This study examines how dividend policy affects the performance of Shariah-compliant (SC) non-financial firms in Pakistan. These firms operate under Islamic law, which restricts interest-based and speculative activities. Because of these rules, their financial structures differ from conventional firms. The study uses data from 2013 to 2023 for all non-financial SC firms listed on the Pakistan Stock Exchange. The screening criteria of Karachi Meezan Index (KMI) were used to identify these firms. A fixed-effects model was applied after conducting the Breusch–Pagan Lagrange Multiplier (BPLM) and Hausman tests. The results show that the dividend payout ratio (DPR) has a significant adverse effect on firm performance. Firm size (FS) and sales growth (SG) have positive, significant effects, while leverage has an adverse, significant effect. Dividend yield (DY) and dividend per share (DPS) were not significant. The findings support the agency, bird-in-hand, and signaling theories. The study contributes to the limited research on Islamic equity markets in Pakistan and shows how dividend policy influences profitability in Shariah-compliant firms. The results can help investors, managers, and policymakers design better dividend policies and strengthen Islamic financial governance in Pakistan. Keywords: Dividend policy, Firm performance, Shariah-compliant, Dividend payout ratio, Dividend yield, Dividend per share
The conceptualization of money has experienced profound evolution over the course of history, transitioning from physical commodities such as cowrie shells and salt to intangible digital representations, most notably cryptocurrencies. Emerging in response to the global financial crisis of 2007, cryptocurrency represents a decentralized, cryptographically secured form of virtual currency underpinned by blockchain technology. It functions as a form of private money, operating independently of traditional financial authorities such as central banks and governments. This study undertakes a systematic literature review (SLR) to explore the multifaceted challenges and debates surrounding cryptocurrencies, with a focus on four principal themes: regulatory frameworks, Sharīʿah compliance, the ontological nature of cryptocurrencies, and associated social implications. The findings reveal that the absence of regulatory oversight in many jurisdictions contributes to high volatility and opens avenues for misuse, including illicit transactions and tax evasion. These regulatory gaps, coupled with uncertainties in intrinsic value and market behaviour, have led to divergent Sharīʿah opinions regarding the permissibility of cryptocurrencies. Notably, Sharīʿah scholars with a technical understanding of blockchain are more inclined to issue favorable rulings compared to those with solely traditional jurisprudential training. Several scholars have linked the volatility, potential use in illicit transactions, lack of legal recognition, and decentralized nature of cryptocurrencies to the prohibitive elements of riba (usury), gharar (excessive uncertainty), and maysir (gambling) in Sharīʿah.Conversely, other researchers contend that these characteristics are not intrinsic to cryptocurrencies themselves but rather arise from external contextual factors— conditions that, if similarly applied to fiat currencies, would also render them noncompliant with Sharīʿah principles. This underscores the importance of technological literacy in contemporary Islamic legal deliberation. In addition to theological and legal concerns, social dimensions such as limited public awareness, cybersecurity risks, usability challenges, and environmental degradation linked to energy-intensive mining processes are also critically examined. Despite these concerns, the review identifies promising use cases in Islamic social finance—particularly in zakāt distribution, waqf management, financial inclusion, and Sustainable Development Goals (SDG) initiatives. Greater engagement between Sharīʿah scholars and technology experts is essential for articulating a coherent Islamic position on cryptocurrencies and harnessing their potential within Sharīʿah-compliant financial ecosystems. Keywords: Cryptocurrency; Systematic Literature Review; Islamic Finance; Regulatory issues, Shariah issues; Social issues; Islamic Social Finance.
