Search Results (50)

Purpose: This research intends to explore the relationships between digital risk management practices and the successful implementation of innovative banking services with the mediating effect of digital capabilities and the moderating effect of digital culture. Methodology Approach: In this study, the data was gathered using a quantitative approach and the cross-sectional survey method with responses from participants who were chosen as the unit of analysis of being investigated for the study. Islamic finance institutions in Jordan were used as the unit of analysis in this study. Responses of different Islamic finance institutions were surveyed in a structured manner to collect data with 281 valid responses. The current study then used structural equation modeling using SmartPLS3 to investigate the relationship between the variables. Findings: The results show that utilizing digital risk management, advanced analytics, artificial intelligence, and automated compliance systems is essential to fostering innovation while upholding Shariah compliance. The study also shows that efficient digital risk management boosts users’ confidence increases service effectiveness and facilitates the launch of cutting-edge Shariah-compliant products. The findings supported a significant meditating effect of the digital capabilities but did not support a moderating effect of the digital culture between digital risk management and innovative banking services respectively. Originality: By investigating digital risk management in the particular context of Islamic innovative banking services, this study provides novel insight. In contrast to earlier research that focuses on innovation in Islamic finance, this paper examines how digital risk management frameworks impact the sustainability of innovative banking services that adhere to Shariah. Moreover, building institutional capacity and resilience requires training programs that emphasize emerging technologies and digital risk awareness. Full article

This study examines whether environmental, social, and governance (ESG) performance reduces credit risk in Gulf Cooperation Council (GCC) banks over 2014–2025, and whether this relationship differs between Islamic and conventional banks. Using loan-loss provision (LLP) ratios as the primary credit risk proxy, we estimate two-way fixed-effects panel regressions and, as the primary specification, a two-step System GMM estimator for 43 banks across six GCC countries (258 bank-year observations). Our results are threefold. First, accounting for profit persistence and endogenous capital accumulation through System GMM reveals a significant negative aggregate ESG–credit risk relationship absent from static fixed-effects estimates, directly supporting the credit risk reduction hypothesis. Second, pillar decomposition identifies the social score as the primary driver, while governance and environmental scores are individually insignificant in the full sample. Third, split-sample GMM estimates reveal that Islamic bank credit risk dynamics are structurally distinct: profitability (ROA) suppresses provisioning approximately 1.2 times more powerfully than in conventional banks, loan intensity disciplines rather than amplifies credit risk under Sharia asset-backed financing, and lagged provisioning exhibits a mean-reversion pattern unique to the profit-and-loss sharing model. Full article

Islamic banking is increasingly expected to align Sharia-based intermediation with sustainability objectives, yet empirical evidence remains limited on how sustainability disclosure links financing structures with bank performance. This study examines whether Islamic Sustainable Banking (ISB) functions as a mediating mechanism between profit-sharing financing, debt-based financing, and financial performance in Islamic banks in Indonesia and Malaysia. ISB is measured using an Islamic Sustainable Banking Disclosure Index that integrates Maqasid al-Shariah principles with SDG-oriented disclosure indicators. Using panel data from 23 Islamic banks over 2018–2023 and applying partial least squares structural equation modeling, mediation analysis, PLS-MGA, and permutation tests, the study finds that both profit-sharing and debt-based financing are negatively associated with ISB disclosure, while ISB is positively associated with net profit margin but not return on assets. The mediation results indicate statistically significant negative indirect associations through ISB, suggesting that sustainability disclosure operates as a conditional transmission mechanism rather than an automatic performance driver within the specified PLS-SEM model. Cross-country tests reveal significant differences between Indonesia and Malaysia, particularly in the associations between financing structures and profitability. The study contributes to Islamic sustainable finance by clarifying how Maqasid-oriented disclosure connects financing composition, governance capacity, and profitability, while offering practical implications for bank managers, regulators, and policymakers seeking to integrate sustainability into Islamic banking governance and financing decisions. Full article

