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The paper attempts to analyze the volatility of returns and expected losses of Islamic bank financing. In particular, it takes the case of Indonesian Islamic banking industry.
Abstract
Purpose
The paper attempts to analyze the volatility of returns and expected losses of Islamic bank financing. In particular, it takes the case of Indonesian Islamic banking industry.
Design/methodology/approach
The paper uses Value at Risk (VaR) approach to compute the volatility (risk) of returns and expected losses of Islamic bank financing. In particular, it uses variance‐covariance method to calculate VaR of multi‐asset portfolios (groups of equity‐, debt‐ and service‐based financing).
Findings
First of all, equity and debt‐based financing produce sustainable returns of bank financing. Moreover, they are also very resilient during unfavorable economic conditions. Second, the performance of service‐based financing is very sensitive to the economic conditions. Lastly, VaR computation on the volatility of returns and expected losses of bank financing finds that risk of investment and expected losses are well managed.
Practical implications
The paper demands Islamic banks to keep intensifying equity‐based financing rather than only debt‐based financing and improve the banking services to support the performance of service‐based financing.
Originality/value
To the best of the author's knowledge, this is the first paper to assist the volatility of returns and expected losses of the Islamic banking financing in Indonesian.
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Keywords
Progress towards addressing the skills shortage in Islamic finance.
Details
DOI: 10.1108/OXAN-DB197767
ISSN: 2633-304X
Keywords
Geographic
Topical
The purpose of this paper is to analyze the compatibility of Islamic banking with the Italian banking system, to report what Italian legislators are currently doing to accommodate…
Abstract
Purpose
The purpose of this paper is to analyze the compatibility of Islamic banking with the Italian banking system, to report what Italian legislators are currently doing to accommodate Islamic finance in the Italian banking system, and to explore solutions to the obstacles that have been identified.
Design/methodology/approach
The paper provides background on the Italian banking system as it works within the European Union (EU); shows some analogies between ethical and Islamic banking; traces the development of Islamic finance; explains the principles of Islamic finance and their impact on common transactions; describes the development of the Islamic finance industry; and analyzes the compatibility of Islamic finance with the Italian banking system.
Findings
Although Italy offers a fertile and flexible legal environment, dedicated banking laws and regulations and, consequently, Islamic banks have not yet been established in Italy. Further research is needed on how to reconcile Islamic banking with EU regulations and the Italian banking system.
Originality/value
The paper presents practical analysis from an experienced Italian financial services lawyer.
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Ahmad Roziq, Moch Shulthoni, Eza Gusti Anugerah, Ahmad Ahsin Kusuma Mawardi and Whedy Prasetyo
This paper aims to create a model of musharaka financing performance and Islamicizing agency theory to explain issues related to musharaka financing and propose solutions to these…
Abstract
Purpose
This paper aims to create a model of musharaka financing performance and Islamicizing agency theory to explain issues related to musharaka financing and propose solutions to these problems.
Design/methodology/approach
This research focuses on Islamic banks located in East Java Province, Indonesia, as the population for investigation. This study used primary data collected through a questionnaire instrument. The research adopts a mixed method approach, integrating quantitative data using the smartPLS program, qualitative data using a case study and kasyif research.
Findings
This research revealed that employee competence, Islamic business ethics and monitoring significantly impact the risk of musharaka financing. In contrast, information asymmetry does not significantly influence the risk of musharaka financing in Islamic banks. On the contrary, information asymmetry, Islamic business ethics and monitoring significantly affect the performance of musharaka financing. However, employee competence and risk of musharaka financing do not significantly influence the performance of musharaka financing in Islamic banks.
Research limitations
The responses to the questionnaire are analyzed from the perspective of directors and financing managers of Islamic banks who possess expertise in management and act as financing providers. However, musharaka partners who receive financing may have different perceptions and experiences of implementing musharaka financing.
Practical implications
Financing managers and directors at Islamic banks need to minimize the risk of musharaka financing and alleviate information asymmetry by enhancing employee competence and selecting musharaka partners capable of adhering to Islamic business ethics.
Social implications
Partners of musharaka financing should enhance their Islamic business ethics. Next, other researchers should improve this study by expanding the research locations, increasing the sample size, incorporating additional variables and involving musharaka partners as respondents.
Originality/value
It is a new research using three methods to construct a model of musharaka financing performance. The research refines agency theory by integrating Islamic values into Sharia agency theory.
