Journal of Islamic Finance

Exploring the Influence of Bank Traits and Economic Factors on the Profitability of Indonesian Islamic Commercial Banks

Fahd Al-Shaghdari, Kamal Mustafa Saeid Ibrahim — Wed, 31 Jul 2024 00:00:00 +0800

The present research aims to investigate the impact of banks' characteristics and macroeconomic factors on the profitability of Islamic commercial banks in Indonesia. This study utilizes a quantitative research technique that involves the application of numerical measurements and analysis to investigate the factors that influence the profitability of Islamic commercial banks. This study investigates the influence of internal factors, including equity financing, bank size, and debt financing, as well as external factors, such as the GDP growth rate and interest rate, on the profitability of Islamic banks in Indonesia. This study utilizes panel data, also known as longitudinal data. The dataset comprises a panel of 11 Islamic commercial banks located in Indonesia. The data were obtained from the DataStream Database and the balance sheet for the period between 2012 and 2022, yielding a total of 121 observations. The results suggest that equity financing, bank size, interest rate, and GDP growth rate significantly influence the profitability of Islamic commercial banks in Indonesia. These characteristics are critical in ensuring the success, profitability, and overall performance enhancement of Islamic commercial banks. However, the internal factor of debt financing does not exert a substantial influence on the profitability of Islamic commercial banks in Indonesia. The study suggests that Islamic banks, especially in Indonesia, should strengthen profit-and-loss sharing instruments in order to reduce inequalities and promote economic growth.

Digitalisation Impact on Indonesia Labour Market: SWOT-TOWS Analysis with Islamic Economic Principles

Hamidah Asma Riyadi; Syed Marwan Mujahid Syed Azman — Wed, 31 Jul 2024 00:00:00 +0800

This study examines the impact of digitalisation on the Indonesian labour market using a SWOT-TOWS analysis framework and alignment with Islamic economic principles. The study aims to identify the strengths, weaknesses, opportunities, and threats of digitalisation for the labour market, as well as to formulate strategies and recommendations based on the SWOT-TOWS matrix. The study also explores whether the results of the SWOT-TOWS analysis can be aligned with Islamic economic principles, which emphasise social justice, equality, and welfare. The study uses a qualitative method with a critical literature review approach to collect and analyse data from various sources. The study finds that digitalisation has both positive and negative implications for the labour market, such as increased efficiency, innovation, and access to information, as well as job displacement, skill shortages, and inequality. The study also suggests some possible ways for academics, it improves understanding and directs future study. For industry, it enhances workforce management and ethical business practices. Policymakers may use it to assist in developing regulations for social security, job creation, and workforce development that are in line with Islamic principles. The study concludes that digitalisation can be a catalyst for economic development and social welfare if it is guided by Islamic values and principles.

Examining the Trend of the Research on Islamic Financial Literacy from 2016-2023: A Bibliometric Review

Yusuf Kaweesa, Romzie Rosman, Syarah Syahira Mohd Yusoff — Wed, 31 Jul 2024 00:00:00 +0800

The purpose of this study is to identify the dynamics of research literature production in the field of Islamic financial literacy by conducting a bibliometric review. Indeed, this would aid in providing directions for future theoretical and empirical research and identifying the most influential work and authors in the field. A systematic literature search using the Scopus database was carried out and gathered a total of 35 publications from 2016-2023, published in 33 peer-reviewed journals, 1 book series, and 1 conference proceeding on which the researchers carried out descriptive statistics and content analysis. There were 32 articles, 2 conference papers, and 1 review. A comma-separated value (CSV) file containing 35 references was used for analysis on Vos Viewer from 2016 to 2023 to reveal thematic clusters. The literature search was done using seven keywords namely, “Islamic Financial Literacy”, “Shariah financial literacy”, “Sharia financial literacy”, “Shariah financial education”, “Sharia financial knowledge”, “Islamic financial knowledge”, “Islamic financial education”. This study revealed that there were four main aspects covered in the reviewed literature. These were basic concepts in measuring Islamic financial literacy, Islamic financial literacy as a determinant of adoption of Islamic banking, measuring the level of Islamic financial literacy, and determinants of Islamic financial literacy. Future research should be focused on analyzing the effect of Islamic financial literacy as a mediator or moderator of other factors of Islamic banking adoption. Indeed, this would help to fill the literature gap by further providing a deeply explored and enhanced Islamic financial literacy concept in the Islamic banking and finance field.

