This study examines the relationship between earnings volatility and operational efficiency in Islamic banks in SSA, addressing a key methodological limitation in the Islamic banking efficiency literature. Conventional Data Envelopment Analysis (DEA), widely used in prior studies, produces upward-biased efficiency scores and invalid second-stage inference when efficiency is linked to stochastic variables such as earnings volatility. This limitation is particularly consequential in Islamic banking, where income streams are structurally volatile due to profit-and-loss sharing and asset-backed financing arrangements. Methodologically, this study demonstrates the necessity of bias correction and applies the Simar–Wilson two-stage DEA framework to obtain statistically valid efficiency–volatility estimates. Using a balanced panel of fully-fledged Islamic banks in SSA from 2010 to 2024, operational efficiency is measured as income-generation efficiency based on non-interest revenue streams. First, operational efficiency is estimated under alternative returns-to-scale assumptions using non-interest operating expenses as inputs and Shariah-compliant non-interest income components as outputs. In the second stage, bias-corrected efficiency scores are regressed on earnings volatility—measured as the rolling standard deviation of return on assets (ROA), which captures earnings volatility relative to asset utilization and aligns with operational efficiency—using truncated regression with bootstrapping. The results reveal a statistically significant negative relationship between earnings volatility and operational efficiency, indicating that earnings volatility weakens Islamic banks’ capacity to efficiently transform operating costs into Shariah-compliant income. Robustness checks confirm the stability of the findings across efficiency specifications. Beyond its empirical contribution, the study shows that efficiency levels reported in prior Islamic banking studies relying on conventional DEA may be systematically overstated in volatile-income environments, with important implications for supervision and policy in emerging Islamic finance markets.
This study analyzes the relationship between Islamic financial infrastructure components and Islamic financing in Indonesia using the autoregressive distributed lag (ARDL) bounds-testing model, covering the period from the fourth quarter of 2013 to the third quarter of 2024. This study examines four key infrastructure indicators (the number of Islamic banks, number of branches, number of ATMs, and total volume of Islamic banking assets) as potential structural dimensions associated with Islamic finance expansion. The results reveal the existence of a long-run equilibrium relationship between these financial infrastructure indicators and Islamic financing, with all four components showing a positive and statistically significant long-run association. In the short run, the number of Islamic banks, ATMs, and Islamic banking assets exhibits a significant positive relationship with financing levels, whereas the number of branches shows no statistically significant immediate short-run relationship. This highlights a potential distinction between short-run dynamic responses and long-run structural alignments in financial infrastructure. Additionally, standard model diagnostic tests (including serial correlation, homoscedasticity, normality, and structural stability) confirm the statistical adequacy of the estimated model. This study suggests that institutional and technological infrastructure conditions may support the expansion and outreach of Islamic financing. In this context, the Indonesian experience provides useful insights for jurisdictions aiming to strengthen the structural foundations of their Islamic financial sectors.
The main purpose of this research is to identify the effect of Islamic work ethics and its dimensions, such as piety, sincerity, trust, responsibility, and cooperation, on innovation. The study adopts a quantitative research design. Data were collected using a structured five-point Likert-scale questionnaire from a sample of 142 valid responses at the SAIDAL Group in Algeria. The data were analyzed using simple and stepwise regression analysis in SPSS to test the research hypotheses. The results of the statistical analysis showed that Islamic work ethics have a significant effect on innovation. Specifically, the dimensions of Islamic work ethics: trust, cooperation, and sincerity; each has a significant effect on innovation. Among these, trust emerged as the most important factor affecting innovation, followed by cooperation and sincerity. This highlights the critical role that these ethical dimensions play in fostering an innovative environment within organizations that embrace Islamic work ethics.
This study analyzes the impact of implementing the ISO 9001:2015 Quality Management System on the financial performance and service quality of PT Bank Syariah Indonesia Tbk (BSI) from the customers’ perspective. A quantitative approach was employed using the Structural Equation Modeling-Partial Least Squares (SEM-PLS) method. Data were collected through questionnaires distributed to BSI customers to assess their perceptions of ISO implementation, financial performance, and service quality using the CARTER model. The results show that implementing ISO 9001:2015 has a positive and significant effect on financial performance. However, its effect on service quality is positive but not significant. This indicates that although the standard improves efficiency and resource management, it has not directly enhanced customers’ perceptions of service quality. These findings underscore the importance of organizational commitment and employee engagement to ensure that ISO implementation is tangibly experienced by customers.
