How the Rules of no.11/POJK.03/2020 Banking Restructuring Policy Improve Financial Performance? (Empirical Study of Islamic Banks in Indonesia)

The Covid-19 pandemic has significantly impacted the economy, including the banking industry. The im-pact on the banking industry is a decline in the health of banks. One form of bank soundness assessment can be seen from the movement of financial ratios, including Non-Performing Financing (NPF), Capital Adequacy Ratio (CAR), Return on Assets (RoA), and Operational Expenditure to Operating Income (BOPO), and Financing to Deposits Ra-tio (FDR). This study aimed to examine the impact of the implementation of banking restructuring policies on the fi-nancial performance of Islamic Commercial Banks in Indonesia. This study used an observation period of 36 months, calculated 1 year before and after the implementation of rules No.11/POJK.03/2020. The sampling method used purposive sampling with 119 observational data samples. Hypothesis testing used the independent Mann-Whitney t-test since the data were not normally distributed. The results showed that the banking restructuring policy could only improve the bank's financial performance, namely CAR and FDR, but not the ratio of NPF, ROA, and BOPO. The contribution of this study can be used as one of the basics for assessing the effectiveness of implement-ing government policies. Copyright © 2022- All Rights Reserved.

Does Islamic banking reduce the risks of COVID-19 for SMEs? Novel evidence for SME financing in the pandemic period for an emerging market

This paper aims to examine the effect of COVID-19 on SME bank lending in the Islamic banking sector to small and medium-sized enterprises (SMEs) in an emerging market: Turkey. Understanding whether SME bank lending in the Islamic banking sector is procyclical or not is very important to reduce the impact of COVID-19 on SMEs. Interrupted time series analysis (ITSA), the Markov switching regression model, and vector autoregressive (VAR) methodologies are employed using novel weekly data for the pandemic period. The present study finds that the Islamic banking sector for SME financing has behaved countercyclically during COVID-19 in the Turkish economy. The paper thus sheds new light on the relationship between Islamic bank lending for SME financing and the COVID-19 shock in an important emerging market. The findings can provide insights into how Islamic banks mitigate the effect of COVID-19 on SMEs in an emerging market context. The present paper clearly shows differences between Islamic bank lending toward SMEs and deposit bank lending toward SMEs in the pandemic era. The willingness of Islamic banks to supply loans to SMEs during the pandemic plays a vital role in reducing SME firm failure in the Turkish economy. © 2023 Elsevier Ltd

THE INFLUENCE OF BASEL III ON ISLAMIC BANK RISK

This paper investigates the impact of bank regulatory capital on Islamic bank risk using bank-level data from 29 countries covering the period from 2004 to 2020. Applying the generalized method of moments technique on dynamic panels, we discover that on average Islamic bank regulatory capital ratios exceed the level required by Basel III. The findings provide evidence in support of the moral hazard hypothesis;that is, there is a negative relationship between capital and risk. They indicate that Islamic banks are better protected against risk when they fulfill Basel III and IFSB regulatory capital requirements. According to our findings, authorities that aim to improve the financial stability of the banking industry should reinforce their policies and oblige banks to adhere to regulatory capital requirements during crises such as Covid-19. Finally, we observe that different risk indicators have diverse correlations with regulatory capital, and that the findings are robust across a variety of estimation methodologies. © 2023 University of Ljubljana - Veterinary Faculty. All rights reserved.

NEXUS OF RISK AND STABILITY IN ISLAMIC BANKS DURING THE PANDEMIC: EVIDENCE FROM INDONESIA

This paper analyzes the effect of liquidity risk and credit risk on Islamic bank stability and whether the risk-stability nexus changes during the Covid-19 pandemic. Using a panel quarterly dataset of 14 Islamic banks from 2017 to 2020, a total of 224 quarterly-bank observations in total and the system generalized method of moment, we find that credit risk and liquidity risk are negatively associated with bank stability. Moreover, the COVID-19 does not alter the negative relationship between liquidity risk and stability. To validate the results, we also estimate the model using the LSDVC. The LSDVC results remain consistent. These results provide new insight into understanding risk management implementation for minimizing these risks. © Bank Indonesia Institute. All rights reserved.

Can trade credit rejuvenate Islamic banking?

