Islamic Financial Services Research Articles

Transformasi Digital dalam Keuangan Islam: Peluang dan Tantangan

This research aims to explore the impact of digital transformation in the Islamic finance sector, discussing the opportunities and challenges that arise with the adoption of digital technologies. The study utilizes a qualitative method with literature review approach. Digital transformation includes the implementation of innovations such as financial technology (fintech), blockchain, and artificial intelligence within the context of Sharia-compliant finance. The results of the discussion present a comprehensive overview of how digitization affects Islamic financial products and services, considering the potential for increased operational efficiency, financial inclusivity, and more effective adherence to Islamic financial principles. Meanwhile, challenges such as data security, regulations, and market acceptance are also outlined, emphasizing the efforts required to optimize the benefits of digital transformation in the realm of Islamic finance.

Fintech in islamic finance literature: A review

This literature review examines the role of fintech in the context of Islamic finance. Through a systematic analysis of relevant literature, this research highlights the contribution of fintech in improving Islamic financial services as well as the challenges faced in the integration process. These findings indicate that although fintech has opened the door to innovation in the Islamic finance industry, there is still a need to overcome barriers related to sharia compliance and consumer protection. Therefore, this research underlines the importance of a careful and planned approach in integrating fintech with Islamic finance principles.

Islamic Microfinance: Addressing Poverty Alleviation and Entrepreneurship Development

This research investigates the role of Islamic microfinance in poverty alleviation and entrepreneurship development. Using a systematic literature review approach, this research analyzes the relationship between types of financing, access to Islamic financial services, government policies, and the level of entrepreneurship with household income and the development of micro and small businesses. The findings show that Islamic microfinance can be an effective instrument in strengthening the economic base of underprivileged communities, especially through the integration of Islamic principles in the financial system.

Evaluation of management soundness of Takaful industry in selected countries

PurposeManagement soundness is essential for the effectiveness of any industry, most especially in any Islamic financial sector, whereby fairness and justice are the key factors to be observed. This paper aims to examine the management soundness of the takaful industry regarding their asset quality, re-takaful and actuarial and earning and profitability.Design/methodology/approachThis study obtained quarterly data from 2019Q1 to 2021Q4 from the Islamic Financial Services Board across Malaysia, Brunei, Saudi Arabia, Jordan and the United Arab Emirates. The panel data modelling with random-effect and fixed-effect estimators were used for the analysis.FindingsThe finding revealed a strong relationship between re-takaful and earnings with management soundness and a weak relationship between asset quality and management soundness. In addition, the result established a significant and strong association between management soundness and earnings and profitability. Therefore, re-takaful and profitability contributed more to the management soundness of the takaful industry than asset quality during the study. An increase in earnings and profitability to enable the takaful industry to pay the claims, especially in calamity, and more focus on the quality of the asset they invested in could enable the smooth running of their day-to-day business affairs.Practical implicationsMore attention is required on the quality of assets in their portfolio for the sustainability of the takaful industry to fulfil their underlying objectives. Management soundness in the takaful industry should address the challenges of managerial lathery, which some studies linked with operational inefficiency because of unskilled personnel in the takaful industry. This could benefit takaful clients, irrespective of religion, to attain their associated share of benefits from the Islamic insurance industry.Originality/valueTo the best of the authors’ knowledge, this is the first empirical study that examined the effectiveness of takaful management across Malaysia, Brunei, Saudi Arabia, Jordan, and the United Arab Emirates.

