Journal of Islamic Finance

Maqasid al-Shariah-Based Strategies for Enhancing Digital Adoption Among B40 Muslim Entrepreneurs

Mon, 29 Sep 2025 00:00:00 +0800

In Malaysia’s pursuit of a digital economy, many B40 Muslim entrepreneurs remain excluded due to socioeconomic constraints and a lack of alignment between digital initiatives and Islamic ethical values. This study investigates how Maqasid al-Shariah principles can be strategically applied to enhance digital adoption among this underserved group. The objective is to develop a values-driven framework that integrates Islamic ethical priorities into digital inclusion strategies.
A qualitative methodology was employed, combining library research for conceptual and theoretical grounding with focus group discussions (FGDs) involving Islamic scholars, digital economy practitioners, policymakers, and B40 Muslim entrepreneurs to capture diverse perspectives and enhance validity. The findings reveal that the fundamental objectives of Maqasid al-Shariah, especially protection of wealth (Hifz al-Mal) and dignity (Hifz al-‘Ird), provide a relevant foundation for fostering ethical and sustainable digital adoption. Sub-themes include incentivizing compliance, integrating Islamic values into digital tools, promoting Shariah-compliant financial products, and leveraging religious institutions for digital education. This study offers practical and theoretical contributions by proposing a Maqasid al-Shariah-based digital inclusion framework for Muslim entrepreneurs in the B40 segment. Its implications extend to policymakers, Islamic fintech developers, and educators seeking to promote equitable and ethically grounded digital participation in Muslim-majority societies.

The Relationship Between Financial Literacy and Financial Wellbeing Among Muslim Women in Indonesia and Malaysia

Aulia Arifatu Diniyya, Salina Kassim, Saidatolakma Mohd Yunus — Mon, 29 Sep 2025 00:00:00 +0800

Women's participation in economic activity could contribute to the high annual global output. Good financial planning, as well as good financial knowledge, attitude, and behaviour, can improve women’s wellbeing. The purpose of this study is to examine the relationship between financial literacy dimensions (knowledge, attitude, and behaviour) and financial wellbeing among women in Indonesia and Malaysia. A quantitative method of study is employed by distributing 411 questionnaires that consist of financial knowledge, financial attitude, financial behaviour, and financial wellbeing questions. Indonesian and Malaysian women were found to have a moderate level of financial knowledge. Financial knowledge was found to have a positive and significant relationship with financial attitude, but it has no significant relationship with financial behaviour. The financial attitude was found to have a positive and significant relationship with financial behaviour and mediates the relationship between financial knowledge and financial behaviour. Financial attitude and financial behaviour were found to have a positive and significant relationship with financial wellbeing. This study contributes to the literature by showing that financial knowledge alone does not directly lead to positive financial behaviour; instead, it shapes financial attitudes, which in turn influence behaviour. When women develop positive financial attitudes, they are more likely to practice responsible financial behaviours and make sound financial decisions. Thus, achieving financial wellbeing requires not only improving knowledge but also fostering the right financial attitudes that can translate knowledge into right financial behaviour.

The Efficacy of the Black–Scholes Option Pricing Model in Valuing Nifty 50 Single Stock Options: Is There a Difference Between Shariah-Compliant and Non-Compliant Constituent Stocks?

Abdul Muneeb Dar, Obiyathulla Ismath Bacha — Mon, 29 Sep 2025 00:00:00 +0800

This study investigates the pricing efficacy of single-stock options on India's NIFTY 50 index by applying the Black–Scholes Option Pricing Model (BSOPM) to both call and put options from December 18, 2024–January 30, 2025. Theoretical prices were estimated using standard inputs (spot, strike, volatility, time to maturity, and a 5.98 % risk-free rate), and mispricing was defined as the difference between market prices and theoretical prices. Paired t-tests and Welch’s tests compared overall mispricing and segmental differences between Shariah-compliant and conventional stocks. The findings revealed widespread mispricing: 46.9% of call options and 57.14% of put options exhibit significant underpricing relative to theoretical values. However, contrary to expectations that Shariah-compliant stocks might display different pricing behaviour due to structural characteristics like lower leverage and volatility, no statistically significant difference in mispricing was observed between Shariah-compliant and conventional options. These results suggest that broader market factors—such as liquidity, risk aversion, and regulatory dynamics—play a more dominant role in influencing pricing inefficiencies than the Shariah compliance of the underlying stocks. These insights can guide hedging strategies for institutional investors and inform regulatory oversight in emerging derivatives markets.