This study proposes a renewal of the contemporary Islamic banking Murabaha financing model as it aggravates financial fragility with waning economic efficiency. We adapt the working capital framework of successful US companies like Amazon and Walmart and model an innovative Murabaha facility as trade credit within the real sector of the economy. We then test its robustness in a range of simulation tests. Our approach is novel and stands in contrast to the familiar financial sector fixed-income facilities, characteristic of Western economies, stealthily mimicked as mark-up (interest rate based) Murabaha by Islamic banks. We argue that this is neither appropriate nor effective for Islamic economies, making them fragile under monetary pressures in crises like the current coronavirus and energy ones. Our simulation results indicate that the trade credit Murabaha not only transforms debt into a risk-sharing one but also offers more competitive financing rates, reduces systemic risk, and improves financial stability. Furthermore, our results imply that the trade credit Murabaha can increase the efficiency of Islamic financial systems and make them more resilient to shocks. Consequently, this paper discusses the integration of our novel Murabaha within a recreated architecture of Universal Banking. As an implication, this should promote business activity and contribute to global growth. Finally, we recommend how to deploy our novel Murabaha based on trade credit (as opposed to the currently deployed fixed-income-mimicked Murabaha) to alleviate twin agency debt costs (risk shifting, underinvestment) and solve the ownership transfer problem of modern Islamic banking. © 2022, The Author(s).

DETERMINANTS OF WORK ENGAGEMENT DURING PANDEMIC: THE CASE OF ISLAMIC BANKING WORKERS

This study analyzes the role of emotional intelligence and resilience in work engagement of employees in the Islamic banking industry during the Covid-19 pandemic. To this end, it gathers data from 364 Islamic bank employees. Using the PLS-SEM for data analysis, the results show positive and significant effects of emotional intelligence and resilience on the work engagement. The emotional intelligence also had a positive influence on resilience. This shows that positive forces from within the individual affect the productivity of organizational members during current pandemic. The implication of the results of this study for management is the need for special attention toward developing the positive potential of individuals so that each member of the organization has good emotional intelligence and resilience. © 2022 Universidade Federal de Goias. All rights reserved.

Developing a Strategy for Islamic Money Market Model to Enhance Quality of Islamic Banking Performance during the Pandemic in Indonesia 2021

Islamic banking for the Indonesian people is a concept that has been developed since 1992 but is still relatively new for the Indonesian people, including the Muslim community itself. Based on the fact that the practice of Islamic banking is only at an early stage, it is only natural that the Islamic banking system is still poorly understood by the public, in the end, even though the customers of Islamic banks are not sure about bank management, they still use Islamic banking services. In the view of sharia, money is not a commodity but a tool to achieve added economic value. Without the added economic value, money cannot create prosperity. This is in contrast to interest-based banking where money breeds money, regardless of whether it is used in productive activities or not. Time is the main factor. Meanwhile, in the view of sharia, money will only grow if it is invested in real economic activities. In operational activities, Islamic banking is faced with problems that can become obstacles in achieving its goals, including problems related to a crisis. Basically, Islamic banking has similarities with conventional banking in dealing with risks in business process activities. These risks can be caused by natural disasters, human error and pandemic risks. This research is a literature review which is expected to produce a robust model Islamic money market to enhance quality of Islamic banking in facing and deal with the crisis due to the pandemic. © 2022, SRAC - Romanian Society for Quality. All rights reserved.

LOAN PORTFOLIO COMPOSITION OF ISLAMIC AND CONVENTIONAL BANKS PRE- AND POST-COVID-19 PANDEMIC? CASE OF INDONESIA

This study investigates how the Covid-19 pandemic has affected the loan portfolio composition of Indonesian Islamic and conventional banks. By using a sample of 108 conventional and 9 Islamic banks, we find that conventional banks issued more consumption loans during the sample period. On the contrary, Islamic banks granted more investment loans than consumption loans. In addition, given limited support from the central bank, Islamic banks still increased their contribution to investment loans portfolio more rapidly during the COVID-19 pandemic. These results support the view that Islamic banks provide funding to long-term investment projects and may contribute more to sustainable economic growth. This finding could have policy implications for both Islamic banks and the government. Despite the fact that Islamic banking is in its infancy in Indonesia, it provides funding for the real economy. Regulators may assist the Islamic banking sector in developing risk management capacity in various sectors, including agriculture, manufacturing, trading, distribution, hotels, and restaurants. Furthermore, implementing a well-integrated policy framework that includes monetary, fiscal, and financial services can also assist in optimizing the momentum of economic recovery after the pandemic despite global supply disruptions, the Russian-Ukraine war, and climate change. © 2021 Asociación Española de Historia Económica.

