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Artificial Intelligence is categorized into the domain of computer science focused on creating intelligent machines that function like humans. Artificial Intelligence supports institutions including Islamic Financial Services in learning, making decision, and providing useful predictive analytics. The progress and promise that artificial intelligence has made and presented in finance have so far been remarkable, allowing for cheaper, faster, closer, more accessible, more lucrative, and more efficient finance especially during the pandemic covid-19 when people are required to stay at home yet still doing a banking transaction. Despite the incredible progress and promise made possible by advances in financial artificial intelligence, it nevertheless presents some serious perils and limitations. Three categories of risks and limitations involve the rise of virtual threats and cyber conflicts in the financial system, society behavioural changes, and legal amendments that cannot respond to technological developments, especially in developing countries. The main objective of this article is to evaluate the operations of the potential risks that may arise in the use of Artificial Intelligence in Islamic finance services, especially dealing with the legal arrangement that is supposed to be in line with business development. Indonesia is a country that adheres to civil law system, in which every legal arrangement is supposed to be based on written law. The lack of this legal system is where the speed of legal changes cannot keep up with the pace of technological development, which is present as a hinder to the development of Artificial Intelligence in the financial system. This article concludes that Artificial Intelligence will have a huge impact in the future on the Islamic Finance industry, but in Indonesian context, it still needs various efforts to reduce the potential risk that eventually has a big impact on the progress of Islamic banks. © 2022, University of Muhammadiyah Malang. All rights reserved.
ABSTRACT
The experience of various crises that have occurred, including the impact of the Covid-19 pandemic, presents a challenge to implement macroprudential policies to ensure the financial system survives and continues to carry out its function in driving the economy. The existing macroprudential policies tend to be individual and focus on prudent banking and other financial institutions. Economic fluctuations that occur on the macro side will greatly impact, either directly or indirectly, the stock price index, as well as the company's internal indicators which are considered to have a major influence on the decisions of investors and potential investors to take action on the stock exchange. The type of research used in this research is quantitative research. The nature of this research is descriptive with a quantitative approach. The data collection technique in this research is Literature Study. The test carried out in this study is the multiple linear regression analysis test (multiple linear regression method), this study uses the ECM model to obtain the best model which includes the classical assumption test. The results of this study based on the partial short-term relationship test, it can be concluded that the Exchange Rate, Inflation, and TPF in the short term have no significant effect on the PNBS Stock Price Index. Meanwhile, short-term CAR has a significant positive effect on the PNBS Stock Price Index. Based on the results of the partial long-term relationship test, it can be concluded that in the long term, the Exchange Rate has a significant negative effect and TPF and CAR have a significant positive effect on the PNBS Stock Price Index while Inflation has no significant effect on the PNBS Stock Price Index. Based on the output results of the simultaneous short-term and long-term F test, it shows that all independent variables simultaneously have a significant effect on the PNBS Stock Price Index in the short term. Based on the provisions of the MUI DSN through the issued fatwas related to the Sharia capital market and Sharia shares, it is explained that Sharia stock investment to invest according to the perspective of Sharia economic law is allowed. [ FROM AUTHOR] Copyright of Jurnal Syntax Admiration is the property of Ridwan Institute and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)
ABSTRACT
The new age Fintech-driven innovative financial services started with the fourth industrial revolution and COVID-19 has stimulated supreme innovation in the global financial services industry. It is the young and millennial population driving these innovations and startups are responding, as there are more than 15, 000 startups and global Fintech-based transaction crossed $6.308 Billion by the year 2020. Islamic finance industry has experienced an unprecedented growth, partly due to incremental investment in Fintech-based financial intermediation. Two most commonly cited high growth areas for Islamic finance lie within blockchain and crowdfunding. This study provides an advanced overview of the Islamic Fintech, blockchain and crowdfunding;their current landscape;and path forward. We discuss opportunities for Islamic financial institutions and a clear roadmap to capitalize on those opportunities. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022.