Pengaruh Literasi Keuangan Syariah dan Lingkungan Sosial KJKS Arjuna Terhadap Minat Menabung Santri Putri Pondok Pesantren Ngalah Pasuruan

This study aims to determine the effect of Islamic Financial Literacy and Social Environment on the Savings Interest of female students in the Islamic Financial Services Cooperative (KJKS) Arjuna. The method used in this study is using quantitative methods with multiple linear regression and using data collection techniques through questionnaires. The population in this study were female students of dorm I Islamic boarding school Ngalah. Based on the results of this study, it can be concluded that Islamic financial literacy has a significant effect on saving interest in female students at the Arjuna Islamic Financial Services Cooperative (KJKS). This is indicated by the Tcount value of 3.531 while Ttable of 1.998 so that Tcount > Ttable (3.531 > 1.998) and a significant value of 0.000 <0.05 then H1 is accepted, the social environment has a significant effect on saving interest in female students in the Sharia Financial Services Cooperative (KJKS) Arjuna. This is indicated by the Tcount value of 5.690 while Ttable of 1.998 so that Tcount > Ttable (5.690 > 1.998) and a significant value of 0.001 < 0.05 then H2 is accepted, Islamic financial literacy and the social environment have a joint effect on the interest in saving female students in the Cooperative. Arjuna's Sharia Financial Services (KJKS) with Fcount of 16,029 while Ftable of 3.13, so the value of Fcount > Ftable or 16.029 > 3.13 then H3 is accepted

Islamic finance and economic growth: Global evidence

AbstractWe document the contribution of Islamic finance development to economic growth by studying a global sample of countries engaged in providing Islamic financial services. Fifteen countries are included in the sample based on significant Islamic banking share in total domestic banking assets. Results are documented through the application of the Panel regression (EGLS) method for the period 2001–2020. Findings suggest a positive contribution of the Islamic Financial Services Industry (IFSI) to economic growth in sample countries in multiple regression settings. Additionally, a range of control variables, including domestic credit to the private sector, inflation, and trade openness, contribute significantly to economic growth. We recommend the creation of a conducive environment for the promotion of IFSI on account of the built‐in stability feature and positive contribution to economic growth. We also recommend overall development in the financial sector of selected economies, including credit availability to the private sector and trade openness. Our study helps in understanding the dynamics of economic growth in economies with a dual banking system (conventional & Islamic). This article contributes to the literature by studying a larger sample of countries engaged in the practice of Islamic finance and considering the significance of the market share of assets under IFSI.

Pengaruh Faktor Sosial Terhadap Minat Menggunakan Layanan Keuangan Syariah

The influence of social factors on interest in using Islamic financial services is an important topic in the banking industry. Social factors such as reference groups, family, role, and status have a significant influence on purchasing decisions at Islamic banks. This study uses qualitative research methods to understand the social dynamics that influence people's interest in using Islamic financial services. The results show that social factors, including social environment and Islamic financial literacy, influence people's interest in using Islamic financial services. Therefore, Islamic banks need to pay attention to social factors in designing marketing strategies and services in order to meet the needs and desires of the community. The suggestion is to conduct market research to identify the needs and preferences of the community regarding Islamic financial products and services.

The Expansion of Sharia Financial Inclusion Through Optimization of Laku Pandai in MSMEs Partners PT. Bank Syariah Indonesia, Tbk

MSMEs make an optimal contribution to the Indonesian economy. However, currently one of the problems of MSMEs is that they do not have access to products and services to Sharia finance. The majority of MSMEs are also still focused on the main business and have not generated much fee-based income to support their results. The community service team proposed a solution to the problem by implementing Laku Pandai to solve the problem. The output target to be achieved is journal publication, being able to implement Laku Pandai as access to Islamic financial services, and getting fee-based income from its operations. Activities begin with initial surveys, planning activities with partners, implementing activities as well as evaluation and follow-up plans. Activities will be carried out with the active role of partners until partners can apply output targets independently.