Satisfaction of Pakistan’s Islamic banking system during the COVID-19 pandemic Logistic model-based identification of the determinants to improve customer

Purpose>This study aims to explore the potential determinants of customers’ satisfaction with the Islamic banking system and highlights the fact that both internal and external factors play key roles in customer satisfaction (CS) during the COVID-19 pandemic.Design/methodology/approach>Primary data from six Islamic banks (Al Baraka Bank Ltd, BankIslami Pakistan Ltd, Burj Bank Ltd, Dubai Islamic Bank Ltd, Meezan Bank Ltd and MCB-Islamic Bank Ltd) were analysed using a binary logit method.Findings>The results showed that internal factors such as hand sanitisation facilities, strict compliance with wearing a mask before entering the bank, the distance between customers and dealing officers, an organised network of branches (in terms of health safety protocols), the behaviour of dealing officers and extended banking hours contributed significantly to enhancing the satisfaction of Islamic banking customers during the pandemic in Pakistan. The results showed that high service charges on loans have a significant adverse impact on CS. Concerning external factors, the results showed that mass media platforms that can update customers about new services and customer transactions’ processing timing, the number of operational branches in the pandemic period, available parking space in front of a bank and recommendations from family and friends to open an account with a particular bank increase CS levels.Practical implications>The study’s results will be helpful for the policymakers and practitioners to design such policies that can promote the Islamic banking system in developing countries such as Pakistan.Originality/value>Under the pandemic situation, the present study highlights the internal and external determinants of Islamic banking customers’ satisfaction in Pakistan. The study provides a foundation for Islamic Banks to revise their policy frameworks and marketing strategies to attract customer interest and improve their satisfaction levels.

Is Islamic FinTech coherent with Islamic banking? A stakeholder's perspective during COVID-19.

The prime purpose of this study is to investigate the impact of Islamic fintech in the Islamic banking sector through a stakeholder approach in the wake of the COVID-19 pandemic. Through self-administered questionnaires, the study collected the data of 1000 respondents for seven categories of stakeholders directly or indirectly associated with Islamic banking and Islamic finance in Pakistan. The stakeholders include the local community, customers, managers of Islamic banks, depositors, employees, regulatory officials, and advisers of Sharia (Islamic Law). The findings indicate that respondents revealed a keen interest in Islamic banking and Islamic fintech, particularly during and post-COVID-19 and believed that Islamic banks must not be considered as profit-oriented organizations. Rather their benefit to society is way beyond profit maximizations. The respondents noted several factors to focus on the projects related to community engagement, promoting sustainable development and reducing poverty in the country. The study unveils that Islamic banks must adopt the practices of Islamic fintech and financial innovations to align the community's social goals. While COVID-19 crisis further facilitated the communities to include Islamic fintech in the Islamic banking system.

Islamic Bank Deposits during COVID-19 Pandemic: A Spatial Finance Approach

This study aims to determine factors affecting deposits in banks during COVID-19 pandemic by employing a spatial finance approach on a sample of Islamic Rural Banks in the Indonesian archipelago. The results showed that the COVID-19 pandemic, capital financing, and bank asset had a spatial influence on bank deposits. Specifically, while COVID-19 pandemic reduces bank deposits, capital financing and bank assets increase these. Using Spatial Lag Model and Local Indicator of Spatial Autocorrelation through Spatial Rate Analysis, the study further found that there is a potential spillover effect in certain provinces based on the bank deposit relationship with COVID-19, financing and bank assets. This implies that the three factors tend to spatially affect the socio-economic activities of the neighboring areas of certain provinces. This study may shed some light for the government in determining post-COVID-19 economic recovery policies using a geographical approach in providing information on financial interactions between regions. © 2022 Penerbit Universiti Kebangsaan Malaysia. All rights reserved.