ABSTRACT
In essence, Islamic law (Maqasid al-Shariah) and the sustainable development goals (SDGs) initiated by the United Nations have the same goal: to achieve the perfection of a sustainable human life. Meanwhile, Islamic finance is regarded as an implementation of Islamic law, as many Islamic finance products and instruments are derived from Islamic law. Prior studies on Islamic law, Islamic finance, and SDGs tend to be scattered, and the role of Islamic finance in SDGs is still questionable. This paper uses a systematic literature review to investigate the intersection of Islamic finance, Islamic law, and SDGs. We selected papers that focused on Islamic finance as an inclusion criterion and excluded papers that only discussed Islamic countries as an exclusion criterion. We retrieved 65 papers and book chapters published from 2008 to 2022 from the Scopus database to analyze which parts of Islamic finance and law can contribute to the SDGs. We use thematic analysis for data synthesis by grouping findings into their relation to Islamic law using Al-Ghazali's Framework of Maqashid Al-Shariah and SDGs from the UN, and then explaining the research results using a narrative method. Through this study, we found that Islamic finance supports the SDGs with the most significant contribution to humanity. In addition, it is essential to know that the support of the government, regulators, and related institutions is much needed to improve Islamic finance for the achievement of SDGs.
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Purpose: Despite the significant growth in Islamic economies and the increasing number of Muslim youths inclining digital services, empirical-based research addressing the adoption of digital Islamic services is still scarce. Particularly, as a new term in the Islamic finance industry, ZakaTech has recently emerged as a modern term describing novel technologies adopted by zakat (compulsory levy on all believing and practicing high-net-worth Muslims) institutions;yet, it has largely been neglected in the literature. Therefore, this paper aims to propose an integrated model that scrutinizes the factors of unified model of acceptance and use of technology (UTAUT) of ZakaTech, combined with social cognitive theory (SCT), especially in a time of COVID-19 social distancing. Design/methodology/approach: The UTAUT–SCT model was validated via SmartPLS structural equation modeling by using a valid sample of 510 users (individual zakat payers) from Saudi Arabia. Findings: The results demonstrated the suitability of the integrated UTAUT–SCT model in predicting zakat payers' intention to use ZakaTech services. This proposed model has 70% explanatory power to explain variance in intention. All UTAUT constructs are statistically significant, except for effort expectancy. Social isolation caused by the pandemic and trust in e-zakat system exerted a significant influence on the inclination to uptake ZakaTech services. Originality/value: To the best of the authors' knowledge, this research is among the first research that studies Muslims' adoption of ZakaTech during COVID-19. Particularly, this study could add value to FinTech acceptance literature by empirically examining an integrated framework of UTAUT–SCT in a context as modern and unique as ZakaTech. © 2023, Emerald Publishing Limited.
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Islamic Sukuk witnessed consistent growth over the past years and is expected to follow the same trend. Sukuk issuance continues by states and corporates alike. Sukuk serves two purposes. That is to say, the issuers of Sukuk aim at diversifying the sources of funds, especially under difficult economic situations. Meanwhile, investor demand remains intact due to the shortage of new Sukuk supply and the global quest for profit. While Sukuk usually enjoys healthy annual yields, also it is unlikely to default. Compared to overall issuances by the end of 2021, the defaulted Sukuk stands at a meagre rate of 0.27%, making it an attractive and secure financial instrument. Therefore, Sukuk issuance becomes part of the value proposition of world financial centres such as the U.K., Luxembourg, Hong Kong, and others. This paper analysis Sukuk's impact on the country's economic development by focusing on specific countries with different economic-financial experiences. Furthermore, it will investigate the feasibility of Sukuk in supporting diverse sources of funds and liquidity. In addition, this paper examines the role of Sukuk in achieving economic growth and development post-Covid pandemic. It also attempts to ascertain the critical phases of economic growth and links them to Sukuk in order to assess the effectiveness and significance of Sukuk in being a potential financial instrument that could support the economies in the post-Covid period. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.
