Islamic Funds Research Articles

Obliterating The Financial Challenges Extenuating SMEs in Lagos, Nigeria Through The Instrumentality of Mushārakah: A Qualitative Assessment

Purpose: The rate at which financial challenges are mitigating the growth of SMEs in Nigeria requires diligent attention from researchers. This research work hereby aims to obliterate the financial challenges extenuating SMEs in Lagos, Nigeria, through the instrumentality of Mushārakah. Methodology: A qualitative case study approach was employed to achieve this objective. Nineteen (19) respondents who fit the criteria were interviewed, and their responses were analyzed using a qualitative method of data analysis. Findings: The study revealed that many SME owners are not fully aware of the operation of Islamic banks in Nigeria. Respondents equally revealed that they used private funds when they started their business. However, they are now better exposed to the benefits of the Islamic banking system. SMEs in Nigeria do not maintain proper books of account; during the loan inspection process, SME owners were advised to keep an appropriate record of the goods they sold and their earnings. This study concluded that entrepreneurs are not fully aware of the terms of Islamic Financing; SME owners are willing to embrace Islamic funding since it is free from interest and less expensive. This study recommended that more SMEs approach Islamic banks for financial assistance to obliterate the financial challenges extenuating SMEs in Lagos, Nigeria, through the instrumentality of Mushārakah. Significance: This research is among the few studies highlighting the financial challenges extenuating SME operations in Lagos, Nigeria, and established Mushārakah as a vital instrument to address the financial challenges extenuating SME operations in Lagos.

Sharia-Based Green Economic Transformation: A Maqasid Framework for Sustainable Social and Environmental Development Through Industrial Policy and Innovation

The main problem in this study is the lack of a comprehensive integration model between sharia-based industries and green economy principles that also support religious moderation and desire. (Shamil Shovkhalov1,2,* 2024. Principles of Islamic economics and its contribution to the ecological ecosystem and green economy development of WFCES). Although the existing literature has extensively addressed aspects of the Shariah economy and the green economy separately, only few have highlighted how these two concepts can be combined to achieve broader goals, including ummah moderation and social welfare. (Prof. Dr. Tariqullah Khan, 2023 Climate Crisis Mitigation – Maqasid Al-Shariah Framework in Islamic Economics Articles on Islamic Economics). This study aims to develop a new framework that integrates Islamic economic principles, specifically Maqasid Shariah, with green economic practices to support not only ecosystems, but also religious moderation. (Christoph Mueller-Bloch Johann Kranz 2015 A Framework for Rigorously Identifying Research Gaps in Qualitative Literature Reviews Conference: Proceedings of the 36th International Conference on Information Systems (ICIS)). The research method used was a qualitative approach with literature study and content analysis of various relevant data sources, including scholarly journals, reference books, and policy reports. The obtained data were analyzed to identify gaps in the literature and formulate the proposed framework. (Abdurahman J. Yesuf a, Dalal Aassouli ab 2020 Exploring synergies and performance evaluation between Islamic funds and socially responsible investment (SRI) in the light of Heliyon’s Sustainable Development Goals (SDGs)). The results of the study suggest that the integration between Shariah-based industries and the green economy can make a significant contribution to environmental and social poverty, stressing the importance of religious moderation as a key element in sustainable development strategies. (Abdurahman J. Yesuf a, Dalal Aassouli ab 2020 Exploring synergies and performance evaluation between Islamic funds and socially responsible investment (SRI) in the light of Heliyon’s Sustainable Development Goals (SDGs)). The conclusion of this study is that the proposed framework can serve as a guide for stakeholders in developing policies and practices that support sustainability and broader social well-being through harmonious integration between the Islamic economy and the green economy.

The power of religion: Islamic investing in the lab

Faith-based mutual funds have recently become a growing corner of the mutual fund industry. Morality and ethics are thought to exert an influence on investors' decisions in this segment, though their role in driving such investments is not clear as these funds are also attractive due to their distinct risk-return profile. If non-pecuniary motives are predominant, investors in such funds may be less sensitive to financial performance, resulting in different fund flows patterns relative to conventional funds. This paper fills the gap in the literature, by providing an express linkage between religious preferences and investment in an Islamic fund. Using an incentivized lab experiment, we compare the extent to which investors with religious preferences are likely to accept inferior financial performances to pursue investments aligned with their religious preferences. We show that those with stronger religious preferences are more likely to stick with their investment in Islamic funds when these funds underperform. We do not find that social preferences play a similar role in socially responsible funds, and we find that investors prefer religious investments over socially responsible investments, providing strong evidence that religious investors do not view socially responsible funds as substitutes for Islamic funds.