Determinants of Intention to Adopt Equity-Based Financing During the Covid-19 Pandemic: A Malaysian Perspective

The purpose of this paper is to empirically investigate the factors that affect Malaysian users’ financing to participate in using Equity-based Financing (Musharakah 8l Mudharabati) or known as EBF. This study applied the theory of planned behavior (TPB) as the underlying theory to analyze the determinants that influence the intention of Malaysian users’ of financing to participate in EBF. The analysis was conducted using Structural Equation Modelling (SEM), with a total of 250 respondents. According to the findings, only attitudes (ATT) about equity-based financing (EBF) had a positive and significant impact on Malaysian users of financing involvement in EBF during pandemic Covid-19. Subjective Norms (SNORMS) and Perceived Behavioral Control (PBControl) turn out to be non-significant factors for users of financing in Malaysia. The results of the study could lead to advancements towards Islamic banking and finance, as well as positive implications for practitioners. Focusing on ATT to establish customer-oriented products of financing connections within banks could help EBF applications be better managed. This study applied TPB for the first time to Malaysian users ’ financial decisions in the area of EBF during the pandemic Covid-19. © 2022. Global Journal Al-Thaqafah. All Rights Reserved.

Credit default risk in Islamic and conventional banks: Evidence from a GARCH option pricing model

An important question in banking is whether restrictions placed on Islamic banks make them more resilient to financial market turmoil and less prone to failure than conventional banks. We evaluate this claim by estimating credit default risk measures for a sample of conventional and Islamic banks using a GARCH option pricing model. Using a daily data set that is better suited for the time variation in volatility, we calculate distance to default measures to evaluate credit risk of Conventional Banks (CBs) and Islamic banks (IBs). We find higher default risk measures for IBs than CBs in general except during the Global Financial Crisis. This result holds true after controlling for bank and country specific variables in that IBs seem to have significantly lower default risk during the Global Financial Crisis and higher default risk thereafter. Consequently, while restrictions on risk taking is advantageous in financial turmoil episodes, the same restrictions expose IBs to risks in normal times. Finally, the credit risk of CBs and IBs is negatively affected by the oil crisis in 2014–2015 and the Covid-19 global pandemic. While there is no significant difference between the effects of the oil crisis on IBs versus CBs, the recent Covid-19 pandemic seems to have worsened the credit risk of IBs compared to CBs.

The need for social theology to strengthen the social functions of Islamic banking in Indonesia

This study is based on the objective conditions of Islamic banking in Indonesia, which have not carried out their social functions optimally. Based on reports from the financial services authority, Indonesia bank and several related research, the efforts to optimise the social function of Islamic banking still encounters several problems related to the distribution of banking funds that are more focused on business interests, lack of real business run by Islamic banks, customer funds that are mostly deposited in Indonesia bank and have not been distributed to the real sector effectively, to banking activities by referring to the capitalistic economic paradigm and not fully referring to sharia guidelines. The results of the study of documents, literature and actual phenomena using descriptive and holistic analysis methods indicate that the degradation of the social function of Islamic banking appears as a result of a lack of understanding of the concept of Islamic economics based on the construction of Islamic social theology. The lack of understanding of banking management towards Islamic social theology has created a gap between the practical and conceptual sides of Islamic social theology, which in turn has an impact on the lack of social commitment from related parties in the implementation of Islamic banking activities. Strengthening the practical side of Islamic social theology is a necessity to overcome the existing problems. Contribution: The article contributes to the discourse on the application of Islamic social theology to Islamic banking practices. It aims to contribute to theological thought in Islam in order to strengthen the social function of Islamic banking, by focusing on the main objective of Islamic economics: al-falah or the achievement of spiritual and material prosperity.

A cross-country analysis on diversification, Sukuk investment, and the performance of Islamic banking systems under the COVID-19 pandemic.

This study investigates the relationship between diversification and Islamic banking systems' performance under the impact of the COVID-19 turmoil using a sample of 24 countries from 2013Q4 and 2020Q4. The findings indicate that the performance of Islamic banking systems is positively associated with sectoral diversification of Shari'ah-compliant financing and income diversification. Although this study confirms a negative impact of the COVID-19 shock, income diversification is found to mitigate the adverse effect of this health crisis on the performance of the Islamic banking systems. In which, Sukuk investment is considered an essential channel for pursuing this diversification strategy. Therefore, this research has important implications for policymakers, managers, and academics.

What motivates retail investors to invest in government-issued digital sukuk during COVID-19?

