This study examines the role of Islamic banking in advancing climate change adaptation. Applying fixed effects and System Generalized Method of Moments estimators to panel data from 29 dual banking countries from 1995 to 2021, we find that a one-standard-deviation increase in the share of Islamic banking assets is associated with a 1.773-point improvement in the climate adaptability index. When climate adaptation is decomposed into its two constituent dimensions, climate vulnerability and climate readiness, we find that Islamic banks contribute significantly to enhancing climate readiness, while their impact on reducing vulnerability is less pronounced. The contribution is particularly salient in countries where Islamic banking is systemically important, underscoring the significance of market penetration and institutional embeddedness. Additionally, Islamic banks are shown to have maintained a consistent, positive contribution to climate adaptation both before and after the adoption of the Paris Agreement in 2015. These findings underscore the normative alignment between the ethical foundations of Islamic finance and the environmental commitment of global communities. This study offers important policy implications, including the need for stronger regulatory support, deeper integration of Islamic finance within national climate strategies, and strengthened climate governance within Islamic banks. It also adds to the literature by providing new empirical evidence on the distinctive and evolving role of Islamic banking in supporting macro-level climate resilience. Acknowledgment The first author acknowledges the support of the Securities Commission Malaysia in awarding the fellowship at the Oxford Centre for Islamic Studies, during which this paper was completed.
This study explores integrating Sharia principles with Socially Responsible Investing (SRI) to achieve comprehensive Sharia values (kaffah) and sustainability for the case of Indonesia. Proposing screening criteria and forming a sustainable Sharia-SRI portfolio, the study compares its performance with Islamic-screened and conventional portfolios. Using shares from the Indonesian Sharia Stock Index (ISSI) and SRI-Kehati, and analyzing their daily closing prices for ten year period spanning from 2014 to 2023, the Wilcoxon Signed Rank Test reveals that the Sharia-SRI integrated portfolio yields higher returns than ISSI and SRI-Kehati over the long term. These findings suggest that integrating Sharia and SRI can address environmental and human rights issues, attract more investors, achieve kaffah and promote ethical investment practices.
This study examines whether ESG and Shariah compliance has synergistic crisis buffers for Indonesian capital markets based on the stakeholder theory and Islamic finance stability principles. Using 3,976 firm-year observations (2011-2024) and System-GMM estimation, we find no significant interaction effects of ESG and Shariah during geopolitical crises. However, we identify four boundary conditions for the null findings: (1) market saturation (73.9% Shariah compliance erodes firm differentiation); (2) crisis specificity (systemic shocks transcend firm-level stakeholder adaptations); (3) parallel legitimacy (ESG and Shariah accommodate distinct stakeholder channels); and (4) measurement horizon (short-term returns overlook stakeholders' long-term value). Theoretically, we establish that stakeholder benefits depend on firm differentiation, and crisis type specificity—applicable to idiosyncratic, but not systemic crises. Practically, regulators should treat sustainable finance and Islamic finance as dual development pathways, and investors should use an ESG-Shariah framework to foster non-financial well-being during a crisis, not to seek return generation. Our contributions not only offer empirical boundary conditions for stakeholder theory in developing Islamic markets but also demonstrate how methodological factors influence values-based investing studies. The findings are contingent on our governance-centric ESG proxy, the elevated Shariah compliance percentage in Indonesian markets, and the short-term return-focused evaluation outcome. Acknowledgment This research is supported by the BIB-LPDP scholarship from the Ministry of Religious Affairs (Kementerian Agama), Republic of Indonesia. The authors would like to express their gratitude for the funding and support provided throughout this study.