Does Islamic Mutual Fund Bear Higher Risk than Conventional Mutual Funds? An Empirical Analysis from Bangladesh

This study aims to identify whether Islamic mutual funds bear higher risk exposure than conventional mutual funds due to implementing their shariah screening criteria to select assets on the portfolio. For this purpose, monthly closing price data of Islamic and conventional funds operated in Bangladesh are collected from January 2016 to August 2023. A total of 2320 observations of each risk measure (e.g., standard deviation, semi-standard deviation, semi-standard deviation, and beta) are computed using a 12-month rolling window method to compare risk exposure between Islamic and conventional funds using univariable and multivariate analysis. The univariate analysis is conducted by performing an independent samples t-test, which confirms that overall, Islamic funds bear lower risk exposure than conventional funds. In multivariate analysis, the Feasible Generalized Least Square (FGLS) method, a dynamic panel data analysis model, is applied where the effects of macroeconomic variables such as deposit rate, GDP growth rate, exports, imports, broad money, and remittances are controlled. The results of the multivariate analysis also confirm that Islamic mutual fund risk exposure is lower than that of conventional mutual funds. This study will be helpful for practitioners and institutional investors in decision-making.

The right literacy on the right performance: Does Islamic financial literacy affect business performance through Islamic financial inclusion?

This study examines how Islamic financial literacy and Islamic financial access contribute to the performance of Halal MSMEs using knowledge-based theory. Micro, small, and medium-sized halal businesses (MSMEs) have an important role in the economy and the rapid growth of the world halal industry. The success of halal MSMEs depends on a number of factors, including the availability of Islamic funding and the financial literacy of Islamic finance. This study adopted a hierarchical regression model to examine quantitative data from a sample of 209 halal MSMEs' owners and managers in Malang Raya, Indonesia. The findings demonstrate that a high level of Islamic financial literacy can encourage Islamic financial inclusion, while inclusive Islamic financial institutions have a significant impact on MSMEs’ performance. In promoting inclusive Islamic finance, this study contributes by describing how Islamic financial inclusion affects the performance of Halal MSMEs and the level of society's knowledge on Islamic finance. Implications: Once MSMEs have a strong understanding of the Islamic finance principles, they are more likely to use these resources to increase access to Islamic finance; thereby leading to business growth and expansion. For this study, the halal industry within the food and beverage sector is a noteworthy production sector.

Analysis of Financial Performance of Islamic Mutual Funds & Islamic Pension Funds in Pakistan

The Islamic finance industry is growing exponentially at global level catering to the demands of Muslim consumers. The same trend is being observed in Pakistan as many Islamic mutual funds and Islamic pension funds are working alongside traditional funds. This research seeks to explore the financial performance of various Islamic mutual funds and Islamic pension funds in Pakistan from 2015-2022. For this purpose, we selected 10 Islamic mutual funds and 5 Islamic pension funds on random basis and employed Sharpe Ratio, Treynor Ratio, and Jenson’s Alpha techniques to analyze the financial performance of these funds in terms of returns generated and their comparison with the industry results. The study's findings showed that Islamic mutual and pension funds in Pakistan are still struggling to provide market-oriented returns to their investors. This gap in generating excess returns may be due to the nature of the Islamic funds that restricts their investment options for diversification due to the Shariah guidance. This study recommends that industry stakeholders including fund management companies, investors, regulatory bodies, Shariah scholars etc. all need to work closely to address the short-comings of the existing operational restrictions of the Islamic funds and ensure a level-playing field along with the traditional fund management companies for generating maximum returns for their investors.