This study investigates the relationship between Islamic insurance (Takaful) and human development within the selected member countries of the Organization of Islamic Cooperation (OIC) over the period 2015–2021, which includes Türkiye, Kuwait, Qatar, the United Arab Emirates, Oman, Malaysia, Indonesia, Saudi Arabia, and Nigeria. It questions the relationship between Takaful development and the Human Development Index (HDI), as well as the interaction between institutional factors and other Islamic financial instruments within this relationship. The study finds a positive and significant relationship between Takaful and HDI, based on panel data and a robust random-effects estimation approach. The Human Development Index (HDI) was chosen over Multidimensional Poverty Index (MPI) due to its annual availability, its close relationship with parameters influenced by Takaful, and its suitability for cross-country comparisons. The results further show that the relationship between FDI and HDI is positive when moderated by government effectiveness; the relationship between Sukuk development and HDI appears to run parallel to the profitability indicators of Islamic banks. However, this potential channel is inferred from separate model estimations rather than a formal mediation framework. In contrast, FDI interacted with political stability does not exhibit a statistically significant association with HDI. The study fills the gap in the body of Islamic finance-development literature by introducing the concept of Takaful, which is a relatively under-researched area, and the concept of HDI, which is a comprehensive welfare measure beyond economic growth and also offers evidence on the role of institutional quality and potential transmission mechanisms between Islamic finance and human development.
Islamic finance is commonly analysed either as a faith-based capital-market segment or as contractual techniques designed to circumvent the prohibition of interest. This contribution proposes a theoretical-legal reading instead, asking under what conditions the conversion of sharīʿa principles into capital-market instruments preserves their normative substance and under what conditions it reduces them to a formal shell. Two concepts organise the answer: legal translation – the never neutral operation by which principles of revealed origin are rendered in the technical language of contracts, securities, and regulation, and dual formalism, the twofold degeneration occurring when religious certification is reduced to a documentary check while the receiving secular system admits the instrument as a mere contractual form. The study is doctrinal and comparative, not empirical: it works on the religious-legal sources as mediated by fiqh scholarship, on AAOIFI and IFSB standards, on State legislation, case law, and scholarship, comparing Malaysia, the Gulf Cooperation Council countries, the United Kingdom, Luxembourg, and Italy along eight dimensions. Taking sukuk as the paradigmatic case, the analysis finds that the asset-backed/asset-based divide is the principal stress point of the translation, where substantive fidelity – the first of four jointly required criteria, alongside functional adequacy, recognisability, and verifiability – is most severely tested: purchase undertakings at nominal value reintroduce the credit-risk profile of the conventional bond, and insolvency is the point at which the divergence between proprietary form and obligational substance becomes visible. The article derives policy implications and indicates directions for further research.
The Editor-in-Chief of the European Journal of Islamic Finance retracts the article “Driving Sustainable Innovation: Islamic Financial Literacy and Inclusion in the Five Southernmost Provinces of Thailand” by Asas Worasutr, Stephen E. Little, and Mohammed Abdel Haq, published in the European Journal of Islamic Finance, 11(3), 1–23 (2024), DOI: 10.13135/2421-2172/9019. Following a request from the corresponding author and the journal’s subsequent assessment, it was established that the article substantially overlaps with an earlier publication by Asas Worasutr in the Journal of Islamic Studies at Prince of Songkla University, which uses the same sample group and interview respondents. The Editor-in-Chief determined that this constitutes redundant/duplicate publication and that retraction is necessary to correct the scholarly record. The original EJIF article remains available in the scholarly record and is clearly identified as retracted.