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This paper investigates the spillover effects of the waves of Covid-19 that affected the performance of the Islamic financial sector index (KMI 30) concerning Pakistan's stock exchange. The daily data is used on confirmed registered cases of Covid-19 and the KMI 30 stock prices from February 2020 to June 2022. The data is distributed into five segments on the basis of Covid-19 waves. The asymmetric GJR-GARCH is used to capture the effect of Covid-19 during each wave and E-GARCH is used to see the positive and negative impacts of Covid-19 on KMI through spillover effects. The E-GARCH model also serves to forecast the conditional variance. The Chow structural break point and Bai and Perron tests identify the structural breaks in each wave. Results of structural break testing confirm the presence breaks in each wave. Meanwhile volatility modeling results indicate there is an asymmetric effect in the return series. The E-GARCH model results reveal that there is return and volatility spillover effect from Covid-19 to KMI 30 in each wave. In future the conditional volatility remains less than the expected volatility as predicted by the forecasting statistics. We respond to policy calls by sharing our novel research in not only combating, but also assisting the required urgency of planning for future of Covid-19 outbreaks. © 2022
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Although the sukuk market has maintained remarkable growth momentum over the recent years, the optimism has been significantly moderated by the abrupt shock due to the pervasive COVID-19 pandemic. However, sukuk can be used as an effective financing option by governments to overcome a fiscal deficit and to support those adversely affected by the pandemic. Sukuk Prihatin (SP), the first-ever digital sukuk issued by the Government of Malaysia, has launched to engage citizens to contribute to the country's recovery efforts in the wake of COVID-19. Therefore, this study aims to probe the motivation that influences retail investors' inclination to invest in such innovative sukuk. Based on an integrated model of planned behavior (TPB) and social cognitive theories (SCT) and data gathered from 279 retail investors, this research found that attitude towards SP investment (SPI), social norms, perceived control regarding SPI, sukuk features and digitization are significant determinants of investors' willingness to invest in SP. It also revealed that tax incentives-moderated interactions of social norms, perceived control and sukuk features on SPI intention are significant. © 2021 Informa UK Limited, trading as Taylor & Francis Group.
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The recent COVID-19 pandemic or Global Health Crisis (GFH) has distorted the normal functioning of the global economies and financial markets. Previous research has shown that Islamic equities were relatively more stable than conventional ones during the 2008 Global Financial Crisis (GFC). So, this study aims to assess the effect of the COVID-19 pandemic on the performance and co-movement of the leading Islamic finance markets by employing MGARCH-DCC on daily frequency data spanning from January 01, 2017 to October 22, 2021. The findings suggest that, as expected, the pandemic outbreak has increased the volatility across the sample markets, but it faded relatively soon, indicating that Islamic equities carry hedging features and offer portfolio diversification benefits to investors. Moreover, the sample countries are less correlated during the sample period than expected. The findings have important implications for policymakers and diverse investors deciding on portfolio diversification. Global ethical and Islamic investors, including fund managers, could benefit by focusing on more stable markets and building optimal portfolios of Shari'ah-complaint equities during turbulent market conditions, such as the COVID-19 pandemic.
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Purpose: This paper aims to investigate the hedge, safe-haven and diversifier properties of Islamic indexes, Bitcoin and gold for ten of the most affected countries by the coronavirus, which are the USA, Brazil, the UK, Italy, Spain, Germany, France, Russia, China and Malaysia. Design/methodology/approach: This research uses the Ratner and Chiu (2013) methodology based on the dynamic conditional correlation models to improve Baur and McDermott (2010). The authors adopt a careful investigation of the features of a diversifier, hedge and safe haven using the dynamic conditional correlation–GARCH and quantile regression models. Findings: Empirical results indicate that Islamic indexes are not considered as hedge assets for the conventional market for all studied countries during the COVID-19 pandemic crisis period. However, gold works as a strong hedge in all countries, except for Brazil and Malaysia. Bitcoin is a strong hedge in the USA and a strong hedge and safe haven in China. Practical implications: International investors in China and the US stock markets should replace Islamic indexes with Bitcoin in their conventional portfolio of securities during the pandemic. Originality/value: To the best of the authors' knowledge, this is the first paper that re-evaluates the hedge, safe-haven and diversifier properties of Islamic indexes, Bitcoin and gold for ten of the most affected countries by the coronavirus. © 2022, Emerald Publishing Limited.