Abstract The concept of insurance was discovered several millennia before Christ (BC). Risk shifting or dispersing was a tactic used by traders from China and Babylonia in the Second and Third millennia BC. Insurance currently underpins the economy, but increasing its market share in developing countries is challenging. Big Data, InsurTech, and the Internet of Things have ushered in the fourth revolution in the insurance sector of the industrialized world. To increase insurance and takaful coverage in Kenya, this research examines the issues and potential solutions related to InsurTech. This study conducted a systematic literature review to identify themes and elements pertaining to problems and solutions in adopting InsurTech in Kenyan insurance and takaful businesses. Several keywords were utilized to locate relevant content on Google Scholar. The studies screened were analyzed according to inclusion and exclusion criteria. This paper identifies several barriers to the adoption of InsurTech in Kenya's insurance industry and proposes potential solutions. Policymakers may find the recommendations helpful in enhancing the services provided by the insurance sector. Keywords: InsurTech, Insurance/takaful Industry, Digital Technologies, Kenya
The purpose of this research is to analyze the amendments and clarifications made by the State Bank of Pakistan (SBP) to the two Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah Standards and to see whether these changes align with or contradict the principles of Shariah. In view of the study's objective of exploring the SBP's changes to the AAOIFI Shariah standards, in-depth interviews were conducted to examine two aspects: the nature of the changes and their implications. The nature of the SBP's changes to the two AAOIFI-adapted Shariah standards was the subject of the questions. Both clauses have been discussed with the respondents—the original clause of the AAOIFI Shariah standard and the corresponding revised clause by the SBP—and the following opinions have been sought in both cases. If changing is just clarifying, is it a general clarification or a further extension of the AAOIFI clause? On the other hand, if the changes concern amendments to AAOIFI clauses, what is the potential reason behind these amendments? If the potential reason is to meet the requirements of the local industry, then, due to this amendment, is there any contradiction with the general principles of Islamic finance, or not, and what is his/her opinion on it? A key finding of this research is the controversy surrounding certain SBP amendments, particularly those concerning currency transactions and immediate exchanges. Some respondents felt that these changes contradict traditional interpretations of Shariah. However, other respondents noted that these amendments provided clarity and practicality in the contemporary financial context. Research has also emphasized the crucial need for SBP to offer detailed explanations and background on these amendments and clarifications so they can be better understood and applied uniformly, thereby promoting transparency and consistency across the industry. Keywords: Islamic banking, AAOIFI Shariah Standards, SBP amendment, Currency transactions.
This analogy shows that Indonesia and Morocco are each applying maqasid al-Shariah to the same Islamic financial reforms but differently because of their social, political, legal and religious environments. Indonesia focuses on social justice, financial inclusion and institutional development, whereas Morocco focuses on stability, community trust and wary integration. Nonetheless, the reforms are justified by maqasid that serve as an ethical binding force, ensuring they adhere to the Islamic mandate. The contribution of maqasid towards shaping the structure of ethical financial systems cannot be overstated, but equally important is fostering a culture of trust and institutional credibility in people. Such comparative studies are beneficial to policymakers and even researchers. It is evident that the way to Islamic finance reform is not easy. The reforms should represent the local realities. Further studies might also examine the long-term effects of such legal regimes on financial inclusion, protection, and economic development among consumers. This will bring us a step forward in understanding how Islamic finance can truly be principled and practical as it relates to local situations but is concerned with economic issues in the context of the modern world. Keywords: Maqasid al-Shariah; Islamic finance; Indonesia; Morocco; Islamic banking law; participatory banking.
Abstrat The regressive nature of indirect taxation in Pakistan elevates poverty and poses a significant challenge to its reduction efforts. These types of taxes, levied on consumption of goods and services, disproportionality affect low-income households, who spend a large portion of their income on essential commodities. As a result, indirect taxes erode disposable income, limit excess to necessities and become a cause of exacerbating poverty and widening income inequality. The first objective of this paper is to examine the effect of indirect tax on exacerbating poverty. The second objective is to discuss Shari’ah legitimacy of taxes and examine the Shari’ah appraisal of Indirect Taxes. In addition to these, we also discuss how indirect taxes disproportionately affect the impoverished and result in more poverty. In order to gain the first objective, empirical approach was adopted with descriptive analysis. Graphical presentation was used to elaborate on the results of the quantitative data. For the second objective, critical analysis of literature review techniques and descriptive statistics were used to elaborate the results. The finding of this study provides compelling evidence of a significant positive correlation between indirect taxes and poverty levels. Our analysis demonstrates that an increase of indirect tax burden exerts a substantial negative impact on livelihood, which results in exacerbating poverty. The increase in poverty is also a cause of socio-economic disparities. The findings underscore the urgent need of comprehensive tax reforms. The effective tax reforms, particularly a well-designed decrease in indirect tax, can significantly affect poverty. The reduction in taxes may lead to better access to necessities which may result in improving the living standards of the poor community. This research recommends an analysis of Pakistan’s indirect tax system through the lens of Shari’ah calls for reforms that align with the principles of justice, equality and well- being of the deprived community. Simultaneously, Shari’ah compliant reforms would advocate for strengthening direct taxation on wealth and income, ensuring that the affluent contribute to the society. It also fosters a system where the tax burden is shared according to the ability and financial position of the people.
