Islamic Financial Services Research Articles

Enhancing Regulatory Frameworks for Islamic Banking Institutions: Comparative Study Between Indonesia and Bahrain

This research analyzes and compares the regulatory frameworks governing Islamic Banking institutions in Bahrain, and Indonesia. The study explores how each country has developed its regulatory environment to support the growth and stability of Islamic finance, highlighting the successes, challenges, and areas for improvement. Using a qualitative comparative approach, the research draws on data from document analysis and previous studies to provide a comprehensive understanding of the regulatory landscapes in these countries. The findings reveal that Bahrain has established robust and internationally recognized regulatory frameworks, largely due to their proactive regulatory bodies and collaboration with global standard-setting organizations such as the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organization for Islamic Institutions (AAOIFI). In contrast, Indonesia, despite its significant potential, faces challenges in regulatory implementation and public literacy on Islamic finance. The study concludes that effective regulatory frameworks are crucial for the credibility and stability of Islamic finance, strengthening regulatory oversight, and adopting international standards to ensure consistent and transparent practices. This research contributes valuable insight for policymakers, regulators, and practitioners aiming to improve the regulatory environment of Islamic financial institutions globally.

Jurisprudential Rulings Related To Digital Currencies And Linguistic Connotations/ الأحكام الفقهية المتعلقة بالعملات الرقمية ودلالاتها اللغوية

It aims to describe of the provisions of Islamic Sharia of encrypted digital currencies and its linguistic implications. Using a scientific jurisprudential methodology. It also discusses the search for the credibility of encrypted digital currencies that comply with the provisions of Islamic Sharia. The results that production is a basis in addition to the value that financing contributes and its linguistic implications, with the most prominent costs as high. Efficiency of Islamic financial financial services, and that the engineering of financial products is based on innovations and creating new solutions for financial management or reproducing the trader in traditional financial finance, with the participation of a strong entitlement basis and participation in many of the basis of effective management of Islamic finance systems, and a statement of the trading rule in those currencies, This is to achieve economic fundamentals and legal credibility and its linguistic implications.

Macroeconomic Factors and Policy Dynamics Influencing FDI Flows from Arab Countries to Malaysia: A Qualitative Analysis (2018-2023)

This study examines the macroeconomic factors and policy dynamics influencing Foreign Direct Investment (FDI) flows from Arab countries to Malaysia during the period 2018-2023. Employing a qualitative research design, the study utilizes semi-structured interviews with key stakeholders, analysis of policy documents, and examination of economic data to provide a comprehensive understanding of this evolving economic relationship. The research reveals that Malaysia's economic resilience, robust GDP growth, and effective fiscal policies have been instrumental in attracting Arab FDI, despite global challenges such as the COVID-19 pandemic. Strategic policy initiatives, including targeted FDI incentives and bilateral trade agreements, have played a crucial role in facilitating investment flows. The study identifies key sectors attracting Arab investment, including real estate, Islamic banking and finance, oil and gas, and tourism. Malaysia's position as a global hub for Islamic financial services and halal industries emerges as a significant factor in its appeal to Arab investors. However, the research also highlights persistent challenges, such as regulatory hurdles, cultural and language barriers, and increasing regional competition. The study concludes that while Malaysia has successfully positioned itself as an attractive destination for Arab FDI, continued policy refinement and focus on high-value, knowledge-intensive sectors are necessary to maintain this position. The findings contribute to the growing body of literature on South-South economic cooperation and provide valuable insights for policymakers, investors, and researchers. Future research directions, including the need for quantitative analysis and comparative studies with other Southeast Asian countries, are suggested to further enhance understanding of these complex investment dynamics.