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Fahru Azwa Mohd Zain, Siti Fariha Muhamad, Hamdy Abdullah, Sheikh Ahmad Faiz Sheikh Ahmad Tajuddin and Wan Amalina Wan Abdullah
This conceptual paper aims to delineate a comprehensive blueprint for the integration of environmental, social and governance (ESG) principles within the framework of Takaful…
Abstract
Purpose
This conceptual paper aims to delineate a comprehensive blueprint for the integration of environmental, social and governance (ESG) principles within the framework of Takaful operations, guided by the principles of Maqasid al-Shariah. The primary purpose is to establish a robust foundation for the sustainable transformation of Takaful, aligning it with ethical finance and Islamic values.
Design/methodology/approach
Using a theoretical research approach, this study delves into the multifaceted dimensions of ESG principles and the principles of Maqasid al-Shariah within the context of Takaful operations. The 17 SDGs/ESG principles and Maqasid al-Shariah are integrated to give a thorough framework for comprehending the disclosure index from western and Islamic ethical viewpoints. The research critically analyses current literature, scholarly works and authoritative sources, drawing inspiration from established approaches. Qualitative content analysis examines and compiles pertinent ideas, and the expert validates the disclosure index. It identifies key convergence, compatibility and divergence points between ESG principles and Maqasid al-Shariah to construct a comprehensive framework for Maqasid-driven ESG integration in Takaful.
Findings
The paper presents a well-defined blueprint for Maqasid-driven ESG integration in Takaful, revealing substantial areas of alignment between the two frameworks. This alignment is particularly pronounced in protecting life, religion, intellect, lineage and wealth. The blueprint underscores the potential of harmonising ESG principles with the principles of Maqasid al-Shariah, providing Takaful operators with a roadmap for enhancing their ethical credibility, societal impact and environmental stewardship.
Research limitations/implications
The blueprint outlined in this study opens new avenues for research at the intersection of Islamic ethics, responsible finance and sustainable development and signals the necessity of developing a standardised disclosure index. This index will serve as a vital tool for Takaful operators to transparently communicate their commitment to ethical and sustainable practices, facilitating a deeper understanding of Maqasid-driven ESG integration and bolstering transparency for all stakeholders. Further research into this disclosure index’s practical implementation, empirical validation and strategic implications is encouraged to advance responsible finance within the Takaful industry.
Practical implications
The proposed blueprint provides Takaful operators with a practical guide to align their operations with both ethical finance and Islamic principles. Embracing the principles of responsible governance, societal welfare and environmental sustainability, Takaful operators can enhance their product offerings, attract socially conscious stakeholders and contribute positively to both financial and ethical objectives.
Social implications
Integrating Maqasid-driven ESG principles in Takaful signifies a commitment to broader social well-being. Through initiatives aimed at safeguarding life, religion, intellect, lineage and wealth, Takaful operators can play a pivotal role in fostering social cohesion, empowering communities and actively contributing to sustainable development goals.
Originality/value
This conceptual paper contributes to the field by presenting a unique blueprint for integrating ESG principles within Takaful operations, guided by Maqasid al-Shariah. The novelty of this approach lies in its holistic perspective on ethical finance, aligning Islamic values with contemporary global ethical imperatives. The blueprint offered here represents an original framework for responsible Takaful practices that resonate with evolving ethical standards and the enduring principles of Islamic finance.
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Keywords
Youssef Chetioui, Hind Lebdaoui, Zakaria Belouali and Adel Sarea
Though Murabaha financing experienced substantial growth in several majority-Muslim countries, its market share in the Moroccan banking industry is still very narrow than other…
Abstract
Purpose
Though Murabaha financing experienced substantial growth in several majority-Muslim countries, its market share in the Moroccan banking industry is still very narrow than other conventional banks’ instruments. The current research investigated the ability of an extended theory of planned behavior (TPB) framework to explain the main drivers of attitude and intention to use Murabaha financing among Moroccan households. The moderating effect of Islamic religiosity was also scrutinized.
Design/methodology/approach
Data were collected via a survey of 512 Moroccan consumers and analyzed using the partial least squares (PLS) technique.