The Role of Social Responsibility of Sharia Financial Institution on Customer Loyalty

The form of customer support for Islamic financial services is very important to create resilience and competitiveness in the Islamic Financial Institution industry. By highlighting social activities, this paper tries to see the role of CSR of Islamic banks in influencing customer loyalty , both individually and through image, trust and service satisfaction. This path explores how CSR makes customers impressed, convinced, satisfied, amazed, and ultimately loyal to Islamic banks. Quantitative descriptive analysis shows that a) the role of CSR gives a positive perspective on customer loyalty, b) Corporate image does not have a significant effect on customer loyalty, c) Trust has a significant positive effect on customer loyalty, d) service satisfaction has a positive effect on service, e) simultaneously CSR, image, trust and service satisfaction have a significant effect on customer loyalty. Indirectly, CSR and loyalty have an interrelated and mutually beneficial relationship between financial institutions and customers. This research has resulted in a new study of the form of the role of CSR on customer loyalty to these financial institutions. The practical implication lies in the importance of developing CSR to generate trust and reputation which in turn increases customer loyalty to Islamic banks

Peran Lembaga Keuangan Syariah Dalam Mengembangkan Bisnis Mikro dan Kecil di Indonesia

This study aims to analyze the role of Islamic microfinance institutions in developing micro and small businesses in Indonesia through the distribution of funds based on sharia principles. The method used is a literature review to identify how Islamic financing schemes, such as mudharabah and musyarakah, contribute to increasing access to capital for small business actors. The results of the study show that Islamic microfinance institutions provide more inclusive and fair financing and business assistance and management of social funds such as zakat, infaq, and sedekah. This supports the growth of micro and small businesses and improves the community's economic welfare. However, several challenges remain, such as low Islamic financial literacy and limited capital. Therefore, this study recommends the need for innovation in Islamic financial technology and increased public education to expand the reach and effectiveness of Islamic financial services for micro and small businesses.

The Mechanism of Avoiding Riba in Islamic Financial Institutions: Experiences of Indonesia and Malaysia

The issue of discrepancy between business goals and sharia principles related to debt raises a problem. Financial institutions seek profit, but lending and borrowing money (qardh) in Islam is not for profit. This has the potential to generate usury (riba), and must be avoided by Islamic Financial Services (IFS). This article examines several Islamic legal opinions (fatwa) from the Indonesian National Sharia Council and the Malaysian Sharia Authority Council utilizing a normative and descriptive legal study approach, in conjunction with the science of Islamic jurisprudence (ushul fiqh). The results of the study outline that Islamic financial institutions must create products to avoid riba practices on unlawful debts. Two models for the creation of anticipatory riba were found by tracing and testing Islamic financial products using a credit schemes (qardh), namely entering into a service contract (ijarah) and conducting several transactions (bay' al-'inah) for one object. This product highlights the repetition of an old practice long-debated in classical fiqh because it is prohibited in a hadith of the Prophet Muhammad. This finding has implications for Sharia compliance as long as Sharia financial products do not shift to profit-sharing or buying and selling-based financial products.

Prospects of Islamic capital market in Uzbekistan: issues and challenges

PurposeDespite its potential as an emerging market for Islamic financial services, Uzbekistan has lagged in legislative support. This study aims to evaluate the feasibility of introducing an Islamic capital market (ICM) in Uzbekistan, preceding a broader industry establishment.Design/methodology/approachThe authors begin by assessing Islamic finance literacy and the potential demand for ICMs in Uzbekistan. The authors then scrutinize Uzbekistan’s capital market legislation and its readiness. This analysis uses primary data, including surveys and interviews, and secondary data from literature and financial legislation.FindingsThis study highlights a significant demand for ICMs, despite low Islamic finance awareness in Uzbekistan. Presently, Uzbekistan’s capital market development is lacking, with regulations not yet suitable for ICMs. As a result, legal and operational enhancements are needed.Practical implicationsThe authors provide essential policy recommendations for authorities and practitioners to facilitate the effective launch of ICMs and enhance Uzbekistan’s capital market stature.Originality/valueTo the best of the authors’ knowledge, this is the first study offering an in-depth analysis of the potential and feasibility of ICMs in Uzbekistan.