INTERNATIONAL ISLAMIC BANKS’ POPULARITY AMIDST THE ASEAN ECONOMIC COMMUNITY: INSIGHTS FROM INDONESIA AND MALAYSIA

The establishment of the ASEAN Economic Community (AEC) aimed to achieve regional integration among all ASEAN member states, with particular emphasis on financial integration. Islamic banking is in line with the broader goals of the AEC, as an alternative financial system, helping to build a more resilient and inclusive financial system in the region. Because of this resiliency and inclusiveness, Islamic banks have been encouraged to develop into international banks in the ASEAN region through increasing their assets and earnings. This paper aims to examine the position of International Islamic banks (IIb) in the AEC under its conventional banking services: OCBC Bank from Singapore, Maybank and CIMB Bank from Malaysia. Through the analysis of banking trends, this qualitative study compares the level of popularity of those banks in Indonesia and Malaysia, the two Muslim-majority countries in ASEAN, after the initial establishment of the AEC period in 2016 to 2024. The findings indicated that the most popular Islamic financial services in Malaysia are provided by Maybank, while the most well-known Islamic financial services under IIb in Indonesia are provided by CIMB Bank. This paper provides an overview of the globalisation of IIb in ASEAN and fills a research gap on the development of IIb, particularly within the AEC.

An Empirical Analysis of E-Takaful Participation Readiness (ETPR) Among Individuals in Malaysia

Increased digitalization is one of the tailwinds expected to impact the Islamic Financial Services Industry (IFSI), including the takaful industry, which is growing at up to 5.2% globally. Despite the increasing penetration of digital technologies, the participation rate in online takaful remains disproportionately low. Hence, a call for a digital platform is seen as vital in the current economic situation to further reach out. This research suggests an integrated model of e-takaful participation readiness (ETPR) and empirically tests the model. Furthermore, this study opts for primary data via a structured online survey adapted from previous studies using a purposive sampling technique. Partial Least Square - Structural Equation Modelling (PLS-SEM) is the main statistical technique used in this study. Based on the perspective of user acceptance of information technology, the current research significantly expands on factors influencing e-takaful participation readiness among 395 individuals such as religiosity, attitude, and takaful literacy. Past studies have visited the topic of e-banking readiness, but limited studies focused on its relation to the e-takaful area. This study is a pioneer in examining consumer participation readiness toward e-takaful services particularly during the digital shifting process due to pandemic. The results supported the measurement model's prediction that each research measure's reliability and validity requirements were met. All the proposed hypotheses were found to be significant and accepted. The findings of this study suggest takaful operators in Malaysia to critically devise their new penetration strategies and focus on giving extra value to induce takaful literacy and make room for improvement in product penetration to the target segments by understanding the factors contributing to this phenomenon. This is crucial for policymakers, takaful operators, and other industry stakeholders to develop strategies that encourage greater adoption of online participation.

Basel Implementation in Banking in Indonesia

This study’s goal is to determine the application of Basel in banking in Indonesia. Bank Indonesia in issuing banking regulations refers to the Bank for International Settlement (BIS) policies related to liquidity, especially as a reference to protect Indonesian banks from crises caused by insufficient liquidity needs in the Bank. policies from the BIS will be accommodated first by the Islamic Financial Service Board (IFSB). IFSB is used as a reference for regulators to make banking policies. One of the IFSB committees, namely the Basel committee in the field of banking supervision, has issued provisions that are a reference for international banking, namely Basel 1, Basel II and Basel III. This study collects data using a descriptive qualitative methodology and secondary data obtained from literature studies. The results of the research show that banks in Indonesia have implemented regulations according to the Basel III international standard OJK has adopted Basel recommendations and has implemented Basel 1, 2 and 3 although there are some shortcomings but the application of risk management is more effective and efficient. The application of the continuation of Basel III is adjusted to the conditions of national banking proportionally.