Findings
First, attitude toward Islamic banking products is a key predictor of consumer intention to use Murabaha financing. At the same time, consumers’ attitudes are influenced by Islamic financial literacy, subjective norms, behavioral control and profit and loss sharing. Islamic religiosity was also found to positively moderate the link between attitudes towards Islamic banking (IB) and intention to use Murabaha financing, e.g. positive attitudes toward IB are more likely to convert into an intention to use Murabaha financing among Muslim consumers with higher levels of religiosity.
Managerial implications
To boost consumers’ intention to use Murabaha financing, Islamic bank managers should consider further investment in advertising to enhance consumers’ awareness about IB products. Islamic banks should also consider digital and social media marketing to increase consumers’ awareness about the products and spread a positive e-WOM with regards to their products. Our findings emphasize the importance of Islamic religiosity in shaping Muslim consumers’ intentions to use Murabaha financing. Islamic banks ought to make sure that Murabaha financing contracts are strictly adherent to and compliant with Shari’ah principles. They should also train their frontline employees on Islamic financing activities so that they can effectively respond to the queries and questions of Murabaha potential consumers.
Originality/value
The study findings contribute to the IB literature by demystifying the key factors shaping Muslim consumers’ intentions to use Murabaha financing. The study also extends the literature by emphasizing Islamic religiosity as a basis for Muslim consumers’ behavior in the context of IB. To the best of our knowledge, this study is among the first to empirically investigate Muslim consumers’ intention to use Murabaha financing in North Africa and the Arab countries.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-10-2022-0680
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Keywords
Annisa Adha Minaryanti, Tettet Fitrijanti, Citra Sukmadilaga and Muhammad Iman Sastra Mihajat
The purpose of this paper is to engage in a systematic examination of previous scholarship on the relationship between Sharia governance (SG), which is represented by the Sharia…
Abstract
Purpose
The purpose of this paper is to engage in a systematic examination of previous scholarship on the relationship between Sharia governance (SG), which is represented by the Sharia Supervisory Board (SSB), and the Internal Sharia Review (ISR), to determine whether the ISR can minimize financing risk in Islamic banking.
Design/methodology/approach
The literature search consisted of two steps: a randomized and systematic literature review. The methodology adopted in this article is a systematic literature review.
Findings
To reduce the risk of financing in Islamic banking, SG must be implemented optimally by making rules regarding the role of the SSB in supervising customer financing. In addition, it is a necessary to establish an entity that assists the SSB in the implementation of SG, namely, the ISR section, but there is still very little research on the role of the SSB and ISR in minimizing financing risk.
Practical implications
Establishing an ISR to assist the SSB in carrying out its duties has direct practical implications for Islamic banking: minimizing financing risks and compliance with Islamic Sharia principles. In addition, new rules regarding the role of SSBs and the ISR in reducing credit risk include monitoring customers to ensure that they fulfill their financing commitments on time. This new form of regulation and review can be used as a reference by the Otoritas Jasa Keuangan or Finance Service Authority to create new policies or regulations regarding SG, especially in Indonesia.
Originality/value
Subsequent research may introduce other more relevant variables, such as empirically testing the competence, independence or integrity of SSB and the ISR team as it attempts to minimize the risk of financing in Islamic banks. In addition, further research is expected to examine whether the SSB or the ISR team has a positive or negative influence on the risk of financing Islamic banks with secondary data.
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Keywords
The purpose of this study is to conduct a systematic content review and bibliometric analysis of the current research trends, core concepts and knowledge mapping on the topic…
Abstract
Purpose
The purpose of this study is to conduct a systematic content review and bibliometric analysis of the current research trends, core concepts and knowledge mapping on the topic Islamic Banking and Finance (IBF) during Covid-19. Apart from highlighting the contributions of prolific authors, prominent institutions and countries, a comprehensive review of a significant number of documents using co-citation and co-word analysis is carried out for the science mapping.
Design/methodology/approach
A data set of 125 papers was collected published in Scopus database during the period December, 2019 and January 5th, 2023. Yearly publications, most-cited papers and authors, active sources, affiliations and countries are highlighted with descriptive analysis. Knowledge structure of the topic was mapped with investigating the social, intellectual and conceptual structures of IBF research. Content analysis is carried out to uncover the underlying research clusters that shape the scientific knowledge structure of studies.
Findings
A diverse group of authors and institutions contribute to the growing body of knowledge on the topic. IBF is adopting new paradigms and frameworks to integrate FinTech, crowd funding and Islamic social finance to provide sustainable solutions in both crisis and normal periods. The research on IBF is classified in to three themes: “financial markets in Covid-19,” “modeling risk and market regimes” and “FinTech and Islamic social finance.”