The Determination of Relevant Market on Islamic Financial Services Sector: Perspective of Indonesian Business Competition Law

Abstract: After promulgation of Act Number 4 of 2023 concerning the Development and Strengthening of Financial Sector, sharia financing service businesses consisting of Sharia Banking, Sharia Public Economic Banks and Sharia Microfinance Institutions (LKMS) have financing products that tend to be the same. This is related to the definition of the relevant market in Act Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition. This study aims to analyze the relevant market and to find potential of anti-competitive behavior in the financial services business. It is a normative juridical research using qualitative analysis. The method is summarized by examining regulations and doctrines related to Indonesian Business Competition Law. The results of this study explain that Sharia Banking, Sharia Public Economic Banks, and LKMS have same relevant market because the only difference is the financing scale. The Sharia Banking as dominant sector can influence the climate of business competition. Based on CR4 theory, the market concentration ratio in the Islamic financial services sector is a market that leads to loose oligopoly. There needs to be a limitation on the scale of financing regarding the maximum value of financing in Sharia Banking area and how much is in the area of LKMS to reduce the potential for abuse of dominance. But, rule of reason approach is still needed to find out the occurrence of violations caused by corporate action. The rule of reason approach used to assess corporate actions is in accordance with the maslahah mursalah concept. Abstrak: Pasca diundangkannya Undang-Undang Nomor 4 Tahun 2023 tentang Pengembangan dan Penguatan Sektor Keuangan, pelaku usaha jasa pembiayaan syariah yang terdiri dari Perbankan Syariah, Bank Perekonomian Rakyat Syariah, dan LKMS mempunyai produk pembiayaan yang cenderung sama. Mereka masih merupakan satu kesatuan dari iklim persaingan atau pasar yang bersangkutan. Hal ini terkait dengan pengertian pasar bersangkutan dalam Undang-Undang Nomor 5 Tahun 1999 tentang Larangan Praktek Monopoli dan Persaingan Usaha Tidak Sehat. Penelitian ini bertujuan untuk menganalisis pasar bersangkutan dan mengetahui potensi perilaku anti persaingan pada bisnis jasa keuangan. Penelitian ini merupakan penelitian yuridis normatif dengan menggunakan analisis kualitatif. Metode tersebut dirangkum dengan mengkaji peraturan dan doktrin terkait Hukum Persaingan Usaha Indonesia. Hasil penelitian ini menjelaskan bahwa Perbankan Syariah, Bank Perekonomian Rakyat Syariah, dan LKMS mempunyai pasar bersangkutan yang sama karena yang membedakan hanyalah skala pembiayaannya. Perbankan Syariah sebagai sektor dominan dapat mempengaruhi iklim persaingan usaha di sektor jasa keuangan syariah. Berdasarkan teori CR4, rasio konsentrasi pasar pada sektor jasa keuangan syariah adalah pasar yang mengarah pada oligopoli longgar. Perlu adanya pembatasan skala pembiayaan terkait nilai maksimal pembiayaan yang menjadi wilayah Bank Syariah dan berapa yang menjadi wilayahnya LKMS untuk mengurangi potensi penyalahgunaan posisi dominan. Namun demikian, pendekatan rule of reason tetap diperlukan untuk mengetahui terjadinya pelanggaran yang diakibatkan oleh suatu aksi korporasi. Adapun pendekatan rule of reason yang digunakan untuk menilai aksi korporasi telah sesuai dengan konsep maslahah mursalah dalam Hukum Islam.

