INCEIF University Journals
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Editorial
Full text linkINCREASED ACCESSIBILITY IN ACADEMIC PUBLISHING
Some years ago research publications were mostly available in printed form; they were less widely disseminated and were mostly accessible by subscription only. However, the demand nowadays is for fast publication that supports rapid dissemination of research findings, open access publishing that advocates for free access to research outputs, and increased accessibility to academic publications in terms of affordability, wider audience and diverse authorship. Publishers, including academic journal publishers, are leveraging on modern technological advances to innovate and fulfil market expectations, especially in addressing the challenge of meeting accessibility standards.
In order to grow their audience and visibility, most journals have shifted to online publication, with e-journals gaining more traction as they are more convenient, economical, discoverable, and easier to share and navigate through. To further maximise the exposure of published articles, journals are also publishing articles in multiformats to facilitate sharing. They promote short summaries and other microcontent of these publications through social media to make scholarly information accessible. Authors are encouraged to share their published articles on various platforms to increase networking opportunities, possibilities for research collaboration, and, most importantly, to increase citations and grow their impact
Fiqh Maxim of ‘al-Ghurm bi al-Ghunm’: A Critique on the Interpretation of the Maxim relating to Risk-Return Concept in Islamic Banking and Finance
No full textPurpose – This paper aims to critically review the interpretation of fiqh maxim ‘al-ghurm bi al-ghunm’ which is widely adapted in the Islamic banking and finance while being associated with the risk-return concept. Tracing back the doctrinal sources of Shariah law, the review intends to examine the appropriate meaning of the Shariah texts based on their contexts and occurrences.
Design/methodology/approach – This paper inclines to the doctrinal methodology specified to Shariah law whereby the observations, documents and records will be comparatively reviewed for establishing a critical evaluation. A number of doctrinal sources have been gathered to analyse the essence of the subject matter, in which the two types of materials referred to are mainly classical Arabic dictionaries and the books of Hadith.
Findings – The review demonstrates a discrepancy on the adaptation of the maxim into Islamic banking and finance in relation to the risk-return concept. Though both principles have similarities in risk return precepts, nevertheless, they also possess differences in terms of interpretation and applications. The context of the Hadiths, which is the Shariah basis of the maxim or from where it is derived, describes specific scenario in relation to asset-based transaction, whereas the risk-return concept is quite generic for risk measurement system that is commonly used in financial management and investment.
Research limitations/implications – Even though the general belief says Islamic alternatives to interest bearing financial services are risk-sharing based mode such as musharakah and mudarabah, the argument is hardly supported by and found in present-day academia Though the observations may limit the searching result, they however do not hamper the findings.
Originality/value – The paper identifies the apparent gap of the current theories to assist researchers ascertaining the research area.
Paper type Conceptual Pape
Sustainable Islamic Financial Engineering with Special Reference to Gulf Cooperation Council’s Economies
Full text linkABSTRACT
Purpose — This paper explores how Islamic economics and finance, when developed as an embedded framework for regenerative development in line with maqāṣid al-Sharīʿah (the objectives of Islamic law), can facilitate the design of sustainable contracts and Islamic financial engineering. This framework provides a mechanism to achieve the paradigm shift advocated by Islamic finance scholars to accommodate the sustainability agenda into the practical applications of Islamic economics and finance. The paper specifically focuses on the Gulf Cooperation Council’s (GCC) economies.
Design/Methodology/Approach — This study employs an analytical research approach to evaluate the compatibility of Islamic social and commercial finance with sustainability objectives. The analysis is primarily qualitative and relies on the One Earth Framework proposed by Simpson et al. (2021) to structure the assessment of opportunities and challenges related to sustainability that Islamic economics and finance in the GCC region can help address.
Findings — The paper highlights the potential of Islamic economics and finance as an embedded framework to address sustainability challenges in the GCC countries. By examining the capacity of Islamic finance to accommodate sustainability pathways, it elucidates avenues for integrating sustainable practices within Islamic financial contracts and institutions.
Originality/Value — One of the key contributions of this paper is the introduction and development of Islamic economics and finance as an embedded framework. This pioneering concept not only lays the groundwork for a practical mechanism but also signifies a fundamental step in realising the paradigm shift within Islamic finance. This transformative approach enhances the relevance and effectiveness of Islamic finance in fostering sustainability, marking a significant advancement in the field.
Research Limitations — While the study provides valuable insights, it primarily follows an analytical approach and does not involve quantitative analysis. It serves as a starting point for further research on the integration of sustainability objectives in Islamic finance.
Practical Implications — The paper suggests practical implications for Islamic finance stakeholders, highlighting the potential for sustainable contract design and financial engineering.
Keywords — Islamic finance, Islamic financial engineering, Natural capital, Regenerative development, Sustainable contract design
Article Classification — Conceptual pape
Unlocking Green Productivity Through Green Lending, Digitalisation and Financial Literacy
Full text linkPurpose — This study aims to measure green productivity in the agricultural sector, specifically on Sumatra Island, with some driving factors such as green lending from rural banks (both conventional and Sharīʿah), digitalisation, and the intermediation of financial literacy.