Research limitations/implications
This study collects data only from Scopus database. Future studies must include research articles from other databases such as, Web of Sciences.
Originality/value
This study highlights research gaps in the existing literature and provides directions for future research.
Details
Keywords
Denizar Abdurrahman Mi'raj and Salih Ulev
Given the overlapping themes and periods in specific subjects within Islamic economics and finance bibliometric research, which may yield similar findings in bibliometric studies…
Abstract
Purpose
Given the overlapping themes and periods in specific subjects within Islamic economics and finance bibliometric research, which may yield similar findings in bibliometric studies, it is essential to document the growth of Islamic economic and financial research using bibliometric methodologies. This study aims to understand better the critical bibliometric review trends and scientific advancements in Islamic economics and finance.
Design/methodology/approach
This study uses bibliometric analysis, collecting 46 Islamic economics bibliometric papers from the Web of Science Core Collection from 1975 to 2022. The authors generated top scientific scholars, keyword analysis, citation analysis, content analysis and conclusions for journal development using R Biblioshiny, VOSviewer, ATLAS.ti and Excel.
Findings
This study has established a comprehensive bibliometric framework for Islamic economics and finance bibliometric papers, encompassing all critical areas within the discipline and identifying any remaining research gaps. The major significant areas revealed were Islamic social finance and microfinance concerns, which are closely pertinent to the issues of ethics, corporate social responsibility and sustainability, respectively. The authors also identified opportunities for future bibliometric analyses in Islamic economics and finance, which include using more comprehensive databases, refining or broadening search strategies, using advanced techniques and units of analysis and suggesting themes for further exploration.
Research limitations/implications
The study relies merely on the Web of Science Core Collection database, which provides the most in-depth citations by source for the world’s scientific and scholarly research. Future research may consider expanding its scope to include other databases for a broader range of sources. Furthermore, due to the rise of bibliometric studies in Islamic economics and finance, this study also comments on the saturation of bibliometric studies conducted in several similar areas. While researchers bring their unique analytical perspectives to bibliometrics, this study provides a comprehensive view of existing research in Islamic economics and finance, highlighting well-explored topics and those that remain less studied. Thus, this could assist researchers in determining their future research priorities.
Practical implications
Policymakers in Islamic financial and economic institutions, including banking institutions, social, financial institutions and halal institutions, should be impacted by this research when making policies or conducting research. The viability of the current Islamic economic and financial ecosystem will be indirectly maintained and managed by these implications.
Social implications
This comprehensive meta-analysis in Islamic economics and finance is expected to impact the development and sustainability of the Islamic economic and financial ecosystem, promoting societal welfare through applying Islamic economics and finance.
Originality/value
This pioneering bibliometric analysis of Islamic economics and finance papers aims to offer insights and projections for future research in the field. This research contributes to the literature by examining various aspects, including evaluating literature on trending topics, analyzing papers related to research areas and conducting content analysis of existing bibliometric studies in Islamic economics and finance. It specifically groups these studies around fundamental topics, summarizes findings from contemporary research and identifies emerging research gaps.
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This chapter uses Islamic finance to question the universality of contemporary finance leading principles. It establishes the existence of different financial paradigms and…
Abstract
Purpose
This chapter uses Islamic finance to question the universality of contemporary finance leading principles. It establishes the existence of different financial paradigms and attempts to determine the form that might take operations in a non-profit maximising context.
Methodology/approach
This chapter uses Thomas Kuhn’s notion of paradigm to demonstrate that Islamic finance has its own dominant logic and, hence, cannot be reduced to a subset of contemporary finance. It describes how the former has been infused by the leading principles of the latter following the adoption by the Islamic financial field of an accounting system using a conventional referential as a point of reference. Finally, the chapter elaborates on the form that might take financing if profit maximisation is not the operation’s main purpose.
Findings
If the condition of profit maximisation is relaxed, the utilisation of Islamic finance instruments might lead to the creation of economical microcycles able to enlarge the socio-economic reach of financing operation.
Originality/value
The notion of economic intermediation is introduced to describe the operations of Islamic banks using their instruments in a non-maximising context. This approach should not be restricted to Islamic finance but viewed as the result of a case study advocating for an alternative view of finance favouring socio-economic development.
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