Islamic Preference Shares from Shariah Perspective: Case Study of Irredeemable Convertible Preference Shares (ICPS-i) Issued by TH Heavy Engineering Berhad (THHE)

Azman Mohd. Noor, Mohd Aizuddin Mohd Kamarul Zaman — Mon, 29 Sep 2025 00:00:00 +0800

This study investigates the Shariah compliance of Islamic Preference Shares (IPS), with particular focus on the Irredeemable Convertible Islamic Preference Shares (ICPS-i) issued by TH Heavy Engineering (THHE) Berhad. The research aims to evaluate how IPS can be adapted within the mushārakah framework, examine divergent Shariah rulings, and assess their operationalisation and financial outcomes. The research adopts a qualitative design, combining doctrinal analysis of classical fiqh, contemporary resolutions of the IIFA-OIC, AAOIFI, and the SAC Malaysia, and statutory provisions under the Companies Act 2016. A comparative analysis highlights differing Shariah positions, while a case study of THHE’s ICPS-i explores practical implementation, drawing on prospectuses, SAC resolutions, and financial statements. The findings confirm that IPS can be framed as mushārakah instruments provided profits remain contingent on actual performance and no capital guarantees are embedded. While IIFA-OIC and AAOIFI categorically reject preference shares, SAC Malaysia adopts a more accommodative approach through mechanisms such as tanāzul (waiver of rights), conditional hibah, and recognition of the Board as wakīl. The THHE ICPS-i complied with SAC resolutions by ensuring profit-contingent dividends, market-based conversion, and liquidation priority via post-entitlement waiver. Financially, the instrument reduced gearing and stabilised the balance sheet but offered limited immediate returns as no dividends were declared during its tenure, underscoring the equity-like risks of IPS. This research contributes by bridging doctrinal Shariah debates and practical market application. It offers a comparative perspective on global and Malaysian rulings and provides empirical insights from the THHE ICPS-i, highlighting IPS as a hybrid financing tool that balances Shariah integrity with corporate needs.

Know Your Customer (KYC) Credit Risk Assessment: A Study of the PBZ Ikhlas – Zanzibar

Hamed Rashid Hikmany, Abdul-Nasser Hamed Hikmany — Mon, 29 Sep 2025 00:00:00 +0800

Risk cannot be avoided completely but its effect could be reduced where there is understanding on types of risks involved and setting mitigation measures. In financial institutions such as banks, the most common risk factor is Know Your Customer (KYC). How much information does the financial institution possess regarding new customers; what changes have occurred on existing customers. This study aims to find out what are the risk factors that cause the People’s Bank of Zanzibar (PBZ) Ikhlas branches to have Non-Performing Finance (NPF), in particular the KYC factor. The 5Cs – Character, Capacity, Collateral, Capital and Conditions – principle are applied, which are intended not to harm debtors who later commit defaults, such as NPF. This is a survey study of PBZ Bank Ikhlas for 2022 operations only and it involves data collection mainly from available reports. The survey was conducted through consultative meetings and by use of questionnaire covering ten officers at PBZ including Shariah Advisory Committee (SAC) and the management members. Data was subjected to a qualitative analysis delving into non-numerical data, open-ended responses and deeper insights. Though this study does not aim to bring about changes in running PBZ, the findings and suggestions could help in understanding the challenges and mitigate the risks. The findings show that there is most likely a lack of an in-depth due diligence on KYC and regular training to both SAC and the PBZ Bank Ikhlas (PBZ) staff. In order to reduce credit risk at PBZ and hence move forward financial stability, PBZ is advised to consider customer background while assessing character. The 5Cs should be made a priority in appraising customers and most importantly engage customers with transparency about the PBZ Ikhlas services and conditionality.