ABSTRACT
This paper investigates the spillover effects of the waves of Covid-19 that affected the performance of the Islamic financial sector index (KMI 30) concerning Pakistan's stock exchange. The daily data is used on confirmed registered cases of Covid-19 and the KMI 30 stock prices from February 2020 to June 2022. The data is distributed into five segments on the basis of Covid-19 waves. The asymmetric GJR-GARCH is used to capture the effect of Covid-19 during each wave and E-GARCH is used to see the positive and negative impacts of Covid-19 on KMI through spillover effects. The E-GARCH model also serves to forecast the conditional variance. The Chow structural break point and Bai and Perron tests identify the structural breaks in each wave. Results of structural break testing confirm the presence breaks in each wave. Meanwhile volatility modeling results indicate there is an asymmetric effect in the return series. The E-GARCH model results reveal that there is return and volatility spillover effect from Covid-19 to KMI 30 in each wave. In future the conditional volatility remains less than the expected volatility as predicted by the forecasting statistics. We respond to policy calls by sharing our novel research in not only combating, but also assisting the required urgency of planning for future of Covid-19 outbreaks.
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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.
ABSTRACT
The Covid-19 pandemic is not yet over, and its impact has affected global economic and financial sectors. This represents a challenge for Islamic finance considered as an alternative finance especially after the advent of the 2009 global financial crisis. Islamic finance certainly has an important market share in crowdfunding and also in microfinance, and its role in the financing of SMEs all over the world is not negligible, and this financial crisis should therefore pose different challenges to Islamic finance. It requires a set of instruments specific to its category, and also needs new technologies (FinTech), strategies and financial services to cope with the possible phenomenon. Our work seeks to present how Islamic finance, with its specific financing instruments, can fight against the disastrous effects of this health crisis, in particular the instruments of Zakat, funding by Qardh-Al-Hassan and fundraising like the Sukuks and finally the importance of using a set of technologies, called Fintech, to build an alternative and sustainable financial system after Covid-19. Indeed, this health crisis should present different challenges to Islamic finance, which requires FinTech, in its new strategies and its financial services. Our Paper is structured as following, we start with a review of the literature, in a second part we present the covid-19 crisis and Islamic finance, the roles of Islamic products in the face of covid-19, and in a last part, the role of artificial intelligence in islamic finance. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.
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The COVID-19 pandemic has posed a massive disruption to the finance sector. Islamic financial markets are no exception. We explore the resilience of Islamic financial markets to the COVID-19 pandemic vis-à-vis conventional markets. A comparative analysis of the impact of the first and second waves of COVID-19 is also conducted. We use five Dow Jones Islamic stock indices and two bond indices and their conventional counterparts as proxies of Islamic and conventional financial markets. Using wavelet, wavelet-based Granger causality, hedge ratio, optimal weights, and hedging effectiveness methods from January 1, 2019, to February 26, 2021, our empirical estimates indicate that both Islamic and conventional stock indices are almost similarly affected by the extreme market turbulence triggered by COVID-19. Hence, Islamic stock markets fail to provide diversification benefits. We also unveil no significant differences between the first and second waves of COVID-19 in the case of dependency. Conversely, Islamic bonds exhibit low dependence on their conventional counterparts, indicating their diversification benefits. We further demonstrate that Islamic and conventional bond pairs could be utilized as a strong portfolio mix because the least hedging cost and highest hedging effectiveness are observed in those portfolios, especially during COVID-19. Overall, our results suggest that global Sukuk offers more resilience in times of extreme market turmoil than other instruments considered in this study. Our findings present global investors and regulators with new insights on diversification and hedging strategy with Islamic finance during a worldwide, severe economic crisis. We present some policy recommendations in creating a more sustainable financial system post-COVID-19.