As a developing and evolving phenomenon, Islamic finance is continuously questioned regarding its performance and efficiency, especially in the context of higher ethical objectives, also termed as maqasid al Shariah, to achieve falah by practicing ihsan. A vast group of researchers has measured the unsatisfactory performance of Islamic financial institutions against the maqasid al Shariah, reflecting their convergence with capitalist systems. This raises a question of whether the Islamic finance industry interprets the concept of maqasid al Shariah the same way as academia and whether they assign maqasid al Shariah the same high level of relevance and importance. This study explores how the practitioners of the Islamic banking industry in Pakistan understands and implement maqasid al Shariah in practice. Adopting a qualitative, multiple-case approach, it draws on 20 in-depth narrative interviews with Islamic bankers and Shariah scholars. The findings of the research suggest ten different perspectives of practitioners, which they hold regarding maqasid al Shariah. They are (1) public welfare (maslahah), (2) business motives alongside banks do not consider maqasid al Shariah as their responsibility, (3) wrong interpretation and wrong evaluation of Islamic institutions on maqasid, (4) new industry and over expectation from the industry, (5) justice/equity (‘adl/ihsan), (6) bankers consider auto inclusion of maqasid al Shariah in every transaction, (7) prevention from prohibitions and provisioning of halal options, (8) Shariah compliance, (9) more focus on protection of wealth (10) maqasid are not divine and are man-made interpretations. These findings contribute to developing more effective performance measurement frameworks for the industry in the future and can compel both regulators and practitioners to consider comprehensive objectives of Shariah in product development rather than focusing merely on compliance. Full article

The role of Corporate Social Responsibility (CSR) in advancing economic, social, and environmental well-being has been increasingly acknowledged in the broader context of the United Nations Sustainable Development Goals. For instance, CSR in Saudi Arabia is increasingly framed as a mechanism to support Vision 2030—a national strategy aimed at transforming Saudi Arabia to a sustainable economy. However, evidence on how financial institutions disclose and prioritize CSR at the country level remains fragmented. This study examines the extent and patterns of CSR disclosure across the Saudi banking sector by analyzing publicly available documents, e.g., annual reports and ESG/CSR reports (n = 36) from 10 banks (4 Islamic and 6 commercial). Findings indicate that CSR disclosures were primarily clustered into four macro themes—society, economic contribution, internal stakeholders, and environment—with a strong thematic emphasis on philanthropic activities, financial donations, disability support, and financing for Small and Medium Enterprises (SMEs). Environmental initiatives were disclosed less frequently and were generally narrower in scope, focusing on resource efficiency, recycling, and selective green financing. In addition, a comparative analysis between Commercial and Islamic banks revealed that the latter focused on values-based CSR, while commercial ones emphasized governance-oriented CSR. Full article

The study documents the impact of the external sector on movements of the Pakistan Stock Exchange (PSX), covering conventional and Islamic indices. Selected variables include international trade, foreign investment, remittances, oil, gold, and currency markets, as well as the KSE-100 and KMI-30 indices. The sample period covers the latest 130 months, from 2015/01 to 2025/10. Results are documented through descriptive statistics, pairwise correlations, and OLS regression. Stability of coefficients during the review period is checked by calculating BTC-Var and switching Var. Outstanding momentum is evident in market indices (in the final phase), accompanied by growth in remittances, while the national currency has experienced an alarming depreciation. The combined impact of the external sector is not in the higher range for either index (adjusted R-square values are low). A group of four variables (remittances, oil, gold, and currency markets) was significant for the conventional index, while a group of three variables (oil, gold, and currency markets) was significant for the Islamic index. All significant variables contribute positively to stock index movements, except the exchange rate. BTC-Var and switching var suggest instability of relationships and regime-dependent var dynamics. The findings are beneficial for managers and investors in predicting index movements and portfolio diversification, as well as for relevant authorities in making policy decisions that promote prudent exchange-rate management and facilitate remittances. To the best of the author’s knowledge, this study is among the few that jointly examine the impact of external-sector variables on stock market movements. Full article