Islamic, ethical and conventional mutual funds: a comparative study (1990–2022)

Purpose This study aims to test mutual fund superiority, comparing the performance of 646 Islamic mutual funds with 475 ethical funds and conventional proxies. Design/methodology/approach This study uses statistical methods including paired t-statistics of independent samples, one-way Bonferroni test–analysis of variance–F-statistic for testing means equality, the chi-squared test for median equality and regression models corrected for heteroscedasticity. These methods are used to identify superiority of mutual funds and to validate the significance of the results. Findings The findings confirm the superiority of conventional funds over ethical funds and ethical funds over Islamic funds. Both ethical and Islamic funds, however, outperform conventional proxies during some recessionary periods. Moreover, stronger performance is recorded for Islamic funds in Europe and North America regions and across age and asset allocation categories, but limited support for reversal fund size, composition focus and reversed price effect. Research limitations/implications These findings should assist investors when deciding to invest and motivate Islamic and ethical funds to improve their portfolio formation and asset allocation strategies set by their professional managers. Originality/value The originality of this study is in its comprehensive approach in that it compares the performance of funds after accounting for such characteristics as fund objectives, size, age, asset allocation, geographical investment focus, fund composition focus, share price levels and the effect of global crises. This study approach is not only original and productive in documenting Islamic funds’ performance for the past three decades (1990–2022) but can also update the literature on these characteristics collectively and individually.

Profitability of Pair Trading: A Case of Islamic Indices in Pakistan

The pair trading strategy under portfolio construction is one of the profitable strategies. This is first ever study to observe the pair trading strategy using Islamic Index KSE firms. Distance approach is applied in this study by taking firms under KMI-30 Islamic index by using daily data from year January 1, 2012 to year December 31, 2019. These firms are divided into three subcategories, high-cap, mid-cap and low-cap. After formation of pairs, trading algorithm under various parameterizations is used to observe the profitability. The study concluded with positive and significant returns of top 3, 5, 7 and 10 pairs for each category. In addition, this study also witnessed with positive returns after risk adjustment of market factor for the top 3, 5, 7, and 10 pairs of Islamic index’s firms. These results are accordance with theories of mean revision and market neutrality. The study is contributing to the literature regarding the profitability of pair trading in Islamic Indices firms in Pakistan. Policy Implication for Islamic fund managers and investors is recommended.

The Role of Islamic Banking and Capital Market in Promoting the Sustainable Development Goals (SDGs): The Case of Malaysia

Since the launch of the Sustainable Development Goals (SDGs) by the United Nations (UN) in 2015, the global financial markets have strongly inclined towards being more ethical, responsible and value-based investing. Similar with the conventional counterparts, the stakeholders in Islamic finance have initiated its efforts and thrives in manifesting and incorporating the global sustainability agenda into its business operations and product innovations. Given that the principles of Islamic finance fundamentally support socially inclusive, environmentally preserved and economically prosper, the potential for Islamic finance to play a role in realizing and translating the SDGs into practical approach is extensively explored in this paper. This paper reviews the role of Islamic finance industry, specifically the Islamic banking and Islamic capital market in Malaysia, in contributing the realization and manifestation of the SDGs in its day-to-day business activities by analyzing few existing products in the local market namely, Islamic microfinance, Islamic green financing, green sukuk and ESG Islamic fund. The discussion presented in this paper predominantly derived from a comprehensive analysis conducted through literature review approach. The paper concludes that Islamic finance industry in Malaysia is still on the right track in terms of contributing to sustainable development goals, environmental preservation and social welfare, as advocated by the United Nations. All of the key stakeholders in Malaysia also have been working hard to make sure the overall Islamic financial ecosystem is aligning with the global sustainable finance movements. This paper provides an indirect motivation and personal incentive for the policy makers to continue assimilating and harmonizing the SDG elements into the Islamic finance industry.

The Sharia Funding Risk Issues in Fintech Securities Crowdfunding: Realization of Legal Certainty in the Shari'ah Perspective