This study investigates the factors that influence existing and potential customers’ intention to adopt Islamic microfinance in the Gambia using the Theory of Planned Behavior (TPB). The study further examines the mediating role of attitude towards the intention to adopt Islamic microfinance. Collecting data from 350 respondents in the Gambia through a self-administered questionnaire, we analyze the relationships between TPB constructs and the intention to adopt Islamic microfinance using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results reveal significant relationships between TPB constructs and the intention to adopt Islamic microfinance. Further results show that awareness and knowledge significantly influence intention to adopt Islamic microfinance through the mediating role of attitudes. This research adds to the extant literature on Islamic microfinance by providing empirical evidence on factors influencing behavioral intentions. It extends the application of TPB to Islamic microfinance, offering valuable insights to policymakers and practitioners. Findings suggest that enhancing awareness and knowledge about Islamic microfinance can positively influence attitudes towards its adoption. In light of the findings, policymakers and financial institutions should focus on educational campaigns and information dissemination to promote Islamic microfinance as a viable financial inclusion tool.
This study empirically examines a mediated moderated mechanism to explain customer satisfaction with halal purchase intentions via word of mouth, grounded on Expectation-Confirmation Theory (ECT). Compiling data from purchasers of fast-moving consumer goods (FMCG) by means of structured questionnaires, we employ partial least squares structural equation modeling (PLS-SEM) to address the objective of the study. Our findings indicate that service quality reliability plays a pivotal role in influencing customer satisfaction. Likewise, the physical environment in which customers are provided services plays a decisive role in consumer fulfillment. This indicates that service excellence reliability also performs a crucial function in ensuring satisfaction among customers. Acknowledgment The authors extend their appreciation to the Deanship of Research and Graduate Studies at King Khalid University for funding this work through a large-group Research Project under grant number (RGP.2/66/47).
This study analyzes the effects of corporate and Shari’ah governance on risk-taking practices in Islamic financial institutions in Pakistan. It also investigates the role of institutional quality in moderating these effects. A sample of 28 institutions over the period 2011–2022, including Islamic commercial banks, Takaful operators and Modarba companies, was utilized for the analysis. Applying the generalized method of moments (GMM) estimator, the results suggest that several individual characteristics of corporate governance and its index are significantly related to Shari’ah non-compliance and solvency risk. The findings also reveal that institutional quality significantly contributes to the lowering of risk. It is recommended that modern corporate and Shari’ah governance practices be adopted to manage both Shari’ah non-compliance and solvency risk.
Using 5,806 bank–year observations from 17 Asian and African economies over the years 2012–2022, we examine how artificial intelligence (AI) adoption influences bank risk-taking and whether cybersecurity capacity moderates this relationship. We find that AI intensity is associated with higher risk-taking at prevailing adoption levels. We also note that their relationship is concave, suggesting a shift from “risk-ramping” during early deployment to “discipline” as model governance and monitoring mature. We also find that stronger cybersecurity attenuates AI’s marginal risk effect. Heterogeneity is evident: conventional banks exhibit higher turning points, reflecting a longer risk ramp, whereas Islamic banks peak earlier, consistent with stricter governance structures and more risk-averse practices. Results are robust in various sensitivity analyses. The findings suggest that AI scaling in banking requires synchronized advancement in cybersecurity and a model-risk management framework, aligned with evolving supervisory doctrine on digital resilience and AI governance.
This study examines the key factors influencing the acceptance of zakat on digital assets in Malaysia. It employs a modified Attitude-Social Influence-Efficacy (ASE) model and makes use of SmartPLS 4.0 to investigate the acceptance of zakat on digital assets among 440 millennial zakat payers. All factors derived from the ASE and the perceived fatwa legitimacy demonstrate significant relationships with such acceptance. Our findings have practical implications. For example, zakat institutions can enhance zakat on digital assets and utilization by applying key concepts from the ASE model and considering the importance of fatwa legitimacy.