This study investigates the factors associated with niyyah (worshipful intention) of Islamic bankers toward issuing green sukuk (G-sukuk) investment instruments. In particular, it analyses how bankers’ empathy, moral and ethical responsibilities, and self-efficacy are related with environmental awareness, perceived social support, and green tech innovation, respectively. These factors then predicted bankers’ niyyah toward issuing G-sukuk. The present research employed the theory of bounded rational planned behavior as its theoretical foundation. Data were collected from 390 bankers employed in different Islamic banks. Random sampling technique was employed for this cross-sectional study and for analyzing data, this study applied structural equation modeling. Findings indicate that all predictors are statistically significant and positively associated with bankers’ niyyah toward G-sukuk for ensuring sustainable finance. Furthermore, G-sukuk initiatives can help to lower the carbon emissions and other harmful substances, which would improve overall environmental sustainability and ecological contexts related to SDG-13. There is limited empirical evidence available on the G-sukuk perspective in Bangladesh. This study will provide practical insights for the bankers and policymakers. Full article

This paper investigates the factors of sustainability of the financial performance of Islamic insurance (Takaful) windows in Pakistan. A large body of literature has examined Takaful providers across many countries; however, there is little research on the dynamics of Takaful windows. This study uses an analytical approach to investigate the effects of various operational and financial measures on Takaful window performance. It is one of the earliest works to examine the profitability of Takaful windows with a dynamic PVAR model, providing new evidence on the peculiar financial forces in hybrid Islamic–conventional insurance frameworks. It explores the effects of the retention ratio, Wakalah fees, commission ratio, gross written contributions, and underwriting surplus on profitability, measured by return on assets (ROA) and return on equity (ROE). It uses annual data from 18 Pakistani Takaful window insurers, employs a panel vector autoregressive framework to capture dynamic interdependencies and endogeneity, and conducts a variance decomposition with impulse response analysis. The findings indicate that the retention ratio and underwriting surplus have significant positive effects on ROA, whereas Wakalah fees have a negative impact. In the case of ROE, the underwriting surplus and commission ratio are associated with positive effects; meanwhile, the retention ratio and gross written contributions are related to negative effects. Variance decomposition emphasizes the commission and retention ratios as the main sources of profitability, with Wakalah fees and underwriting surplus being insignificant. The regulators need to ensure proper fund separation and establish the most optimal rules regarding Wakalah fees. The operation of Takaful windows should focus on commission management and business retention strategies to enhance profitability and financial sustainability. The increase in the financial performance of Takaful windows contributes to the expansion of Shariah-compliant insurance, facilitating the financial inclusion of Muslim communities in mixed markets. Full article

This study assesses the financial soundness of Sudanese commercial banks during escalating civil conflict by integrating Altman’s Z-score models with scenario-based stress testing. Using audited financial data from 2016 to 2022 (pre-war) and projections through to 2028, the analysis evaluates resilience under low- and high-intensity conflict scenarios. Altman’s Model 3 (for non-industrial firms) and Model 4 (for emerging markets) are applied to capture liquidity, retained earnings, profitability, and leverage dynamics. The findings reveal relative stability between 2017–2020 and in 2022, contrasted by significant vulnerability in 2016 and 2021 due to macroeconomic deterioration, sanctions, and political instability. Liquidity emerged as the most critical driver of Z-score performance, followed by earnings retention and profitability, while leverage showed a context-specific positive effect under Sudan’s Islamic finance framework. Stress testing indicates that even under low-intensity conflict, rising liquidity risk, capital erosion, and credit risk threaten sectoral stability by 2025. High-intensity conflict projections suggest systemic collapse by 2028, characterized by unsustainable liquidity depletion, near-zero capital adequacy, and widespread defaults. The results demonstrate a direct relationship between conflict duration and systemic fragility, affirming the predictive value of Altman’s models when combined with stress testing. Policy implications include the urgent need for enhanced risk-based supervision, Basel II/III implementation, crisis reserves, contingency planning, and coordinated regulatory interventions to safeguard the stability of the banking sector in fragile states. Full article