The current study examines the impact of High-Performance Work System (HPWS) on Employee Job Engagement (EJE) and Job Performance with the moderation of Islamic Work Ethics (IWE). The cross-sectional data is collected from the primary source with the use of self-administered questionnaire. The sample size is 318 and data is collected from the education sector of Pakistan. For the data collection the convenience sampling technique is used. The present study shows that the High-Performance Work System has significant effect on Employee Job Engagement and Job Performance. The present study also shows that the Islamic Work Ethics has positive significant effect on Employee Job Engagement and Job Performance, but the moderation of the present study is not supported by the results. This study will help the education sector and other policy makers to use fair HRM practices at work setting. This study is limited up to one source data and cross-sectional design due to limited time but in future many other outcomes and variables can be discussed through longitudinal design in any other sector or industry. Additionally, the study contributes to the literature on High-Performance Work Systems (HPWS), employee engagement, and Islamic Work Ethics (IWE) by addressing gaps identified in previous studies
This paper examines the jurisprudential and economic foundations of Build–Operate–Transfer (BOT) contracts and evaluates their role as a Sharīʿah-compliant mechanism for managing excess liquidity in Islamic banks. Using a descriptive and analytical methodology, the study traces the historical emergence of BOT-type arrangements, clarifies their legal nature within contemporary concession and public–private partnership (PPP) frameworks, and outlines the main contractual parties, phases, and variants (such as BOOT, DBFO, and related models). On the Sharīʿah side, the paper analyses classical and modern fiqh discussions and positions of leading Sharīʿah bodies, showing that BOT structures can be accommodated as composite contracts built primarily on istiṣnāʿ and ijārah, supported by the general principle that the default rule in transactions is permissibility. Attention is given to the maqāṣid al-Sharīʿah (objectives of Islamic law) served by BOT, including the provision of public utilities, preservation and development of assets, risk sharing, and promotion of real-sector investment. Economically, the study argues that conventional, debt-based financing contributes only limitedly to added value and national production, whereas BOT contracts are intrinsically tied to the creation, operation, and eventual transfer of productive infrastructure. When deployed by Islamic banks, BOT arrangements enable the mobilisation of surplus liquidity into large-scale projects through instruments such as sukuk issuances, syndicated financing, and dedicated investment funds, while transferring construction and operational risks to specialised private entities and preserving final public ownership of strategic assets. The paper concludes that, under appropriate Sharīʿah structuring and regulatory support, BOT contracts can serve as an effective tool for liquidity management in Islamic banks, simultaneously advancing sustainable development, providing fiscal relief to governments, and enhancing the social utility of Islamic finance.
The negative economic growth observed in Indonesia and Malaysia has led to the classification of both nations as experiencing an economic recession. This situation arises from a reduction in total household expenditure, despite an increase in zakat collection. The management of zakat in Indonesia and Malaysia, in light of the economic recession, is implemented through various programs. This research aims to conduct a comparative examination of zakat management in Indonesia and Malaysia during economic downturns, with a particular emphasis on policy responses to the recession triggered by COVID-19. Subsequently, this investigation employs a qualitative descriptive methodology grounded in secondary data sourced from zakat institutions, governmental reports, and scholarly literature. The findings elucidate four notable distinctions in zakat management between Indonesia and Malaysia: the focus on resource allocation, the prioritization of beneficiaries, the sustainability of impact, and the originality of programs. Indonesia focuses on directing zakat towards economic initiatives, whereas Malaysia places greater importance on its distribution for consumptive purposes. Indonesia has delineated six priority clusters of mustahik affected by the COVID-19 pandemic, whereas Malaysia has categorized only three priority clusters of mustahik. Malaysia employs a unique methodology, characterized by a thorough focus on distributing consumptive zakat to meet pressing household needs. The execution of the program is expected to enhance overall household consumption, thereby aiding in the recovery from economic recession by restoring public purchasing power. This study advances the framework for zakat distribution, contributing to informed decision-making in the realm of policy development during economic crises. This research provides a comprehensive analysis of the allocation of zakat funds as a mechanism for social safety and economic resilience, highlighting exemplary practices from Indonesia and Malaysia, two leading Muslim-majority countries.