Introduction: In the era of globalization and information technology, fintech is transforming the financial sector, including fintech securities crowdfunding, which is a funding model based on the participation of many small investors. In the context of sharia, sharia principles regulate financial transactions and services, while crowdfunding fintech securities is a popular phenomenon in sharia funding, but requires investor protection regarding investment risk and legal protection.Purposes of the Research: To analyze the legal certainty of protection for investors who invest in Islamic funding through fintech securities crowdfunding in Indonesia and analyze the risks faced by investors in this context.Methods of the Research: This study uses qualitative normative legal research methods to understand legal certainty and investor protection in Islamic funding through Fintech Securities Crowdfunding. Data collection was carried out through literature study and then analyzed qualitatively to identify patterns, themes and related issues.Results of the Research: Sharia funding through Fintech Securities Crowdfunding in Indonesia provides attractive Islamic investment opportunities but also involves various risks such as business risk, liquidity, legal, sharia, and others. Legal certainty regulated by Financial Services Authorityand Sharia Supervisory Board is the key in providing protection to investors. OJK regulations ensure information transparency and compliance with sharia principles, so that investors can invest with confidence according to sharia values. Thus, an investment ecosystem that has integrity and is inclusive within the sharia framework can be realized.

Crowdfunding: As an Alternative to Islamic Funding

In this digital era, the rapid development of the financial industry has significantly impacted several factors, including financial technology. Fintech services have become the focus of new technology applications, and one of the impactful fintech sectors is crowdfunding. Crowdfunding is a funding model that provides individual investors or a pool of investors to business owners of various new business ventures or social and cultural projects. Based on the crowdfunding phenomenon, there are currently many investors who are interested in funding several types of businesses. However, many investors or business owners are still unfamiliar with crowdfunding schemes, resulting in a lack of confidence in the funding schemes offered. In addition, crowdfunding aligns with the principles of Islamic finance, which avoids usury and promotes the equitable distribution of welfare. This research, based on published studies and indexed by Scopus, focuses on bibliometric research to explore the conceptual development of Islamic crowdfunding.
 Keywords: crowdfunding, Islamic finance, Shariah compliance, SRI, bibliometric analysis

A bibliometric and visualization analysis of Islamic fund management research

PurposeThis paper aims to provide bibliometric data from previously published research in Islamic fund management. Several categories, such as the most influential authors, the keywords and themes of the previously published research, were analyzed. Also, this paper provides a rigorous background for Islamic mutual funds research by synthesizing and reviewing the content of the previously published research to identify the gaps and provide future research direction.Design/methodology/approachData were gathered from Scopus databases from the year 2007 until 2022. A total of 115 articles were found published over the period of 15 years. Three different software, namely, R-Studio, VOSviewer and Excel are used to analyze the data that depict, among others, the most impactful authors in the field, the top journals covering Islamic fund management research and the most cited document. Content analysis of the previously published research was also provided.FindingsPublication in Islamic funds started gaining attention in the year 2012 and after. Collaborative works on Islamic funds are not strong yet among the contributory nations, although the USA and Malaysia contributed the highest number of publications. This study also found that there was a lack of research collaboration among authors in this research field, and most of the articles published were concentrated on the performance measurements of Islamic funds.Research limitations/implicationsResearchers might find the results of this paper useful, as they provide a comprehensive analysis of the previously published research in the field.Practical implicationsWhile these findings gave an overview of the intellectual structure of the research field, they also have the potential to inspire scholars working on Islamic funds research to collaborate on new research projects. Managers can also use this research to further enhance the emergence of Islamic fund management.Originality/valueThis is a comprehensive paper that examines previously published research in the field of Islamic fund management. The findings of this research benefit practitioners and researchers wishing to embark on research in this niche area.

Applications of Waqf-Featured Fund in the Malaysian Islamic Fund Management Industry: A Comparative Study

Historical evidence demonstrates the enormous role waqf institutions have played in the development and advancement of Muslims throughout the Muslim history. With the proper structure and strategy, waqf contributes to numerous spheres of life, including mainstream economic development. Contemporary development of Islamic finance has enabled the waqf concept to be linked to various financial products, including Shariah-compliant investment instruments, such as, Islamic unit trust funds and Islamic wholesale funds. This paper aims to highlight the current applications of the Waqf-Featured Fund (WFF) in the Malaysia Islamic Fund Management Industry. This is in relation to the launch of a new WFF framework to facilitate the offering of Islamic funds with waqf characteristics. The study took both qualitative via in-depth semi-structured interviews with eleven (11) WFF stakeholders, as well as, analyzing of policy documents, journal articles, books, and online resources. The findings shed light on the current issues and challenges confronting waqf projects in Malaysia, as well as the current guidelines and essential requirements for the WFF, the current application of the WFF in the Malaysian Islamic Fund Management (IFM) industry, and a proposal for the future application model, which includes fund collection, investment structure, distribution process, and fund reporting.