This paper examines the impact of country specific EPU on Islamic stock indexes of developed, emerging, and frontier markets using Quantile on Quantile Regression (QQR). For robustness, we employ causality in mean and variance. We gather Islamic stock indexes and country specific EPU data from nine markets, classified as developed, emerging, and frontier, from January 2010 to November 2024. Our findings demonstrate that EPU exhibits predictive power for Islamic stock indexes across different quantiles (lower to higher). Additionally, the effect of EPU on respective Islamic stock indexes is asymmetric. Finally, we also show that country specific EPU negatively (positively) impacts Islamic stocks during bearish (bullish) periods of economic activity. These findings add to our understanding of and contribute to the limited literature on Islamic stock markets, highlighting their unique characteristics and responses to policy-driven uncertainties.
This paper introduces the Best Sharia-based Capital Asset Pricing Model (BSCAPM), a mathematical modification of the BCAPM model integrating Islamic finance principles. The study focuses on optimizing the beta in the model, incorporating factors aligned with Islamic principles, such as zakat and purification, while excluding short selling. Using data from the Jakarta Islamic Index (JII) from June 2020 to May 2024, the BSCAPM portfolio outperforms the BCAPM portfolio in terms of the Sharpe ratio. The results suggest that BSCAPM could serve as an effective alternative for modeling in Islamic investments, providing Muslim investors with a Shariah-compliant, optimal portfolio formation model. The research contributes to the underexplored domain of portfolio selection modeling in the Islamic sector, enriching references on asset pricing of Shariah portfolios, particularly in the Indonesian Shariah stock market.
This study applies an integrated Quantile Vector Autoregression and Quantile Regression to examine spillover dynamics in the FinTech context. By analysing the period from 2019 to 2024, which includes significant events such as the COVID-19 pandemic, the 2023 banking crisis, and notable regulatory developments, the study captures nonlinear and asymmetric relationships between FinTech attention (ATFIN), FinTech stock performance (FINTS), and financial stock returns, for both conventional (FINS) and Islamic (IFINS) stocks. The findings suggest that ATFIN tends to respond to market movements during normal and bearish conditions, while it becomes a net transmitter during bullish periods, amplifying investor sentiment and speculative activity. Conventional financial stocks consistently emerge as strong transmitters of market spillovers, whereas Islamic financial stocks function mainly as receivers, especially during market upswings, indicating their potential role as a stabilizing force. These results contribute to the literature on behavioural finance and financial contagion by highlighting the asymmetric behaviour of FinTech attention across market regimes. The study also offers practical implications for regulators and institutional investors. Monitoring ATFIN may help identify speculative trends, while Islamic FinTech models could appeal to more risk-averse investment profiles.
Maintaining good service quality in halal certification procedures has become crucial as the demand for halal products grows globally. Focusing on Indonesia, this study investigates the relationship between firm satisfaction with halal certification services and support systems, human capital, and anti-bribery practices. The study uses Structural Equation Modelling (SEM) and the SERVQUAL framework to analyze survey data from 2,367 businesses with halal certifications in 32 Indonesian provinces. The aim is to reveal the determinants of satisfaction and the impact of institutional performance on service delivery. The findings demonstrate that employees with responsiveness, empathy, assurance, and good communication significantly improve not only the perceived quality of services but also the efficacy of anti-bribery initiatives. Meanwhile, support systems that enhance employee performance and customer satisfaction include sufficient equipment, transparent quality control, and complaint procedures. These findings highlight that integrity and professionalism are just as important as technical systems to make certification successful. This study provides insights for certifying organizations and legislators in formulating strategies to boost the competitiveness of Indonesia's halal market, increase efficiency, and build confidence. Strengthening institutional capacity and reducing bureaucratic barriers can help ensure a more reliable and business-friendly certification ecosystem. ACKNOWLEDGMENT This work was supported by Airlangga University under the Research Scheme “Penelitian Unggulan Halal” (Grant Number: 63/ST/UN3. HALAL/PT.March 01, 2024).