This study explores how FinTech and artificial intelligence (AI) adoption shape efficiency and financial stability in dual-banking systems. It focuses on 26 listed Islamic and conventional banks across 11 countries in the MENA and Southeast Asia regions between 2020 and 2024. To measure digital adoption, we create a seven-component FinTech Adoption Index. We use fixed-effects regressions to examine its impact on cost efficiency, profitability, solvency stability, and credit risk. This analysis also controls bank size, capitalization, and macroeconomic conditions. The results show a clear adoption gap. Conventional banks consistently score 0.5–0.8 points higher on the FinTech Index compared to Islamic banks. Each additional FinTech component raised operating costs by about 0.8%, but improved profitability slightly by only 0.03%. This suggests that technological integration creates upfront costs before any real efficiency gains are seen. However, the stability benefits are stronger. FinTech adoption increases the Z-score by 3.6 points and lowers the non-performing loan ratio by 0.1%. Islamic banks gain more stability benefits due to their risk-sharing contracts and asset-backed financing structures. Overall, an efficiency–stability trade-off emerges. Conventional banks focus more on profitability, while Islamic banks gain resilience, but face slower efficiency improvements. By combining the Resource-Based View and Financial Stability Theory, this study provides the first multi-country evidence of how governance structures shape digital transformation in dual-banking markets. The findings offer practical guidance for regulators and bank managers around balancing innovation, efficiency, and stability. Full article

This study examines the performance and resilience of Islamic banks during the COVID-19 pandemic, a period marked by unprecedented global economic disruption. Drawing on empirical data and a comparative analysis with conventional banking institutions, the research evaluates key financial indicators—liquidity, profitability, asset quality, and capital adequacy—to assess how Islamic banks responded to the crisis. The unique principles of Islamic finance, including risk-sharing, asset-backed financing, and the prohibition of interest and speculative activities, provide a distinct framework for crisis response. By analyzing how these features influenced bank performance during the pandemic, the study offers valuable insights into the relative robustness of Islamic versus conventional banking models. The findings contribute to the academic discourse on financial stability and risk management, offering practical implications for policymakers, regulators, and stakeholders to strengthen financial systems against future global shocks. Full article

Globally, financial inclusion is regarded as being crucial for balancing an economy’s financial system. However, despite the significance of financial inclusion, it still needs to be clarified to identify what factors are responsible for the diverse trend of financial inclusion in the forty-five Sub-Saharan Africa (SSA) countries from 1999 to 2024. The main rationale of the study empirically investigated these determinants of financial inclusion in forty-five Sub-Saharan Africa (SSA) countries from 1999 to 2024, which covers three distinct periods: which is the pre-COVID, 2020–2022 is the COVID period, and the post-COVID period from 2023 onward, but examined as a whole from 1999 to 2024 for easy policy formulation for SSA countries. The study was anchored on two main research objectives: firstly, to examine the factors influencing financial inclusion in Sub-Saharan Africa (SSA) in these three distinct periods, and lastly, to present the policy implications of the result of these factors in enhancing financial inclusion in the post-COVID era in SSA. The study used the Panel Least Squares (PLS) technique in the data analysis. The result revealed that economic growth (GRO), Islamic banking (ISMAIC), money supply (MSS), internet users (USERS), and credit availability (CREDIT) positively and significantly enhance financial inclusion with coefficients of 0.001298, 4.926809, 1.08 × 10⁻⁶, 0.459388, and 0.657431, respectively, with significant p-values of 0.0008, 0.0023, 0.0000, 0.0000, and 0.000, respectively. On the flip side, internet servers (SERVER) have a negative coefficient value of 4.63 × 10⁻⁶ with a p-value of 0.000. Though inflation (INFL) and interest rate (INT.) have negative coefficient values of −0.02853 and −0.08317, they have insignificant p-value impacts of 0.2841 and 0.2501, respectively. The result indicates that many of the variables have a significant impact on financial inclusion. This is shown from the probabilities of the t statistics of each of the independent variables in the estimated model, which are significant at the 5% level. The policy implications of these results include the following: firstly, SSA governments should promote economic growth through investment in productive sectors, infrastructure development, and job creation programs to indirectly improve financial inclusion. Secondly, SSA countries’ policymakers should maintain price stability through sound monetary and fiscal policies to ensure inflation does not hinder access to financial services. Thirdly, SSA countries’ governments and central banks should promote lower interest rates and enhance credit accessibility, especially for marginalized groups, through subsidized loans and targeted credit schemes. Fourthly, policymakers should support the expansion of Islamic finance by improving regulatory frameworks and increasing awareness about Sharia-compliant financial products. Full article