CROWDFUNDING: AS AN ALTERNATIVE TO ISLAMIC FUNDING

This study aimed to explore deeper conceptually about crowdfunding as alternative funding according to Islamic principles. There are still limitations to looking for similar research, so this research will be fundamental to study, especially for business actors or investors who want to take part in a halal business and have a high social value. Based on published studies and indexed by Scopus, this research is based on bibliometric research to see the conceptual development of Islamic crowdfunding. The bibliometric approach to reviews has gained popularity due to several factors, including the introduction of software, cross-disciplinary methods, and increased ability to handle large volumes of data. The results showed that the development of literature on Islam Crowdfunding as alternative Islamic funding had made rapid progress in recent years. The existence of public awareness of social values and welfare is one of the factors that support the success of Islamic crowdfunding. Crowdfunding is beneficial for funding companies. It dramatically facilitates investors in getting access to information related to the distribution of funds that must be done as well as from the side of the return of funds.

Islamic Fund Managers' Market Timing Abilities and their Impact on Fund Performances

This study examines Shariah-compliant fund's financial performance compared to conventional funds based on managerial timing abilities. Compared with traditional fund managers' timing skills, the study focuses on the most neglected area of Shariah-compliant manager timing abilities, liquidity, and volatility timing abilities. The study uses 69 funds whose significant exposure is the equity between January 2010 and June 2022, consisting of three investment styles: equity, asset allocation, and balanced funds. The study incorporates volatility factors based on Busse (1999) and liquidity factors from Amihud (2002) into the Carhart (1997) four-factor model. The study found that Islamic fund managers have better liquidity and volatility timing skills than conventional fund managers. The results are robust for analyzing individual funds based on different liquidity measures. There is no substantial evidence that Islamic and traditional fund managers can predict market returns.

Conceptualization of Islamic Spiritual Intelligence (ISI) in the Islamic Financing Adoption

Islamic financing is the methods and types of funding a personal or business uses which consist of sale-based and equity-based, used to carry out unique benefits and capital investments. Islamic financing research is very restricted and needs to be more developed, notably on the demand side or the consumer. This article aimed to explore the impact of Islamic Spiritual Intelligence (ISI) on the behavioural intention of Islamic financing adoption. This study uses a content analysis technique to accomplish this goal. The study is based on reading scholarly papers and related materials and is based on ISI theme theories and the use of Islamic funding. The analysis discovered that ISI has a favourable relationship with consumer behaviour regarding Islamic financing adoption.

Success factors for peer-to-peer lending for SMEs: Evidence from Indonesia

Sharia fintech lending grew up at the teenage stage and has successfully taken a strategic place in the Indonesian loan market. Adopting the economics of information and signaling theory, this paper investigates the probability of successful crowdfunding. Using cross-section data, this study analyzes 1,153 funded projects on Ammana.id platform, a well-known Indonesia’s sharia P2P lending. This study runs OLS regressions to examine the effect of loan information (ranking, estimated profit shares, and financing duration) on the amount of crowded funding. This finding support both theories, that the information about the loan is a signal in determining the success of project funding. Ranking and duration of financing significantly affect the success of the P2P sharia lending platform, nevertheless profit share estimation is not significant. Loans that operated in short, tend to raise more funding, and vice versa. Loan ranking can provide the lender with instant information about the borrowers’ condition. Lenders tend to avoid low rankings loans due to the potential failure of loan payments. This study also found a surprising result that the coefficient of profit sharing is positive for Islamic funding but insignificant. This result shows that material gain is not the main issue for investors, but the elements of trust and justice are nobler according to Islamic beliefs. This study proves that loan information as a low-cost signal can be used by investors to make the best decision and reduce adverse selection problems. The findings support the strategic growth of Islamic platforms to build a sustainable Islamic investment and maintain financial stability. Acknowledgments Appreciation is given to the General Directorate of Higher Education, Research and Technology, Ministry of Education, Culture, Research and Technology, and the Institute for Research and Community Service of Universitas Islam Nahdlatul Ulama (Unisnu) Jepara, Indonesia.