This paper examines the impact of accounting for Islamic finance in dispute resolution within Islamic banking and finance (IBF) law. The global expansion of the IBF industry has heightened the necessity for robust dispute resolution mechanisms capable of addressing complex financial arrangements. These mechanisms must reconcile conventional legal frameworks with Islamic commercial law, requiring interdisciplinary expertise in both finance and jurisprudence. A significant challenge arises from the inadequate integration of accounting practices with Islamic finance dispute resolution. Financial records, essential for validating contractual adherence to Sharia principles, are often misinterpreted or underutilized in legal contexts due to a lack of expertise among judges, lawyers, and accountants in both Islamic finance and its accounting standards. The study adopts a legal approach, employing an analytical design to examine the fundamental principles and processes of dispute resolution in Islamic finance. The legal analysis will involve a comprehensive review of relevant legal sources, including Islamic law, national laws and regulations, court judgments, legal opinions, and industry standards. The study shows that the promotion of legal certainty will require a strong base of legal and Islamic finance professionals and the competence and awareness of accountants, lawyers, and judges to understand the principles of IBF. The study also shows that financial records, statements, and documentation have a significant role in resolving disputes. Accounting records can provide evidence of transactions and terms agreed upon. Properly documented and transparent accounting practices can help clarify the nature of the dispute and contribute to finding a fair and efficient resolution in the context of Islamic financial disputes.
The article investigates waqf as a classical Islamic institution that has evolved from a charitable endowment into a versatile contemporary legal and financial tool. It first reconstructs the terminological, historical, and structural features of waqf, clarifying its links with inheritance law, its main types (charitable, family, and mixed), and the roles of actors such as the waqif and the mutawalli. The analysis then adopts a comparative-law perspective to explore the relationship between waqf and the common law trust. It examines both functional and structural analogies – notably asset segregation, perpetuity, and the pursuit of public benefit – and reports on scholarly debates about possible historical connections between the two devices, while refraining from any deterministic genealogy. These similarities help explain the contemporary mobility and partial interchangeability of waqf and trust, as demonstrated by the growing reliance on trust instruments in jurisdictions where waqf regulation applies, including dynamic commercial environments such as Dubai. The core of the contribution focuses on India as a legal “laboratory” where common law, Islamic law, and Hindu law intersect. The article traces the historical development of waqf in the subcontinent, from its medieval implantation and colonial reconfiguration to the present framework shaped by the Waqf Act 1995, the Income Tax Act 1961 and the recent Waqf (Amendment) Act 2025. Attention is paid to governance arrangements (Waqf Boards and related institutions), fiscal treatment, and ongoing constitutional challenges to the 2025 reform. By combining historical and functional comparisons, the article demonstrates how waqf operates today as a complex, contested, yet promising instrument of ethical and sustainable finance, capable of supporting social welfare and poverty reduction while raising delicate questions about religious autonomy, minority protection, and the balance between state control and community self-government.
The purpose of this study is to explore risk management practices and fiqh muamalat to improve the performance of Islamic microfinance institutions. This study focuses on BMT UGT Nusantara, one of the largest Islamic microfinance institutions (IMFIs) in Indonesia. Due to the site's unique characteristics, the study design is a descriptive exploratory, single-case study with a holistic approach. Data were acquired using various methodologies, including in-depth interviews with informants, field observations, focus group discussions, and document reviews. The Interactive Model is used to analyze data, which is then tested for validity through the evaluation of credibility, transferability, dependability, and confirmability. This study highlights several substantial findings, including the successful implementation of risk management practices at IMFIs. Risk management involves understanding, identifying, mitigating, and assessing risks. Despite the lack of standards and the perception that risk management is only partial, risk management practices have improved financial and organizational performance. Sharia compliance risk is the most widely acknowledged, while finance and liquidity risk are the most anticipated. The practice of Islamic jurisprudence (fiqh muamalat) is efficiently implemented by integrating Sharia compliance as an operational system and Sharia practices as a work culture, which fosters ethical behavior and is acknowledged as a good risk management practice.
Financial exclusion remains widespread and continues to constrain the livelihoods of low-income groups and other marginalised communities worldwide. Islamic finance has expanded rapidly in both Muslim-majority and non-Muslim countries as an alternative means of accessing capital and financial services that comply with the prohibition of riba (interest) and broader Sharīʿah principles. By incorporating fairness, risk-sharing, and contractual discipline into financial transactions, Islamic finance aims to foster a more stable and inclusive economic order. This article presents a systematic review of the literature on the contribution of Islamic finance to bridging the financial inclusion gap, with a particular focus on its effectiveness, constraints, and emerging opportunities. Guided by the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) protocol, a structured search of the Scopus database identified 78 peer-reviewed articles published between 2013 and 2024, of which 29 met the inclusion criteria. The evidence suggests that Islamic banking, microfinance, social finance instruments, and Sharīʿah-compliant fintech can expand access to finance for both Muslims and non-Muslims seeking interest-free products, particularly in underserved market segments. Profit- and loss-sharing contracts, asset-backed modes of financing, and redistributive tools such as zakat and Islamic insurance (takaful) are highlighted as key mechanisms. At the same time, the review documents challenges, including low levels of Islamic financial literacy, regulatory and institutional constraints, uneven geographic penetration, and the phenomenon of financial migration, whereby customers shift from conventional to Sharīʿah-compliant institutions without necessarily increasing overall inclusion. The review concludes that, if appropriately supported by policymakers through enabling regulation, consumer protection, and investment in digital infrastructure, Islamic finance can complement conventional finance in reducing financial exclusion and advancing inclusive and socially just economic development. Future research should deepen comparative analyses across regions and products, and explore how Islamic finance can better serve women, youth, and micro-entrepreneurs facing multidimensional exclusion and inequality.