Exploring the Nexus of Financial Technologies, Financial Inclusion, and Blockchain in Islamic Finance within Digital Transformation

Financial technology and continuous digital growth are having an influence on financial inclusion which has significant ramifications for the faith-based financial paradigm. The objective of this research is to investigate the relationships and effects of financial technologies in Islamic financing inside financial institutions within the framework of digital transformation and blockchain technology. The use of these advancements will significantly affect Sharia-compliant Islamic finance. This paper critically investigates the historical and current implications of Financial Technologies, financial inclusion, and Blockchain in Islamic Finance worldwide with a focus on banking, investing, and compliance with regulations. Using a comprehensive review of the literature, indexing journals, and empirical case studies, this research seeks to provide significant new insights on the development and status of several areas within the Islamic financial industry. In order to make Sharia compatible, it also examines how digitalization has altered the landscape. Furthermore, before they can considerably promote financial inclusion in many countries, the Islamic financial services industry and the junction of technology and Islamic finance still have a ways to go due to the scale necessary. The study's findings may serve as a guide for financial institutions, decision-makers, and other interested parties in order to maximise the potential of blockchain technology and other financial innovations in Islamic finance across a range of Islamic nations. Long-term, equitable economic growth will result from this.

THE EFFECT OF ISLAMIC FINANCIAL DEVELOPMENT AND HUMAN DEVELOPMENT ON INCOME INEQUALITY: DOES ISLAMIC FINANCE KUZNETS CURVE VALID IN THE OIC COUNTRIES?

Income inequality is evident in all countries regardless of the level of development or income status. Islamic financial system has Shariah-compliant financial instruments that, when properly utilized, can facilitate equitable income distribution in the OIC member countries. This study examines the effect of Islamic financial development and human development on income inequality in the OIC. The study also analyzes the validity of the Islamic finance Kuznets curve hypothesis. We employ FMOLS and DOLS estimators with data from 20 OIC member countries covering the period from 2012 to 2022. The results show that Islamic financial development and human development promote equitable income distribution. The findings also confirm the validity of the Islamic finance Kuznets curve hypothesis. Thus, to reduce the income gap in the OIC, Islamic financial institutions should expand further via for examples innovation in Shariah-compliant Islamic financial products and services. In addition, policymakers should prioritize policies and programs that can promote Islamic financing and improve human development in the OIC member countries.

Do Islamic Financial Industry Players Implement Islamic Values in Their Business?

This study aims to identify Islamic values in Islamic financial industry players in Indonesia. The development of the Islamic financial services industry in 2021 showed positive growth with an increase in assets of 13.8% (Rp2.05 trillion) compared to 2020 which only reached Rp1.80 trillion. Meanwhile, the results of the study revealed that Islamic financial industry players organizationally commit many violations or fraud both organizationally and individually. Islamic values derived from the Quran and Hadith are a guide and reference for all Muslims, including Islamic financial industry players. There are four criteria of Islamic fundamental values and nine of Islamic value principles in business. Research methods were conducted through quantitative research with the distribution of questionnaires. The population of Islamic financial industry players are Islamic banking, Islamic insurance, Islamic capital markets, and non-bank financial institutions. The results show that Islamic values have not been fully implemented by Islamic financial industry players.