Analysis of Selectivity, Timing, Persistence and Correlation of Islamic vs. Conventional Saudi Mutual Funds

The purpose of this study was to evaluate the selectivity and timing performance and persistence in active Saudi mutual funds through a comparative work involving 100 Islamic funds against 51 conventional funds trading in Saudi TADAWUL stock Exchange from 2010 to 2015. We have split each group based on 6 regional investment categories: Local, International, Arab, Asian, European and American (US). We employed specific models to assess selectivity and timing performance. Then we investigated their persistence. Findings indicated superior selectivity with Arab Islamic funds compared to conventional peers and similar negative selectivity in both Islamic and conventional International funds. In addition, there was evidence of selectivity with US conventional funds, and none with Islamic peers. Furthermore, results showed significantly higher timing with local and Arab conventional funds compared to their respective Islamic peers. As for the performance persistence, there were signs of selectivity and timing persistence for both Islamic and conventional funds, mostly on local, International and Arab levels. Nevertheless, Islamic funds’ performance persistence in both skills was longer. Finally, both Islamic and conventional selectivity and timing were negatively correlated overall, indicating skills’ mutual exclusiveness and specialization. We recommend studying a larger sample, for a longer period. Different grouping may be applied, based on asset classes, i.e. Equity, Bond, Balanced, Income, etc. The study can even extend to a multi-market or multi-regional investigation i.e. MENA region.

Islamic Investment Financing and Commercial Banks Facilities: Mediation Effect of the Islamic Bank Size

Purpose: The objective of this study was to investigate the effect of Islamic financing on commercial banks’ credit facilities tested under the mediation of the two variables of Islamic bank size (Total asset and Investment deposit).
 Theoretical Framework: Even though studies of Islamic banking funding have been done within the Islamic economics and finance context, there has been needed to explore the effect of mediating the size of the Islamic bank and the relationship between Islamic financing and commercial banks’ credit facilities.
 Design/Methodology/Approach: We used the methodologies of Baron and Kenny (1986) and Preacher and Hayes (2008) to test a mediation effect of the Islamic bank size variable. Regarding the testing and validity of the hypothetical research model, path analysis was used within the structural equation modeling analysis. The study sample consists of 16 commercial and Islamic banks in the Jordanian banking sector, it is comprehensive of all listed banks' data in the Amman stock exchange, to the possibility of fairly generalizing the results to the community.
 Finding: Results indicate that the two variables of size indicators may partially mediate the direct effect of Islamic financing on commercial banks’ credit facilities. Such an effect is statistically significant. The findings provide practical solutions to enhancing competition in the Jordanian commercial and Islamic banking services market through various Islamic financing services to maintain and sustain banking resources.
 Research, Practical & Social implications: Future studies can consider other indicators of Islamic bank size and assess their influence on the various dimensions of the relationship between Islamic funding methodology and commercial bank facilities
 Implications/Originality/Value: This study contributes to the literature on Islamic banking by analyzing the results of the effect of Islamic investment financing formulas on the commercial credit market in Jordanian banking, and it offers a practical and applied perception of the role played of the Islamic banking methodology in the Jordanian commercial credit market.

DO INVESTORS OF ISLAMIC EQUITY FUNDS FOLLOW WARREN BUFFET’S ADVICE? A REGRESSION ASSESSMENT

Researchers have doubted Islamic funds’ ability to provide promising financial returns due to the shariah screening procedures. Despite its popularity, Islamic funds are still in doubt to generate attractive returns. Survival of Islamic funds is highly contingent on their capacity to foresee Shariah compliance opportunities in economic shifts. Investors defer fund withdrawal of the worst-performing funds and anticipate the manager will adjust the fund's investing strategy for a future with higher yields. Thus, this paper aims to investigate investors’ reactions to the Islamic equity fund results (IEs) according to the opportunity motive of Warren Buffet. This is accomplished by evaluating the relationship between fund flow and performance. This allows us to determine whether investors behave toward the greatest and worst-performing funds by transferring cash into or out of the funds. This study uses panel data analysis to investigate 134 IEs from 2007 through 2019. The findings revealed that the link between fund flow and performance of IEs is incompatible with the asymmetric relationship, implying that the cash outflow for poorly performing funds declined. In contrast, cash inflow fell for funds that performed the best. Consistent with Warren Buffet’s advice. Keywords: Islamic equity funds; fund flow; fund performance; Warren Buffet