Application of the capital adequacy standard according to the Basel III agreement in Islamic banks - an applied analytical study on the Kuwait international bank during the period (2015 – 2022)

The capital adequacy standard according to Basel III is considered one of the most prominent tools for hedging risks, and it is imposed by all central banks. However, Islamic banks find some difficults to apply this standard, as it is intended for conventional banks. An Islamic standard issued by the Islamic Financial Services Board amending the Basel III standard has been issued with the aim of applying it by Islamic banks. However, Basel III remains the most accepted standard in the international banking arena. This study aims to know the possibility of Islamic banks applying the standard issued by the Basel III agreement on capital adequacy, or whether should apply the Islamic standard issued by the IFSB, This study was conducted using the descriptive approach, the case study approach and the analytical approach, which allowed us to reach a set of results, the most important of which is that Islamic banks can apply Basel III standard, but applying the Islamic standard issued by IFSB is more appropriate because it takes into account the characteristics of Islamic banks in the capital adequacy equation.

The Needs and Readiness of the Islamic Banks to Adopt the Comprehensive Islamic Accounting Standards: The Malaysian Experience

The Islamic finance sector in Malaysia has seen substantial growth over the past few decades, becoming one of the leading markets for Islamic financial products and services. This growth has brought about significant challenges in financial reporting, primarily due to the limitations of conventional International Financial Reporting Standards (IFRS) in addressing the unique characteristics of Islamic financial transactions. The shari’ah transactions are governed by Shariah principles, which prohibit interest (riba) and emphasize on risk-sharing, ethical investments, and social justice. The study aims to provide a comprehensive analysis of the current issues and debates surrounding the need for comprehensive Islamic accounting standards in Malaysia. It will review recent literature, regulatory developments, and the experiences of practitioners in the particular field. Furthermore, the report seeks to highlight the readiness of Bank Negara Malaysia and all Islamic Banks to adopt Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) standards and explore the feasibility of integrating these standards within the International Financial Reporting Standard (IFRS) framework. Additionally, this report aims to contribute to the ongoing discourse on Islamic accounting by offering critical insights and recommendations for policymakers, regulators, and financial institutions. The ultimate goal is to enhance the transparency, comparability, and reliability of financial reporting in the Islamic finance sector, thereby promoting its sustainable growth and integration into the global financial system.

The Contribution of Islamic Banking to Economic Growth the Organization of Islamic Cooperation (OIC) Countries with the CAMELS Approach

The purpose of this study is to examine the contribution of Islamic banking to economic growth by analyzing the influence of Islamic banking performance on economic growth using the CAMELS method. A quantitative approach is employed in this research with secondary data in the form of panel data. Data sources are obtained from the publications of the Islamic Financial Services Board (IFSB) and the World Bank, using a sample comprising 6 countries that are members of the Organization of Islamic Cooperation (OIC) with a time range from 2013 to 2022. The results of the testing demonstrate that the variables CAR, ROA, NPF, and MAN do not significantly affect economic growth, while LIQ and SEN have a positive effect. However, simultaneously, CAR, MAN, NPF, ROA, LIQ, and SEN collectively influence economic growth.

Analisis Pengaruh Literasi Keuangan Islam terhadap Inklusi Keuangan Syariah pada Generasi Milenial

Currently, there are still heated discussions regarding the low level of sharia financial literacy and inclusion, which causes a lack of competitiveness. At the same time, Indonesia is entering an era of demographic bonus, which can be seen from the large number of millennial generations and a Muslim population of 237.56 million people (86.7% of the total population). This research uses a quantitative approach with survey methods to collect data from a sample of the millennial generation in Indonesia. The research instrument is a questionnaire designed to measure the level of Islamic financial literacy and use of Islamic financial products and services. Data analysis was carried out using the SmartPLS tool to test the relationship between Islamic financial literacy and Islamic financial inclusion. The validity and reliability of the instrument were tested before data collection to ensure the accuracy of the research results. The research results show that there is a positive and significant relationship between Islamic financial literacy and Islamic financial inclusion. Millennials with a high level of Islamic financial literacy tend to be more active in using sharia financial products and services. This research has important implications for stakeholders, including governments, financial institutions, and educational organizations, to strengthen Islamic financial literacy programs to encourage wider participation in the Islamic financial system.