Abstract Access to reasonably priced and environment-friendly housing financing continues to be a major problem particularly in countries with the majority Muslim populations where adherence to Islamic financial principles is mandated. This study looks at two often used Islamic financing techniques, Murabaha and Diminishing Musharakah, and contrasts them in the effort to provide practical solutions for sustainable housing finance. This study adopts a comparative descriptive research design which allows for the systematic comparison between the two different Islamic financing models within the context of sustainable housing finance. Supported by descriptive and inferential statistical studies, a cross-sectional survey of financial institutions and customers looks at the relative performance of the models regarding cost, risk-sharing, sustainability, customer happiness, and operational simplicity. The results show that Murabaha mirrors traditional debt agreements and impedes efficient risk sharing even if it is easy and has lower operating risks. On the other hand, Diminishing Musharakah has shown better results in terms of affordability, equity sharing, customer happiness, and long-term feasibility despite its higher administrative complexity. According to the finding from the regression analysis, financing models have a significant impact on the outcomes of sustainable housing finance; the variance in promoting affordability and socio-economic welfare was higher with Diminishing Musharakah. Thus, it is recommended that Islamic financial firms should prioritize equity-based financing models and reduce operational challenges through client education initiatives and digitization. Additionally, regulatory agencies are urged to encourage the implementation of risk-sharing frameworks in order to promote financial inclusion and socioeconomic progress. This research advances the empirical evidence on sustainable Islamic finance that supports Diminishing Musharakah for environment-friendly and ethical housing development in accordance with international Sustainable Development Goals (SDGs).
Abstract Training programs are vital for the professional development of employees in every organization. Pakistan's Islamic banking sector is experiencing unprecedented growth, accelerated by the State Bank of Pakistan's mandate for full conversion to Islamic banking by 2027. This transformation is creating massive opportunities for both current and future professionals in the field. However, this rapid expansion brings an urgent need for comprehensive training programs to develop three core competencies: technical banking skills, essential soft skills, and in-depth Sharia compliance knowledge. Only through effective training can employees properly implement Islamic financial principles, maintain operational excellence, and drive organizational success. As the sector prepares for exponential growth, investing in employee development today will determine which institutions lead Pakistan's Islamic finance revolution tomorrow. The future belongs to banks that prioritize building a skilled, motivated workforce capable of navigating both the technical and ethical dimensions of Sharia-compliant finance. This case study is more focused on the development of Sharia knowledge and skills among the employees by using PDCA methodology. Before the implementation of PDCA in Islamic banks, the proficiency of Islamic banking knowledge and compliance was ordinary among the employees, resulting in an increase in costs and inefficiency. The results revealed that implementation of PDCA has improved Islamic banking knowledge and skills among the employees significantly. Even though it belongs to an Islamic bank, the learning points are very important and beneficial for multiple organizations and individuals. The pre and post testing has developed better understanding of the learners and the training becomes an investment rather than an expense. Furthermore, the PDCA based improvements are also found very similar to the action research-based plan, implement, observe, and reflect in the
Abstract This study investigates the potential of Islamic financial instruments—such as Zakat, Waqf, Qard al-Hasan, and Islamic microfinance—as effective tools for poverty reduction and inclusive socioeconomic expansion. Through a qualitative literature review supported by thematic analysis, the research draws from both classical Islamic texts and modern case studies across Muslim-majority countries. Finding’s highlight the effectiveness of Islamic finance in endorsing financial inclusion, reducing income inequality, and supporting Sustainable Development Goals (SDGs). However, challenges such as inadequate awareness, regulatory inconsistencies, and institutional limitations hinder its broader impact. The paper recommends that integrating the ethical framework of Islamic finance with contemporary financial systems can lead to a more just, inclusive, and sustainable economic model. Policy recommendations accentuate financial literacy, regulatory standardization, and hybrid models that amalgamate Islamic and conventional practices to enhance outreach and effectiveness.