This study investigates consumer insights on halal certification in Malaysia by examining awareness, perception, visibility, trust, and purchase behaviour, with religious belief as a moderator. Using a non-probability purposive sampling method, 801 valid responses were collected and analysed with Partial Least Squares Structural Equation Modeling (PLS-SEM). The results show that perception and awareness significantly influence trust, while visibility has no significant effect. Trust and religious belief strongly predict purchase behaviour, and religious belief also moderates the relationship between trust and purchase. It should be noted, however, that the sample disproportionately represents Indigenous Sabah respondents, while Malay respondents—the national majority—are underrepresented. Therefore, the findings are context-specific and not generalisable to the entire Malaysian population. Despite this limitation, the study provides useful insights into consumer trust in halal certification and offers practical recommendations for practitioners, regulators, and policymakers, as well as theoretical contributions for future research. ACKNOWLEDGMENT This paper was supported by the Geran Penyelidikan Dana Kluster (DKP) Fasa 1/2023 (DKP0020). The authors gratefully acknowledge the financial support provided through this grant, which has facilitated the implementation of this research. The authors also sincerely thank the journal’s editors and reviewers for their valuable comments and suggestions that helped improve the quality of this paper.
This study introduces Sharīʿah analytics, a novel methodological framework leveraging machine learning and big data analytics, to systematically analyze classical Islamic jurisprudential texts (furūʿ al-fiqh kitābs), and further assesses cryptocurrencies against the Islamic monetary principles. Sharīʿah analytics is done via computationally processing 55 texts across four Sunni and one Shia legal tradition, examining Arabic currency-related terms and their fundamentals to explain whether cryptocurrencies align with pre-modern juristic definitions rooted in physicality, standardization, and regional acceptance. Findings reveal that cryptocurrencies inherently diverge from classical criteria, e.g., weight-based valuation, intrinsic material purity, and communal consensus, interpreting them non-compliant with traditional Islamic currency frameworks. This approach advances Islamic monetary scholarship, offering a data-driven lens to reconcile ethical monetary principles with emerging digital economies. The study fills a gap in existing literature by systematically contextualizing cryptocurrency debates within primary juristic sources rather than relying on speculative analogies or fragmented scholarly opinions. ACKNOWLEDGMENT Fahmi Ali Hudaefi would like to thank Dr Haula Noor (Universitas Islam Internasional Indonesia) for introducing him to Islamicate Digital Humanities, which grounds the idea of Shariah analytics. This research received funding from the Deanship of Scientific Research, Vice Presidency for Graduate Studies and Scientific Research, King Faisal University, Saudi Arabia [KFU252890]. In addition, this research also received funding from Majelis Pendidikan Tinggi Penelitian dan Pengembangan (Diktilitbang) Muhammadiyah Risetmu Penelitian Reguler Batch IX [0259.1043/I.3/D/2025].
This paper tests the Shariah-compliant-augmented three-factor model (TFM) in the U.S. stock market from July 2005 to June 2024. In particular, we investigate whether the Shariah Compliant (SC) risk factor, measured as the difference in returns between the portfolio of non-Shariah-compliant (NSC) firms and that of SC firms, constitutes a systematic source of risk able to explain financial distress. We find that the SC risk factor is a major determining factor in pricing of stock portfolios classified by size, book-to-market and Shariah compliance, along with those of distressed and non-distressed firms. Additionally, we point out that the SC risk factor explains the cross-section of stock returns even when other financial distress risk factors are considered, suggesting that it contains significant distress-related information. Finally, we show that this risk factor is significantly related to innovations in term spread, which is consistent with Merton’s ICAPM explanation. Overall, the findings indicate that the SC factor represents a systematic, undiversifiable distress risk factor. These results have important implications for asset management using SC stocks, supporting an SC-augmented TFM to fairly value assets and suggesting that SC investment may provide protection against financial distress.
This paper is based on a keynote speech delivered at The 11th International Islamic Monetary Economics and Finance Conference (11th IIMEFC). As a keynote contribution, this article does not include a formal abstract.