This article examines the application of the stock screening tool “purepofo” (www.purepofo.com), which integrates Halal and Environmental, Social, and Governance (ESG) criteria with a comprehensive performance assessment based on widely used financial metrics. The article evaluates Purepofo’s ability to align Shariah compliance and ESG standards with performance-driven investing, addressing ethical and financial imperatives. The study presents a comparative analysis of the financial performance of stocks screened using a combined screening approach versus non-screened counterparts, while also outlining methodological limitations. Key findings reveal that Halal and ESG-screened stocks outperformed peers in several financial dimensions, including operational efficiency, dividend reliability, and resilience to market volatility. Notably, these stocks demonstrated higher Sharpe Ratios, more substantial gross margins, and consistent revenue growth, challenging the perception of a trade-off between ethical compliance and financial performance. However, limitations, such as the underrepresentation of high-growth stocks and valuation complexities, highlight the need for further methodological refinement. The discussion emphasises the potential of a customised financial metrics model to support investors in achieving competitive returns without compromising ethical integrity. The results suggest that Halal-ESG stocks offer more than symbolic ethical Value; they exhibit measurable financial resilience, governance, and sustainability strength. While alignment with Maqasid al-Shariah principles remains central, the data—rather than ideals alone—positions Islamic finance as a leader in sustainable investing. This article contributes to the growing discourse on Halal-ESG integration by offering actionable insights for Islamic finance portfolio managers, Shariah scholars, and thought leaders. Bridging ethical compliance, sustainability, and financial performance highlights the role of integrated tools in advancing innovation and inclusivity in global finance.
The 17 Sustainable Development Goals set forth by the UN 2030 Agenda require the adoption of proactive initiatives by countries in a global partnership and by companies, consumers, and citizens. SDGs recognise that ending poverty is strictly intertwined with strategies to reduce inequality and spur economic growth, all while tackling climate change and preserving the environment. In this context, the lack of financial inclusion increases poverty and frustrates economic development since access to essential financial services helps people nurture their education and financial plans, and financial inclusion can help alleviate poverty and lift economic development. The study highlights how, within this scenario, Islamic finance can play an important role in promoting sustainable and ethical development and financial inclusion, specifically in environmental sustainability, by increasing the so-called “green sukuk” or “ESG Sukuk.” Accordingly, the article analyses, from the comparative law perspective, the context of two Asian countries, Malaysia and Indonesia, that are pivotal markets for developing Islamic financial instruments and that of Sub-Saharan Africa, highlighting the potentialities of Islamic finance to foster sustainable development (in particular, SDG-01 No Poverty; SDG-05 Gender Equality; SDG-08 Decent Work and Economic Growth; SDG-09 Industry Innovation and Infrastructure; SDG-10 Reduced Inequalities; SDG-11 Sustainable Cities and Communities). It also provides significant examples of initiatives adopted by Malaysia and Indonesia, grounded on the tools of Islamic finance, to support sustainable economic and social development in sub-Saharan Africa. As a result, the article stresses, through the adoption of the comparative law methodology, the importance of a proper transnational legal framework – in a broad sense, including legal language and formation of scholars and practitioners - to promote Islamic finance and financial inclusion: such aspect tends to be neglected in current literature, seemingly more focused on techno-economic aspects.