Examining Investor Protection in the South China Sea through an Islamic Large Language Model Legal Analysis

Klemens Katterbauer, Sema Yilmaz Genc, Hassan Syed, Laurent Cleenewerck — Wed, 31 Jul 2024 00:00:00 +0800

The Asia-Pacific area, which comprises a sizeable portion of the world economy, has become a popular destination for investment. Furthermore, there is a significant Muslim population in the Asia-Pacific region that is increasingly seeking financial services and products that align with their religious principles. This includes the South China Sea (SCS), which borders several nations including China, Vietnam, Malaysia, Singapore, Indonesia, Brunei, Thailand, and the Philippines, has drawn a lot of attention. Over the past few years, there has been a lot of focus on the growing tensions resulting from conflicting territorial claims. Foreign investors are growing more concerned about protecting their capital in light of the escalating tensions in the South China Sea (SCS). This article explores the application of large language models, specifically Llama 3, in analysing investment treaties and their relationship with measures to protect Islamic finance investors. The methodology employs a comparative legal case approach that integrates principles of Islamic finance to examine investor protection in the South China Sea. The analysis includes the implications of the outcomes of tribunals in the Crimea cases, commonly known as effective control. Under the jurisdiction of the host state, they carried out investment treaties within the territory even without meeting the international legal definition of territory. Given the large Muslim population in the territory, LLMs may utilise the textual information and reasoning for textual information processing and conclusion. This also resulted in the conclusion that implementing investment treaties beyond national boundaries would allow for discussions on the maritime rights of SCS governments without the need for precise demarcation, enabling the application of a uniformly held Islamic legal principles for dealing with Investor protection irrespective of the domestic legislation. Future research may focus on the utilisation of LLMs for decision making in investor dispute tribunals, thereby providing more consistent decisions taking into account Islamic principles that are more uniformly held.

Murabaha & Tawarruq: An Examination of Issues and Challenges from an Accounting Perspective

Mahvish Nawaz Mokal, Zaki Ahmad, Auni Zulfaka, Abi Huraira Rifas — Wed, 31 Jul 2024 00:00:00 +0800

This study investigates the critical issues surrounding the accounting treatment of Murabaha and Tawarruq within the scope of Islamic finance. It aims to propose recommendations for augmenting the Islamic financial accounting standards, thereby aligning them with Shariah principles and ensuring their practicality and relevance in financial reporting. Employing a qualitative approach, the study conducted an in-depth comparative analysis of the International Financial Reporting Standards (IFRS) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Through an extensive review of relevant literature and accounting standards, the article presents a comprehensive assessment of contemporary practises in contrast to Shariah-prescribed accounting principles. Notably, the accounting treatments of Murabaha and Tawarruq under IFRS and AAOIFI exhibit significant variations, necessitating a critical evaluation of conventional accounting standards' applicability to Islamic financial modes. This concern is further magnified by the application of uniform accounting principles to two distinct financial modes operating on disparate models. By identifying the limitations in the accounting for Murabaha and Tawarruq, this study contributes to the development and improvement of Islamic financial standards. The findings offer valuable insights into the deficiencies within current accounting practises and pave the way for the implementation of enhanced Islamic financial accounting standards that adhere more closely to Shariah requirements. Consequently, the proposed improvements seek to enhance the practicality and relevance of financial reporting while upholding the principles of Shariah in the accounting treatment of these integral modes of Islamic finance.