islamic finance domain. This paper delves deeply into the dynamics surrounding the development of the sukuk market, meticulously examining both the opportunities it presents and the challenges it poses. In this study, a qualitative research methodology is employed, consisting of two main approaches: exploration and descriptive analysis. Through an exploratory study and descriptive analysis, data were gathered primarily from online libraries and databases. Through a meticulous synthesis of existing literature and empirical evidence, this research endeavors to furnish a comprehensive understanding of the myriad factors influencing the growth of the sukuk market and the implications for diverse stakeholders involved. By shedding light on the potential of sukuk as a viable investment avenue, while concurrently addressing the regulatory, structural, and market-related obstacles impeding its broader adoption and expansion, this study aims to offer valuable insights.

Islamic green finance: mapping the climate funding landscape in Indonesia

Purpose This study aims to explore the potential of Islamic climate finance in Indonesia and to map Islamic climate finance based on Islamic finance instruments, both commercial and social. Design/methodology/approach The analysis was conducted in Jakarta, Indonesia, between October 2022 and June 2023. This study adopted a qualitative interpretive approach in two phases. The first phase was desk-based research which focused on document analysis such as official documents, scientific publications, non-governmental organization publications and company reports in Indonesia. This analysis was conducted to identify significant milestones in developing green and eco-friendly finance that used Islamic financial instruments in Indonesia. The second phase consisted of interviews with essential Islamic climate finance project actors, such as green sukuk publishers, zakat and waqf collection agencies, stakeholders, capital market regulators, Shariah supervisory boards and Islamic finance experts. Findings The main finding of this study is that the development of Islamic green finance in Indonesia can occur through various channels, including greening Islamic capital markets, greening Islamic social finance, Islamic green finance and developing green banking services for the unbanked to support financial inclusion. Green sukuk, or Islamic bonds, are key financial instruments in Islamic green finance. They are used to fund projects in areas such as clean energy, mass transit, water conservation, forestry and low-carbon technology. These green financing initiatives also include socially responsible investments that are designed to improve the lives of people and communities. Research limitations/implications First, the availability of data on Islamic green finance practices in Indonesia may be limited, making it difficult to obtain a comprehensive understanding of the current landscape. Second, cultural and religious factors may play a role in the adoption and implementation of Islamic green finance, and these factors may vary across different regions in Indonesia. Practical implications The exploration and clustering of Islamic climate finance based on Islamic financial instruments in Indonesia can lead to the development of more sustainable and environmentally friendly practices in the financial industry. Originality/value This study serves as a pioneering effort to explore the potential and clustering of Islamic climate finance based on Islamic financial instruments in Indonesia.

The Role of the Green Economy in Economic Growth in Indonesia Based on an Islamic Economic Perspective

Over the past few years, the concept of a green economy has been recognized as a vital mechanism for achieving economic progress in both developed and emerging nations. This study aims to analyze the role of the green economy in Indonesia's economic expansion based on an Islamic economic perspective. The research methodology employs library analysis and content assessment. The data sources utilized in this study were gathered from previous research, articles, regulations, and reference literature pertaining to green economics, economic growth, and Islamic economics. The results denote that the green economy bears tremendous potential to support economic advancement in Indonesia under an Islamic economic lens. By applying key tenets such as the obligation to safeguard nature and the judicious utilization of resources, Indonesia can cultivate a development paradigm that is sustainable and beneficial across all societal strata. This research recommends that private and public sector entities continue endorsing and integrating green economy principles moving forward. Specifically, Islamic financial instruments can be directed toward eco-friendly investments like renewable energy, sustainable agriculture, green technologies, and environmentally-conscious infrastructure. Such participations from Islamic economics in "greening" the economy signify promising trajectories aligning ethical and sustainable finance. As the world grapples with urgent ecological crises, policy frameworks in Indonesia should incentivize collective societal and commercial transitions toward greener fiscal practices. Islamic finance with its underlying moral philosophy can potentially transform finance itself into an apparatus upholding both economic and environmental welfare.

Examining the impact of zakah and Islamic finance on national economic growth

Purpose – This study aims to analyze the effect of Islamic financial instruments, including social funds zakah, infak, and sadaqah (ZIS), Islamic financing, Sharia stocks, and corporate sukuk, on economic growth.Methodology – This study uses monthly data from 2013 to 2022 to examine the relationship between ZIS distribution, Islamic bank financing, Islamic stock capitalization, corporate sukuk issuance, and economic growth proxied by the production industry index (IPI). The Vector Error Correction Model (VECM) was utilized.Findings – According to the short-term estimation results, sukuk significantly hinders economic growth, whereas only the ZIS variable has a positive and significant impact. Long-term economic growth is positively impacted by the ZIS and Islamic financing variables, negatively impacted by sukuk, and not significantly impacted by Sharia stock. The Impulse Response Function and Variance Decomposition analysis results also demonstrate that the variables of the Islamic financial sector have a shock effect on Indonesia's economic growth, with ZIS funds making up the majority of the contribution and Sharia stocks the least.Implications – This study will help policymakers, industry, and academia accelerate the Islamic finance sector in Indonesia and strengthen its role in supporting and advancing Indonesia's economic recovery.Originality – Islamic finance, commonly known as Islamic banking–extends beyond Indonesian banks. Non-bank Islamic institutions, including capital markets and social finance, play a vital role in optimizing Islamic financial instruments for national economic growth.

Clustering Research on Islamic Empowerment Model using R

This bibliometric research was conducted to provide a more in-depth picture of the "Islamic Empowerment Model" by analyzing a number of relevant articles that have been published in the Dimensions database. A total of 233 imlia publication documents in the period 2022-2023 became the object of this research. Using bibliometric analysis methods with the help of Biblioshiny-R software, this study seeks to reveal publication trends over time, identify the most prolific authors in this field, explore journals that have a significant impact in related literature, and reveal the main themes that consistently appear in these scientific works. The results show that the number of publications has increased significantly since 2016, reaching a maximum of 52 publications in 2021 and 2022. 2011 was the year with the highest average number of citations throughout the observation period. The Journal of Social Science Research, is the top publishing journal. There are several authors associated with this journal, such as Huda N, Alhifni A, and Ahwarumi B. The next important finding is that there are 3 research clusters including, Islamic empowerment models through Islamic financial instruments, women's empowerment models in Islam, and Islamic empowerment models through pesantren education. The results of this study are expected to provide valuable insights for various parties, including researchers who want to better understand the development of Islamic empowerment literature, practitioners involved in this field, and academics who want to explore this topic in more depth.