The Use of Retrocession by Retakaful operators: An Analysis from Shariah Perspective

In Malaysia, the insurance and takaful sector is under the purview of the Central Bank of Malaysia, and the same goes for reinsurance and retakaful operations. However, due to the country's dual financial system i.e. the conventional and Islamic financial system, conventional reinsurance and retakaful, fall under different laws. The conventional reinsurance is regulated under the Financial Services Act (2013) while the takaful and retakaful by the Islamic Financial Services Act (2013). Undoubtedly, the takaful industry is expanding in the Malaysian market today by leaps and bounds. Retakaful acts in the same way as takaful, providing (re)takaful arrangement for their policyholders. The survival of the takaful operator is heavily influenced by the retakaful operators. The takaful operator will distribute some portion of their risks that they cannot bear to a retakaful operators. However, the retakaful operators are currently unable to cover the entire risk that were ceded by the takaful operators due to lack of retakaful operators in the market, as well as very limited capital, inadequate accumulated funds, and regulatory solvency issues. At the same time, retakaful operators also face challenges in meeting their commercial goals. They, in turn, use tools such as retrocession to overcome their impending challenges. This paper aims to analyse the importance of retrocession to the retakaful company from a Shariah perspective. The research is timely as not much research has been carried out on Retakaful operations in Malaysia. There is also limited discussion related to the business models of retakaful, as well as no specific guidelines focusing on retakaful itself. Therefore, a qualitative approach is suitable for the purpose of exploring such new areas. Besides, Retakaful industry is considered relatively new compared to reinsurance.

The Influence Of Islamic Financial Literacy, Religiosity, And Service Quality On The Decision To Save at Islamic Banks with Trust as an Intervening Variable in Jambi Province

This study examines and analyzes the influence of Sharia financial literacy, religiosity, and service quality on saving decisions in Islamic Banks with trust as an intervening variable in Jambi Province. This study has a sample size of 115 respondents representing each district/city in Jambi Province with a proportional nonrandom sampling technique. The data used were primary data obtained from distributing questionnaires. The research analysis method used Structural Equation Modeling Partial Least Squares (SEM-PLS) and data processing techniques using descriptive statistical analysis techniques and Partial Least Square (PLS) analysis with the help of SmartPLS 4.1.0.2 software. The results of this study indicate that Sharia financial literacy, religiosity, and service quality have a positive and significant effect on customer trust in Islamic banks in Jambi Province. Sharia financial literacy and service quality positively and significantly affect customer decisions to save at Islamic banks in Jambi Province. However, religiosity does not affect saving decisions at Islamic banks in Jambi province. Trust positively and significantly affects saving decisions at Islamic banks in Jambi Province. Trust can mediate the influence of Sharia financial literacy, religiosity, and service quality variables on saving decisions in Islamic Banks in Jambi province.

Determination of Firm Value with Dividend Policy as Moderation Variable: Evidence Islamic Banking in the World

Islamic banking is a company sector that dominates the global Islamic economic industry. To hold it, Islamic banking has to do a lot. One of which is to grow the value of the company. This research aims to identify factors that have an effect on company value in Islamic banking companies in the world. The company value factors studied are profitability (ROE), leverage (DER), company size, and dividend policy (DPR) as moderating variables. To determine the sample, researchers used purposive sampling by selecting 20 Islamic banks registered with the Islamic Financial Service Board (IFSB). Descriptive statistical analysis and moderated regression analysis are used as analysis methods. The results of this research show that profitability and company size have a significant effect on the value of Islamic banking companies. Leverage does not have a significant effect on the price of Islamic banking agencies. Dividend policy as a moderating variable does now not show significant results so it cannot moderate the connection between profitability, leverage and company size on the value of Islamic banking firms. Simultaneously, the variables profitability, leverage, firm size and dividend policy significantly impact the value of Islamic banking companies.