Digitalization and sustainable development goals in emerging Islamic economies

Purpose This study examines the intersection of emerging Islamic economies and the digital economy in the context of the United Nations sustainable development goals (UN SDGs). This study aims to investigate the opportunities, challenges and barriers faced by emerging Islamic economies in the context of the digital economy. It specifically focuses on how these economies can contribute to the achievement of UN SDGs established in 2015. In addition, the study explores the prospects of Islamic digital finance and its potential to facilitate the adoption of the UN SDGs. Design/methodology/approach The following components outline the design, methods and approach of this study, identify and select specific UN SDGs that are relevant to the research aims. These selected goals serve as the basis for evaluating the impact of conventional and Islamic digital financial inclusion, gathered data from credible sources such as Bloomberg and Refinitiv Thomson Reuters to support the analysis. These sources provide comprehensive data on global indicators, progress and targets related to the UN SDGs, compare and evaluate the impact of both conventional and Islamic digital financial inclusion strategies on the selected UN SDGs; the study uses qualitative interpretation of the gathered data, which involves identifying patterns, themes and connections within the data to draw meaningful conclusions. Findings Results revealed that Islamic digital finance has the potential to contribute significantly to achieving the UN SDGs by promoting financial inclusion, encouraging ethical investments, supporting small and medium enterprises, promoting sustainable investments and leveraging technology to expand access to Islamic financial services and support sustainable investments. Research limitations/implications While there are many potential benefits of Islamic digital finance in helping to achieve the UN SDGs, there are also several limitations that should be considered in research, such as limited access to digital infrastructure, regulatory challenges, product offerings, scale, awareness and adoption. Addressing these limitations will be critical to maximizing the potential of Islamic digital finance to contribute to achieving the UN SDGs. Practical implications This study points to an important gap in the literature; for practitioners, this study has significant managerial consequences for achieving the UN SDGs in emerging economies by facilitating social impact investments and promoting ethical and sustainable investments. Originality/value This study’s uniqueness lies in its exploration of the limited exploration of connecting the implementation of digital financial systems to promote UN SDGs within emerging Islamic economies.

SHARIAH-COMPLIANT FINANCE: AN ANALYSIS OF THE ISLAMIC FINANCIAL SERVICES INDUSTRY

A study on the Islamic financial services industry is a comprehensive analysis of the financial sector that operates in accordance with Islamic principles, also known as Shariah-compliant finance. Shariah is Islamic law and code of conduct derived from the divine principles mentioned in primary sources of Islam i.e., Quran and Sunnah. Islamic finance is guided by the principles of Islamic law (Shariah), which prohibit activities such as charging or paying interest (usury) and engaging in speculative transactions. Instead, Islamic finance promotes ethical and equitable financial practices. This research highlights the substantial growth and financial soundness of the Islamic financial services industry, and it suggests a positive outlook for the sector's future. Islamic finance has gained momentum globally, attracting both Islamic and non-Islamic investors who are interested in ethical and Shariah-compliant financial solutions.

CAREER STUDENT INTEREST PREFERENCES ON SHARIA FINANCIAL SERVICES

ABSTRAKThe study aims to determine students' interest in a career in Islamic financial services, as well as what factors influence students to be interested in Islamic financial services. The number of samples in this study were 90 respondents with the sampling method using random sampling method. Data collection was carried out through a questionnaire. Data analysis uses the help of the IBM SPSS Statistics application. The results showed that religiosity had no effect on students' interest in having a career in Islamic financial services while subjective norms had an effect on students' interest, and behavioral control had no effect on students' interest in the Islamic economics and business faculties of Iain Kerinci in choosing a career in Islamic financial services.
 Keywords: Religiosity, subjective norms, behavioral control, interest in a career in Islamic financial services.

Embracing the digital economy: Exploring the role of trust, perceived ease of use, and religiosity on intention to use Islamic peer-to-peer lending

This study investigates the pivotal roles of trust, perceived ease of use, and religiosity on individuals' intentions to adopt Islamic peer-to-peer (P2P) lending platforms within the digital economy context. The novelty of this study lies in its focus on an area that has received limited attention in prior studies (Islamic P2P lending) and the inclusion of individual factors, particularly religiosity, in the analysis. Additionally, a five-point Likert scale survey and purposive sampling technique were employed, targeting young Muslim potential borrowers aged 18-24 (Generation Z) who are presently engaged in microbusiness activities and have knowledge of financial technology. However, they had not yet utilized any P2P lending platforms. Data from three hundred twenty-three respondents was analyzed to investigate the relationships between variables. The results of this study suggest that all examined variables, including trust, perceived ease of use, and religiosity, have a significant and positive impact on individuals' willingness to use Islamic P2P lending. This implies that the more trust individuals have in Islamic P2P lending platforms, the easier they perceive them to use, and the stronger their religious beliefs, the more likely they are to accept and utilize these new Islamic financial services.