Design/Methodology/Approach — The study employs panel data from 154 regencies on Sumatra Island for the period 2018 to 2022. Data Envelopment Analysis was employed to generate agricultural green total factor productivity, followed by regression estimation to see the influence of each determining factor.
Findings — This study reveals the significant impact of green lending on green productivity. However, in Sharīʿah rural banks, which adhere strictly to Sharīʿah rules, this impact is positive only when moderated by financial literacy. On the other hand, digitalisation is also found to influence green productivity, but the effect weakened when the level of financial literacy could not be controlled.
Originality/Value — To the best of the author’s knowledge, this study is the first to observe green productivity in the agricultural sector within a dual economic system that fosters both Islamic and conventional financial practices at the regional level.
Practical Implications — This study implies that governments and banks should integrate green lending and digitalisation across various levels of financial literacy
Islamic Framework for Sustainable Development: Islamic Framework for Sustainable Development
No full textPurpose: The primary aim of this study is to address the gap in the current academic literature by proposing a comprehensive framework that integrates Islamic principles with the Sustainable Development Goals (SDGs).
Study Design/Methodology/Approach: Utilizing a systematic literature review, this study focuses on scholarly works published from 2012 to 2023, employs thematic analysis, and engages with subject experts to craft a framework that advances global sustainability goals.
Findings: This study's framework positions Zakat and ethical finance as key to equitable wealth distribution and sustainable economic growth. Halal and Tayyib principles are shown to support ethical consumption and food security, essential for economic sustainability. Islamic teachings on education and gender equity are identified as drivers for societal well-being and equality, central to social sustainability. Additionally, Islamic environmental principles on water, resource use, and marine life ethics reinforce commitments to ecological sustainability.
Research Limitations/Implications:
While the study lays down a theoretical framework, it emphasizes the need for empirical testing and validation. The implications call for a cross-disciplinary approach to refine the framework and its application across diverse socio-economic and cultural settings.
Practical and Social Implications: This framework serves as a blueprint for policymakers, providing actionable insights to integrate Islamic principles with sustainable development initiatives. It underscores the relevance of Islamic values in crafting policies that are not only economically viable but also socially equitable and environmentally sustainable.
Originality/Value: The originality of this study lies in its novel approach to synthesizing Islamic teachings with sustainability objectives, contributing a unique perspective to the body of knowledge. It extends the discourse in Islamic economics to include a holistic consideration of environmental concerns, thus offering a comprehensive and practical framework that aligns with global sustainability agendas
Analytical Study of the Implementation of AAOIFI’s Ethical Standards in the Algerian Islamic Banking System: Assessment and Recommendations
Full text linkPurpose ‒ The application of ethical requirements is a key way for all stakeholders in the Islamic financial industry to build trust and promote integrity. This study aims to assess the extent to which the Algerian banking system has adopted the ethical standards for Islamic financial transactions issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).
Design/Methodology/Approach ‒ This study conducted an analytical reading. It utilised the descriptive approach to present the study's variables and employed the analytical approach to discuss the various concepts and legal regulations that govern the banking sector and to provide recommendations that would help to build a solid foundation for the banking system.
Findings ‒ The findings revealed that the Algerian monetary authority is committed to gradually promoting Islamic banking regulations in a thoughtful manner. However, the study also found that there is a lack of clarity regarding the adoption of regulatory laws in Algeria for the ethical standards issued by AAOIFI, even within the 2023 Monetary and Banking Act.
Originality/Value ‒ To the best of the authors’ knowledge, this paper is the first study to assess the extent to which the Algerian banking system has adopted the ethical standards for Islamic financial transactions issued by AAOIFI.
Research Limitations/Implications ‒ The primary limitation of this research is its exclusive focus on the Algerian banking system and its reliance on secondary data.
Practical Implications ‒ This research offers valuable insights for those in decision-making roles. It recommends the establishment of a committee of experts to develop standards tailored to the Algerian Islamic banking environment. The committee should be financially independent and under the supervision of the monetary authority. Additionally, the study suggests the issuance of a code of ethics to govern the professional conduct of Islamic banks (IBs) and Islamic financial institutions (IFIs) in accordance with Sharīʿah
ESG and ESG controversies on firm risks in the emerging markets: The moderating roles of Shariah screening and legal origins
Full text linkPurpose – This study examines the impact of environmental, social and governance (ESG) and ESG controversies on firm risk, and proposes the moderating roles of Shariah screening and legal systems over the relationship.
Design/Methodology – The research data were 522 firms from 16 emerging markets over the period 2013-2021 (4689 observations). The data (i.e., ESG, financial data, etc.) obtained from the Refinitiv Eikon database. The panel regression model was used to examine the relationships of variables studies.
Findings – We find that ESG is negatively related to risks while ESG controversy is positively related to risks. This suggests that when firms engage in more ESG activities, stakeholders’ relationships are reinforced, and lead to reduced firm risks. Further, this study also finds that both Shariah screening and legal environment play significant moderating roles in reducing risks via their influence on ESG and ESG controversies. The evidence is consistent with the stipulation that Shariah-compliant firms are more inclined to engage in ESG activities.