Transformation of Islamic Economics: Opening Halal Opportunities Amid the Dynamics of Society 5.0

Various correlated variables affect the transformation of the Islamic economics in the context of society 5.0. These variables include halal supervision and certification, public awareness of sharia principles, product and service innovation, collaboration between Islamic financial institutions and technology companies, and integration of advanced technology. New product and service innovations, such as sukuk bonds and Islamic mutual funds, also contribute greatly to the transformation of the Islamic economics. On the other hand, the integration of technologies such as fintech and blockchain has increased accessibility and transparency in Islamic financial services, and increased public awareness of the benefits of the Islamic economics has increased demand for Islamic goods and services. Technology companies and Islamic financial institutions work together to produce innovations in Islamic financial services, while technologies such as blockchain ensure authenticity and transparency in the halal industry. Understanding these components is important in transforming the Islamic economics towards a more inclusive, sustainable and ethical economic system in a 5.0 society.

TOWARDS A NEW PARADIGM: SHIRKAH PRODUCT AND SERVICE INNOVATION IN FACING THE CHALLENGES OF THE MODERN ECONOMY IN THE DIGITAL AGE

The increasing complexity of the modern economy in the digital era, accompanied by global and regional economic challenges, drives the need for adaptive and sustainable innovation of Islamic financial products and services. This study aims to analyze the potential and challenges of implementing shirkah contracts in the development of innovative products and services in Islamic financial institutions. Using the method of comprehensive literature review and comparative analysis of the implementation practices of shirkah contracts in various global Islamic financial institutions, this study found that shirkah contracts have a flexible and adaptive framework for the development of innovative products and services that are in accordance with the needs of the modern economy such as MSME financing, sharia fintech, and sharia investment. Challenges in the implementation of the shirkah contract include aspects of regulation, governance, and financial literacy. Therefore, this study recommends innovative strategies and solutions to overcome challenges and optimize the potential of shirkah contracts in facing the digital era.

Strategi Pemasaran PT Bank Syariah Indonesia KCP Cemara Asri dalam Menawarkan Produk Pembiayaan Pra Pensiun Guna Menarik Minat Nasabah

The purpose of this study was to determine effective marketing strategies in offering pre-pension financing products by PT Bank Syariah Indonesia KCP Cemara Asri and increasing customer interest in this product. This study also aims to determine how effective marketing strategies can increase bank income and improve the quality of Islamic financial services. In this study, researchers applied a qualitative method that prioritizes data collection through field study techniques or field research. This approach was chosen to obtain an in-depth understanding of the obstacles faced by Bank Syariah Indonesia KCP Cemara Asri in marketing pre-retirement financing products. Qualitative methods allow researchers to dive into the perspectives of various related parties and analyze effective marketing strategies to increase customer interest in these products. effective marketing strategies for PT Bank Syariah Indonesia KCP Cemara Asri for pre-retirement financing products involve an integrated and diverse approach. The steps include increasing public education about the product, strengthening digital promotion, establishing cooperation with companies, and organizing seminars and education to the public.

An exploratory study on the issues in weightages-based profit distribution mechanism in Islamic banking institutions: the case of Pakistan