This study determines the effect of announcements of re-composition of Islamic Index, commonly known as PSX-KMI All Share Islamic Index of Pakistan Stock Exchange, on the turnover and returns of included and excluded firms. This study is warranted because of the growing interest of individual and institutional investors in Shari'ah compliant stocks. The quantitative approach has been applied using secondary data of companies that are included and excluded due to re-constitution of PSX-KMI All Share Islamic Index surrounding four announcements. The Event Study approach is used to calculate abnormal turnover and abnormal returns surrounding the announcement period. In the second stage, regression analysis is conducted. The study finds insignificant impact of re-composition announcement of KMI-All Share Index on abnormal turnover and abnormal returns following inclusion and exclusion of companies. The underlying reason of insignificant evidence contradicts ethical screening theory followed by investors but can be attributed to non-standardization of stock screening criteria amongst asset management companies in Pakistan, mainly because of their Shari'ah scholars' interpretation of Islamic laws according to different schools of thought, hence the space of Shari'ah-compliant securities for trading & investment varies from one institutional investor to another. This study contributes to the body of knowledge related to market reaction on regulatory intervention (i.e., announcement reaction) and its impact on the prices and volumes of listed Shari'ah compliant stocks. As per the authors' best knowledge, this is the first empirical study examining the effect of announcements of re- composition of PSX-KMI All Share Islamic Index on the volume and price of included and excluded companies in Pakistan.
Comprehensive and Technical Efficiency of Insurance and Takaful Companies in Pakistan Insurance and Takaful companies, both, are business organizations existing for the motive of profit. Large capital is required by the shareholders to establish a company; therefore, the company is expected to earn sufficient profit to meet the expectations of the shareholders. Moreover, a company also has its responsibilities towards its customers in terms of quality service. Shareholders are more concerned with their profit and customers regarding the services. Companies pay claims when the covered persons suffer a loss which can be the death of the family’s only bread earner, factory on fire, theft of business goods etc. Therefore, efficient financial performance of insurance and Takaful companies is important to fulfil the requirements of both: shareholders and clients. This study investigates financial efficiency of insurance and Takaful companies via Data Envelopment Analysis during the period 2011 to 2015. We have taken six general (non - life ) insurance & Takaful companies operating in Pakistan with input factors labor cost, assets and output factors premium / contribution received and percentage of claims paid. Results show that insurance and takaful companies are more than 80% efficient in their operations. For further increasing their efficiencies, they need to reduce their input by less than 20% to have same level of output. Comparing efficiencies of insurance and takaful companies, insurance companies are more efficient in terms of pure technical & super efficiency while takaful companies have higher scale efficiency than insurance companies, though the difference in most of the cases is less than 2%. Both types of companies need to improve their efficiencies by decreasing their assets input and labor cost while retaining the same output level of premiums and claims. Keywords: General insurance, Data Envelopment Analysis (DEA); Malmquist index, Takaful, Scale and technical efficiency
Characteristics of Shari’ah Governance and Incidence of Charity: A case of Pakistan There are several studies which have evidenced the role of Shari’ah governance on the profitability of Islamic banks for different countries in different data setup. The main purpose of Shari’ah governance is derived from the concept of corporate governance to avoid any non-compliant transactions and book charity against any non- compliant income. There are two kinds of Shari’ah supervisory boards. First is the proactive type that follows the rule of ‘Hisba’ which restricts any non-compliant transaction before it happens. The second type is reactive which detects and reacts to the non-compliant transactions following the Islamic legal system when they happen. The first type would conclude to a reduction in the incidence of charity transactions. In contrast, the second type would conclude to increase in the incidence of charity transaction. The objective of this study is to explore whether the Shari’ah governance of Islamic banks of Pakistan is jointly proactive or reactive. This study is deductive and uses quantitative methods. This study builds an unbalanced panel data of full-fledged Islamic banks of Pakistan using the available data from financial statements. This study is one of its kinds to see the nature of Shari’ah governance based on empirical patterns using Panel FGLS model. The results show that board size, board expertise, and reputation are the reactive factors while the others are proactive factors. Keywords: Shari’ah Supervisory Board, Panel Data Analysis, Shari’ah Disclosure, Shari’ah Controls.