Originality/Value – This study is unique as it is an attempt to examine the moderating role of Shariah screening and legal system in influencing the impact of ESG and ESG controversies on firm risk.
Practical Implications – The findings suggest engaging more aggressively in ESG activities can benefit from their risk mitigating effect. Further, the present evidence of the positive impact of Shariah screening in mitigating risk via ESG and corporate controversies. This evidence lends credibility for firms to be considered as Shariah-compliant
Indonesian Islamic Banks’ Post-Pandemic Profitability Alignment with Sustainability Goals
Full text linkPurpose — The Islamic banking sector in Indonesia has recovered from the COVID-19 pandemic. Despite the sector’s resilience to the crisis, Islamic banks have lower levels of profitability than their conventional counterparts. They therefore need to optimise profitability as well as implement sustainability practices due to their high reliance on income from intermediary functions and their core principle of protecting life and preventing harm. This study aims to optimise the post-pandemic profitability of Indonesian Islamic banks while seeking to align profitability with sustainable development goals (SDGs).
Design/Methodology/Approach — The model is developed based on the combination of linear programming and financial analysis, with constraints considering banking regulations and practices. The model highlights financing product types, financing fields of business, and types of deposit products that contribute to higher profits and support sustainability practices.
Findings — The recommended financing product types, financing fields of business, and deposit product types lead to profitability growth of up to 85 per cent, even better than the pre-pandemic performance of Islamic banking and the overall Indonesian banking industry. This research also finds that Islamic banks’ strategy for profit optimisation is consistent with the increasing support for SDGs.
Originality/Value — There is a lack of literature discussing the alignment of Islamic banks’ profit optimisation with the SDGs. This study contributes to the literature by aligning the Islamic banks’ profitability strategy with sustainable financing.
Research Limitations/Implications — The study is expected to promote the implementation of sustainability practices as well as increase the profitability of Islamic banks, drawing from evidence in Indonesia
Navigating Credit Risk in Islamic banks: A Multidimensional Analysis of Non-Performing Loans
Full text linkPurpose ‒ This study examines the determinants of non-performing loans (NPLs) in Islamic banks. The research aims to identify bank-specific and macroeconomic factors that influence NPLs and explores the effects of the institutional environment, product development, and credit concentration on credit risk.
Design/Methodology/Approach ‒ The study employs panel data analysis, utilising secondary data from 2008- 2022 from the World Bank, Refinitiv Eikon, FitchConnect and the AAOIFI website. Multiple regression models are used to isolate the impact of specific variables on NPLs in Islamic banks.
Findings ‒ The results indicate that return on assets (ROA), liquidity ratio (LIQ), net interest margin (NIM), and net charge-off ratio (NCOFF) are significant bank-specific determinants of NPLs. Higher ROA and LIQ reduce credit risk, while higher NIM and NCOFF increase it. Macroeconomic factors like GDP growth and inflation significantly affect NPLs, with economic downturns and high inflation intensifying credit risk. Political stability mitigates risk, while credit concentration in sectors such as real estate increases NPLs. A positive relationship between AAOIFI membership and NPL suggests compliance challenges.
Originality/Value ‒ This study comprehensively analyses NPL determinants in Islamic banks across 30 countries, emphasising the role of institutional stability and prudent product development in credit risk management.
Research Limitations/Implications ‒ The unavailability of NPL data from earlier years results in an unbalanced sample. Future research should explore the impact of Fintech and ESG (environmental, social, and governance) factors on credit risk management in Islamic banks.
Practical Implications ‒ The findings offer valuable insights for policymakers and banking practitioners aiming to enhance credit risk management in Islamic banking. Integrating fintech and ESG principles can improve risk profiles and foster sustainable banking practices
Waqf and Microfinance Integration for Enabling Sustainable Financial Inclusion: Analysis of Sharīʿah Compliance
Full text linkPurpose — Sustainability has remained one of the most significant challenges facing the microfinance industry, and Islamic microfinance is no exception. The need for Sharīʿah compliance poses an additional challenge for the Islamic microfinance industry. Many practitioners have argued that, in practice, social missions should be sacrificed for profitability so that microfinance institutions (MFIs) could achieve sustainability and competitiveness in the finance market. This paper investigates the potential of integrating waqf and microfinance to allay the challenge of balancing social responsibility (outreach) and financial sustainability within Islamic MFIs. Additionally, it analyses the Sharīʿah compliance requirements underpinning this integration.
Design/Methodology/Approach — This study adopts a qualitative method of inquiry, utilising an inductive approach to understand the conceptual framework of waqf and financial inclusion and in discussing Sharīʿah compliance aspects of socially-oriented instruments in socio-economic development.
Findings — The research finds some historical antecedents to evidence the inherent social mission of waqf which, if integrated with microfinance, ensures the sustainability of Islamic MFIs. This affirms that outreach and sustainability may not be mutually exclusive under waqf and Islamic microfinance integration.
Originality/Value — This study, through historical antecedents and contemporary practices, establishes that waqf and microfinance integration can address the sustainability of the Islamic microfinance industry and preserve its social mission