Purpose This study aims to explore and analyze the issues in weightages-based profit distribution mechanism in Islamic banks from Shari’ah, practical and regulatory perspectives. Design/methodology/approach A qualitative research approach was used in this study based on primary data collected through semi-structured interviews from Shari’ah practitioners and senior industry experts in the field of pool management in the Islamic Financial Services Industry of Pakistan. Findings The current study found that the weightages-based mechanism conforms to the rules of Mudarabah and; therefore, permissible. However, the elements of exploitation, transparency and fairness require further research, as these elements seem to exist in this mechanism. It was also found that there are many loopholes in the regulatory guidelines for pool management in Islamic banking institutions (IBIs) in Pakistan resulting in practical issues. Practical implications The findings of this study may help improve pool management in IBIs, which in turn may cater the objections raised by academicians, customers and industry experts. Moreover, the alternative solution based on the findings of this study can be transformed into a proposal for regulators to take necessary actions against unfair profit distribution and issue further improved guidelines for IBIs in Pakistan. Originality/value To the best of the authors’ knowledge, very limited studies have been conducted on pool management particularly with issues from different perspectives and alternative solutions have been suggested that may act as a proposal for IBIs as well as regulatory authorities.

Dampak Literasi Keuangan Dan Inklusi Keuangan Terhadap Keputusan Mahasiswa Dalam Menggunakan Layanan Dan Produk Bank Syariah

This research aims to see the effect of financial literacy and financial inclusion on student decisions in using Islamic bank products and services. The type of research used in this research is quantitative with data collection techniques used are questionnaires and questionnaires. The method of determining the sample using the slovin formula obtained 30 research respondents. The data analysis technique uses Structural Equation Modeling (SEM) with the help of SPSS. This study shows that financial literacy and financial inclusion variables have a positive and significant impact on student decisions in using Islamic bank products and services. This research is expected to be able to change the mindset of students towards the use of products and services of Islamic banks. Then it is expected that students use Islamic financial services not on the basis of literacy or inclusion but pay attention to the application of sharia.

Analisis Syariah Marketing Mix Arrum BPKB dan Urgensinya dalam Meningkatkan Pendapatan UMKM Nasabah Pegadaian UPS Diponegoro Sumenep

The main objective of this study is to analyse the impact of the Arrum BPKB sharia marketing mix at Pegadaian UPS Diponegoro on the income level of MSME customers.This qualitative case study uses structured interviews to collect primary data from MSME players, complemented by secondary data from institutional records. The focus of the analysis is placed on understanding how the application of Sharia principles in marketing can improve business funding solutions. The application of Sharia Marketing Mix for Arrum BPKB financing has significantly increased customer interest and participation. Interviews with five MSME customers showed a marked increase in their daily and monthly income, confirming the effectiveness of this strategy in the real world. This study highlights the alignment of Shariah-compliant practices with customer needs and market dynamics. The findings underscore the importance of incorporating Shariah principles in marketing strategies in Islamic financial services. In practical terms, this approach not only helps in complying with ethical standards, but also enhances customer trust and financial inclusion for cash-strapped MSMEs. This study introduces new insights into the localised impact of Shariah marketing practices on MSME profitability, particularly in the Indonesian financial services context, and sets a precedent for further regional studies

Nonlinear effect of Islamic financing on economic stability: A Case of equity and debt financing

The main purpose of this study is to differentiate between the effects of two major categories of financing of Islamic banks on the economic stability of the selected countries. This study determines the nonlinear effect of equity-based and debt-based financing of Islamic banks to assess how the stability of the economy can be achieved. This study acquires the data on Islamic banking product-wise financing at a national level from the Islamic Financial Service Board (IFSB), and the data on industrial production index is selected from International Financial Statistics for selected countries. The sample size comprises of all the countries included in the IFSB. The data ranges from 2014Q1 to 2019Q4. The economic stability is estimated using the GARCH volatility approach, and the nonlinear ARDL model is used to determine the causal effect of Islamic banking product wise financing. This study clarifies the empirical relationship between Islamic banking equity-based financing and debt-based financing and whether macroeconomic stability is linear or quadratic in terms of the marginal effect of financing, which helps policymakers to constitute strategies for expanding the size of Islamic banking financing. The results identified the inverted U-shaped effect of equity-based financing types on output instability. At the same time, both financing types are not causing price instability. The outcomes are instruments for the central bank to optimize the Islamic banking financing structure to achieve the goal of product-wise financing of economic stability.