Despite theoretical differences between conventional and Islamic finance, critics argue that Islamic finance remains operationally similar to conventional finance. This apparent convergence in substance has led to growing disillusionment among stakeholders, prompting calls for a reassessment of the objectives and principles underlying Islamic finance. The objective of this study is twofold: first, to conduct a comprehensive comparative analysis between Islamic finance and conventional finance, and second, to explore the hidden dynamics of Islamic economics and finance by investigating its special theoretical features. By conducting intensive library research and reviewing main studies in Islamic economics and Finance, this study examines the salient features of Islamic economics and finance. The study identifies several hidden dynamics, including the role of money as a medium of exchange, prohibition of debt securitization, financing real sector development, the role of Islamic finance in infrastructure development, and the impact of Shariah screening mechanisms on stock market crashes. By examining the salient features of Islamic Economics and Finance, this research aims to provide theoretical insights that will contribute to academic literature, while also guiding regulators and industry practitioners in innovating financial products that more authentically embody the ethical spirit of Islamic finance.
This study develops a Sustainability-based Islamic Corporate Governance (SICG) index that integrates the roles of the Shariah board, regular board, and sustainable board and examines how it impacts multi-dimensional performance of Islamic banks. It employs a sample of 15 Islamic commercial banks in Indonesia from 2010 to 2023. The findings reveal that governance elements have a positive impact on particularly financial performance, while its influence on social performance is limited. For environmental and sustainability performance, a positive impact is primarily observed in the roles of the regular and sustainable boards. Further analysis through the Paris Agreement interaction confirms that most of these findings are consistent and support the role of SICG in enhancing various performances of Islamic banks. These results highlight the need for Islamic banks in Indonesia to transition toward SICG and suggest that policymakers facilitate this transformation by developing relevant regulations and guidelines to align governance structures with broader sustainability objectives. ACKNOWLEDGMENT The paper is supported by sponsorship from the Indonesia Endowment Fund for Education (LPDP), whose sponsorship has played a crucial role in facilitating the research process. The authors deeply appreciate this support and are grateful for the opportunities it has provided. The authors also gratefully acknowledge the valuable comments provided by the journal's editors and reviewers.
This study investigates global research trends on the role of Islamic finance in promoting social equity and poverty alleviation. Using bibliometric and content analysis methods, we analyze publications on the subject from Scopus from 1991 to 2025 using Rstudio, VOSviewer and Excel to identify key authors, institutions, and journals and to perform a thematic analysis. The results show increasing academic interest, with publication peaking from 2020 onwards. Leading contributors are M. Kabir Hassan and Universiti Utara Malaysia (UUM) for respectively authors and institutions. Dominant themes include zakat, waqf, Islamic microfinance, and financial inclusion, alongside emerging areas like Islamic fintech and productive zakat. Despite its growth, the field remains fragmented, with gaps in governance, regional representation, and long-term impact assessments. Future research should focus on integrating Islamic finance with national poverty strategies, addressing gender disparities, and leveraging technology for greater financial inclusion. This study provides a comprehensive roadmap for scholars and policymakers, contributing to a deeper understanding of Islamic finance as a tool for fostering social equity and poverty alleviation.
This paper examines the seasonality in information asymmetry as proxied by the probability of informed trading (PIN) in relation to the Islamic holy month of Ramadan. It utilizes data collected from Boursa Kuwait, covering the period from January 2013 to December 2018, and pooled panel regressions to test the hypothesis that increasing religiosity during Ramadan would reduce the probability of informed trading. The results reveal that the PIN increases during Ramadan relative to other Islamic calendar months, contrary to our hypothesis. Further tests reveal that institutional trading activities increase during Ramadan compared to individual trading. We argue that the presence of sophisticated traders (institutional traders) in the market during Ramadan contributes to the observed increase in the PIN effect. This study contributes to the literature by exploring the relationship between religiosity and information asymmetry in the context of an Islamic financial market, offering new insights into the behaviour of institutional traders during the holy month of Ramadan. We refer this phenomenon as the “Ramadan PIN effect”, which differs from the previously documented "Ramadan returns effect" and "Ramadan liquidity effect".