Green banking has become a concept of interest, particularly with the focus on the role played by banks in pursuing Sustainable Development Goal 13 on climate action. This study is distinguished from previous ones in that it aimed at investigating the multi-regional view on green banking practices/activities around the world with a special emphasis on the opportunities and challenges that various banks encounter in different geographical areas. A systematic review approach was adopted based on the Web of Science and Scopus databases, in which 159 articles were retrieved and 62 articles synthesized through a thematic analysis. The research process was demonstrated through a Prisma 2020 flowchart. Key multiregional green banking activities identified include digital banking, green loan or sukuk products for Islam-dominated economies, green services and investments, and financing of green infrastructure. In essence, the implementation of green banking is either directly through active green lending and greening their operations or indirectly through enhancing conditions. The key challenges identified include regulatory handles, social economic and culture hinderances, transition risk and the high cost of compliance, greenwashing concerns, and weak investor confidence. The most prevalent opportunities included green banking as a strategic competitive advantage, emerging market niche, and as a strategy for long-term climate risk management. Full article

The study documents the achievements of the Islamic Banking Services Industry (IBSI) in light of Islamic finance objectives (including commercial performance, financial stability, and wealth distribution). A balance sheet analysis of IBSI in the United Arab Emirates (UAE) for 33 quarters (2013 Q4–2021 Q3) is conducted, focusing on sources and uses of funds, as well as documentation of commercial performance. The findings suggest that the UAE IBSI has remained successful in achieving its micro/primary objectives (commercial performance) and made progress towards partial achievement of its macro/intermediate objectives (financial stability and equitable wealth distribution). While evidence suggests achievements in the area of financial stability, the aspect of equity in wealth distribution requires more focus. The study recommends that regulators develop a legal framework focusing on the business models for IBSI, aimed at achieving broader economic objectives. It is also recommended that managers of UAE IBSI include profit and loss-sharing contracts in deposit collection, financing and investment portfolios. The contribution to the literature includes the documentation of findings on the achievements of UAE IBSI in financial performance, as well as its broader economic objectives within the Islamic financial system. Full article

The purpose of this study is to investigate the influence of environmental disclosure and corporate governance on the financial performance of Islamic banks in Saudi Arabia. This study highlights that sustainable practices are transparent with financial objectives using the religious framework of Islamic finance. This research is based on Worldwide Vision 2030, which covers sustainable development and promotes environmental, social, and governance (ESG) principles, as well as corporate governance factors, such as board composition and Shariah Supervisory Boards (SSBs). We use a hybrid approach for our findings, with a dataset spanning 2011–2023 for the quantitative analysis and 20 semi-structured analyses conducted for a qualitative approach that aligns with objectives. We found that environmental disclosure boosts profits and stakeholder trust. Corporate governance structures, such as environmental boards and sustainability committees, improve the environmental disclosure of financial performance in Islamic banks. In this positive interaction, specialized governance drives Sharia-compliant sustainability initiatives. SSBs help Islamic banks integrate sustainability and meet religious and ESG environmental standards. Board diversity and dedication in the sustainability committee both play important roles in enhancing environmental disclosure practices; in return, these improved financial performances. The interaction of environmental disclosure and board environmental expertise has a positive impact on the overall performance, which indicates that governance structure supports sustainability-related decision-making, aligning with transparency. This study suggests that Islamic banks standardize ESG frameworks, improve board environmental expertise, and invest in real-time sustainability reporting digital solutions. Saudi Islamic banks can lead regional and global sustainable banking by adopting these strategies to align with global sustainability trends, improve financial performance, and meet ethical finance expectations. Full article