Shari’ah Scholars’ Insight on Shari’ah Governance Framework for Islamic Banking Institutions in Pakistan One of the major reasons behind the financial crises generally and the 2008 crises especially, was the poor corporate governance in financial institutions. For ensuring good Islamic corporate governance as well as Shari’ah compliant environment in Islamic banking institutions (IBIs), Shari’ah governance framework (SGF) was developed in many countries including Pakistan. This study is conducted to evaluate the SGF, its implementation level, and the challenges facing the IBIs in the implementation of the SGF in Pakistan. For this purpose, the insight of the Shari’ah scholars is taken on SGF by following the qualitative research approach with semi-structured interviews of the scholars. The respondents included Shari’ah Board’s (SB) members and Incharges of Shari’ah Compliance Department (SCD) in various IBIs in Pakistan. The researchers used Nvivo12 software for the analysis of the interviews data. The study discovered some important issues faced by Islamic banks in the implementation of SGF. It is evident from the research that there are shortcomings and weaknesses in the implementation of Shari’ah governance framework which requires improvements such as interpretation and quantification of the provisions of the SGF, approval from Shari’ah Board (SB) for all minute requirements, reporting line issues, and communication gap between the board of directors (BODs) and the members of SB. This research work suggests that the State Bank of Pakistan (SBP) should revisit the SGF in the light of the present study and further improve its provisions as well ensure the implementation of SGF in true letter and spirit. Keywords: : Shari’ah governance framework, Shari’ah scholars, Implementation, Islamic banking institutions
Comparison and Analysis on Shariah Standards of AAOIFI & BNM For Mudarbah Product There are two main international standard setting bodies which provide shariah, accounting and auditing standards for global Islamic financial industry. These two institutions are the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Bank Negara Malaysia (BNM). The objective of the current study is to provide an analysis of Mudarbah financing by comparing the standards of the AAOIFI and BNM. Qualitative method of research is used to analyze the content from archival sources. It is established that there are a lot of clauses between the two standards which need to be highlighted for the development of a comprehensive and uniform Islamic financial system. This study will help to achieve this goal by minimizing the gap between AAOIFI and BNM. Keywords: Mudarbah financing, AAOIFI, BNM, Shariah Standards
This study aims to assess the impact of Securities Commission (SC) of Malaysia 2013 revised Shariah approved firms screening method in relation to the levels of debt and the Shariah- approved firms’ performance. Panel regressions were employed to examine the impact for firms that are consistently Shariah-approved as determined by the SC of Malaysia.The period of study is 2000 to 2014. There gression result indicatesa non-monotone association between Shariah-approved firms’ performance and debt levels. The optimum level of debt, however, is much higher than the 33% benchmark set by SC. Hence, it can be concluded that the 2013 revised Shariah- approved firms screening method which introduced the 33% debt ratio benchmark did not improve the performance of Shariah-approved firms for the period studied. Nevertheless, since the observations are only until 2014, it is possible that the observations have not capture the true impact of the change. Keywords: Debt financing, Firm performance, Shariah-approved firms, Shariah screening method, Optimum debt level.
Finance as Worship or A Commercial Funding: Empirical Evidence from Islamic Banking Industry of Pakistan The present study aims to determine the perception of general public well versed with the conventional education regarding the contemporary Islamic banking & finance as to whether they consider Islamic banking finance as worship or a commercial funding. A total of 644 questionnaires were distributed to collect the data. Independent sample t-test through SPSS was used to estimate the results. The findings revealed that the mean values of independent sample t-test of the Islamic bankers, conventional bankers, teaching faculty and non-finance industry professionals are 6.07, 4.91, 4.86 and 5.07 respectively. As the mean values of conventional bankers, teaching faculty and non-finance industry professionals are less than that of benchmark level of 6.0. Therefore, the study recommends authorities to formulate policies and initiate Islamic banking awareness programs both at the micro & macro levels. Keywords: Finance, Worship, Commercial Funding, Islamic Finance.