Purpose To analyse Sukuk Prihatin (SP), the first-ever retail digital sukuk issued by the Government of Malaysia in the midst of the COVID-19 pandemic, as part of the national economic recovery plan. The issuance of SP was oversubscribed, even upsized, resulting in the government announcing its intention to issue similar types of sukuk in the future. In light of this, the purpose of this study is to understand the motivation for retail investors to invest in SP. Design/methodology/approach The purposive sampling method was applied via a self-administered survey, while the cross-sectional data were empirically tested using the SmartPLS 3.2.9 structural equation modelling. An integrated model of the theory of planned behaviour and social cognitive theories was used in determining investors' intention to invest in SP. Findings The findings of this research revealed that attitude (ATT) towards SP investment (SPI), social norms (SN), perceived control (PBC) regarding SPI, sukuk features (SF), tax incentives (TI) and the spirit of unity and brotherhood (SUB) were significant determinants of investors' willingness to invest in SP. This research also provided evidence for significant national pride-moderated interactions of ATT, SN, PBC, SF, TI and digitisation on investment intention. Practical implications The outcome of this study could assist governments and policymakers to structure sukuk and other debt-based capital market products to attract retail investors who would be willing to invest in the development of the nation in the midst of a crisis. Originality/value This study is the first of its kind to investigate various relevant predictors, which have been derived from behavioural, contextual and motivational perspectives. These predictors could influence investors' perceptions of an innovative sukuk like SP, which was issued in the midst of a pandemic. The value of this study is its possible use by governments and policymakers to further develop debt-based capital market products that have the dual function of an investment vehicle and a source of funds for the economic recovery of a nation.

Islamic Banking Transaction and Social Based Crowdfunding During Pandemic: Shariah Analysis on Islamic Financial and Non-Financial Institutions Approaches

This paper is based on an ongoing study titled "Social Based-Crowd Funding in Battling Covid-19 and Maqasid Shariah: Some Legal and Shariah Observations in Malaysia and Indonesia." The COVID-19 pandemic has been one of the most serious health crises since the turn of the century. The corona pandemic has presented Islamic banks with significant challenges in dealing with this pandemic, taking into account, on the one hand, its impact on various economic sectors and regulatory authorities' decisions. However, it appears that Islamic financial institutions are at odds over how to handle Islamic banking transactions, particularly a moratorium between the bank and their clients during the pandemic, as well as the use of social-based crowdfunding activities. This investigation begins with a historical pandemic that afflicted the entire world. The purpose of this paper is to examine the position of Islamic banking transactions and social-based crowdfunding during the pandemic from a Shariah standpoint. This paper also highlights Malaysia's Islamic banking approach to social based financing and social based crowd funding by financial and non-financial institutions during the pandemic. The qualitative research method was used in this paper, which included a library-based research method. A descriptive content analysis method will be used to analyse the data. This paper is significant in that it will add to the body of knowledge and literature on the subject while also providing Shariah's perspective on the status of Shariah's commercial and socially based crowdfunding contracts. The principles of adl and Ihsan appear to have been applied, affecting Islamic banking commercial transactions and social-based crowdfunding contracts. During a pandemic, however, there is a need to strike a balance between the financial stability of the financial institution and the needs of society as a whole. As a result, Shariah parameters must be developed in such a way that financial institutions understand how Islamic commercial transactions and socially based crowdfunding should be treated, particularly during a pandemic. © 2021, CA and C Press AB. All rights reserved.

What triggers mobile application-based purchase behavior during COVID-19 pandemic: evidence from Vietnam

Purpose Coronavirus disease 2019 (COVID-19) has shifted purchase behavior and accelerated the diffusion of modern retail channels via mobile application (or m-application). This work aims to frame a mechanism of m-application-based behavioral intentions in the COVID-19 context. Design/methodology/approach The authors designed a web-based survey to retrieve empirical data from 478 Vietnamese users. Quantitative approach and structural equation modeling (SEM) were employed to test a research model. Findings Findings reveal that antecedents of Unified Theory of Acceptance and Use of Technology (UTAUT) (i.e. performance expectancy and facilitating conditions), external influences (i.e. perceived imitation), m-application-related factors (i.e. additive value and alternative attractiveness) and COVID-19-related factors of Protective Motivation Theory (PMT) (i.e. perceived contraction threat, fear and social distancing) are determinants of use intention. Moreover, COVID-19-related dimensions and use intention have direct and indirect positive influences on purchase intention. Practical implications Practitioners should stay agile and focus greater attention on a mechanism in which consumer adoption and purchase intention are formulated in the pandemic. Originality/value This work narrows the gap by simultaneously identifying the importance of the dimensions from UTAUT and COVID-19-related factors from PMT, especially social distancing, integrated with additive value and alternative attractiveness of m-applications in forming the behavioral intention model in a disease context.