Takaful as a risk-mitigating tool plays a significant role in the modern Islamic finance landscape, since it has experienced substantial growth and expanded globally in the field of economics. The alignment of the Islamic financial sector with conventional financial market trends, while adhering to Shariah law, has contributed to the growth of Islamic finance and Economics. To attain sustainable development goals, several countries have already introduced green insurance products, and the takaful market in various countries has competitively initiated green takaful products under the climate finance concept. This study aims to explore the challenges to initiating green takaful products as a climate financial tool. The study adopts a qualitative and inductive approach, utilising interview data as the primary source of information. Thematic analysis was employed to analyse the collected data for the study. The findings indicate numerous challenges, such as regulation, risk, cultural, and learning and development challenges in implementing green takaful in the Sri Lankan takaful market. This research holds a significant contribution to the takaful sector in terms of initiating green takaful products in the insurance market in Sri Lanka. Furthermore, each challenge discussed in this study and the ways to overcome them can be a major focus in future studies. Hence, it provides valuable insights for policymakers, regulatory authorities, product creators, practitioners and coming researchers in climate finance and green takaful schemes.
The Sustainable Development Goals (SDGs) agenda is an important global agenda. Public finance, including Islamic public finance, is an essential financial agenda of a country, specifically for Islamic countries. However, both work towards the good welfare of people globally (via SDGs) and the country's people (via Islamic public finance). As both works parallelly, Islamic public finance plays a significant role in advancing SDGs through its unique principles and practices that emphasise social responsibility, ethical investments, and people's welfare. This is where this study aims to highlight the contribution of Islamic public finance towards sustainable development and stimulate discussion on the role of the Baitulmal authorities in the design and implementation of the SDGs. This study uses the narrative review and mapping method. The narrative review is done on past studies or articles on Islamic public finance instruments. The mapping method identifies the motives of each Islamic public finance instrument and then links them to each goal of the SDGs. The results show a gap in Islamic public finance elements in the current public finance practice. These few missing elements of Islamic public finance should be regarded as added value elements in the current practice of public finance that widen the scope, generating more revenues in public finance. With more sources of revenue in public finance, more funds could be spent on achieving the SDGs. Hence, the public finance policy is suggested to be constructed by adding the Islamic public finance elements, specifically for Islamic countries.
This study provides an in-depth analysis of the Moroccan financial system by examining key banking institutions, their characteristics, and their services. Under King Mohammed VI’s leadership, Morocco has emerged as one of the most financially advanced Mediterranean countries and the most developed in the Maghreb. Its openness in tourism and finance has facilitated the growth of both conventional and Islamic banking sectors. Using a qualitative methodology, this research follows a structured approach. First, a literature review examines academic and regulatory perspectives on Morocco’s financial system. Then, we analyze Moroccan banks by classifying them as commercial or business institutions and distinguishing between local and foreign financial entities. The study categorizes services into retail, corporate, and digital (FinTech), focusing on Sharia-compliant banking and its customer offerings. Furthermore, it assesses the evolution of digital financial services among Moroccan banking groups and foreign-owned banks. A unique aspect of this research, coauthored by management scholars and Arab studies experts, is its examination of how Moroccan banks communicate with customers, including language use and segmentation based on Sharia compliance. The findings will highlight Morocco’s banking strengths and potential improvements that could inspire financial strategies in Italy and other European countries with significant Muslim communities. Additionally, this study identifies best practices for expanding Sharia-compliant services to the hundreds of thousands of Muslim immigrants from Morocco and the broader Maghreb region.
The takaful industry as it exists today in terms of its growth potential and the challenges associated with its development. The opportunities associated with takaful are numerous, mainly due to its wider market reach and adaptability; unlike conventional insurance, takaful is permissible for Muslims and non-Muslims alike and offers a more diverse range of products. The takaful industry is also one of the fastest-growing businesses, contributing significantly to the global insurance industry. However, despite the promise of takaful, the industry faces many obstacles today. Most importantly, the overall value of the takaful industry in terms of total assets and contributions (premiums) is negligible compared to both the size of the Muslim population and the conventional insurance industry. Not to mention the challenges related to supervision and transparency, standardization, and lack of knowledge. Therefore, this paper will analyze the economic potential and impact of the takaful industry, as well as explore the role of takaful in poverty alleviation, where some research has already proven successful. It will also examine the challenges facing the industry, which are slowing down its development and preventing it from realizing its full potential.