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Purpose This paper aims to explore the impact of the COVID-19 pandemic on the market timing skills of Islamic equity funds in Asia, Europe and North America. Design/methodology/approach The authors employed a two-step process. First, a Granger causality test is applied to test the bivariate relationship between Islamic fund indices and stock market ones by highlighting the impact of the COVID-19 pandemic. Second, the methodology of Treynor and Mazuy (1966) is deployed to account for the market timing abilities skills of Islamic fund managers during the pandemic period. Findings The investigation revealed mixed results. The European Islamic funds were positively impacted by the stock market as well as by the COVID-19 pandemic context. Additionally, compared to their Asian and North American peers, only European Islamic fund managers have the ability to time the market during the health crisis period. Research limitations/implications Despite its contribution to the Islamic finance literature, this study has some flaws. Indeed, the selected sample of three regions, namely Asia, Europe and North America, precludes extrapolating these conclusions. Other regions should be investigated to further our understanding of Islamic equity funds. Furthermore, due to data availability and accessibility, the study period was limited to a specific time of the COVID-19 pandemic. This shortcoming can be addressed through a multiwave investigation, especially since each region was exposed differently to the pandemic. Practical implications The paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic fund managers across the three regions would serve as a guide to identifying the most suitable internationally focused investment strategy. Social implications The paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic funds managers across the three regions would serve as a guide to identify the most suitable internationally focused investment strategy. Originality/value The originality of this investigation is that it is the first to examine Islamic equity fund managers and their skills to time the stock markets during the COVID-19 pandemic period in Asia, Europe and North America. The current paper extends the Islamic finance literature.
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While looking for safe-haven assets, the literature obtained mixed and varying results, changing from one period to the next, or one geographical area to another. Recently, this field of research grew even more, motivated by the changing environment resulting from the global financial crisis and the current COVID-19 pandemic. We compare five Islamic and five conventional leading financial indexes for the period 2004?2020, covering both global and regional data (Asia-Pacific, Europe, GCC, and the United States). By employing DCC GARCH and extended GARCH (1,1) models, we find a lower volatility and higher persistence in Islamic indexes when compared to their conventional alternatives, holding also when traditional safe-haven assets are included in comparative terms and across geographical areas. We therefore provide robust evidence on the consistent behavior of Islamic assets: Their defensive properties remain and are even stronger in the current unprecedented and ongoing crisis.
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This study investigates the dynamic linkages and spillover effect between emerging economies (BRICS and Turkey), focusing on global crises, notably the COVID-19 pandemic. The study uses daily frequency data covering the period from 2002M5 to 2021M03. For the methodology, the paper employs Wavelet Coherence for multiresolution time-frequency analysis in addition to the frameworks of Diebold-Yilmaz Connectedness Index (DY12) and Barunik-Krehlik Frequency Connectedness Index (BK18). The empirical results reveal that the stock market comovements among sample markets are non-monotonous and depend on the time and frequency of returns. Significant correlations among the sample countries and a spike in overall spillover are also evident at the outbreak of the COVID-19 pandemic or the Global Health Crisis (GHC). China, Brazil, Russia, and Turkey with all the other markets, experienced the weakest links during the GHC. Brazil, Russia, and South Africa act consistently (across different horizons) as net transmitters, whereas India, China, and Turkey perform as net receivers. Islamic equities are more likely to ?give? and less prone to ?receive? than conventional equities. Compared to the Global Financial Crisis (GFC), the GHC effect is more severe but short-lived. The findings of this study are helpful to policymakers and diverse investors when making portfolio diversification decisions.
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The current global COVID-19 pandemic is adversely affecting financial markets, including commodities, conventional stocks, and Islamic stocks. This paper empirically investigates the extent to which COVID-19 effects may drive interdependence in markets. We fit copulas to pairs of returns before and during the ongoing epidemic shock, analyze the observed changes in the dependence structure, and discuss asymmetries on the propagation of crisis. We also use the findings to construct portfolios possessing desirable expected behavior. We find that the dependence structure changes significantly during the global pandemic providing valuable information on how the COVID-19 crisis affects inter-dependencies. The selected portfolio, including gold and Islamic return indices, has the best performance outside the COVID-19 crisis, and slightly more performing during the bear markets validating gold's intrinsic characteristic to be a safe haven. However, the portfolio performances, when combining the Brent with Islamic or conventional indices, have the same trend for the whole period. Our findings contribute to help investors better adjust their investment strategies.
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Purpose: This research aims to demonstrate portfolio modeling, which leads to Sharia compliance in encountering crises because of COVID-19. The authors proposed modifying the Black–Litterman (BL) model adapted to the Sharia principle. The implementation of BL on Shariah-compliant stock data with capital asset pricing model (CAPM) requires adjustment because of the interest rate in the calculation. Thus, the objective of this study is to develop and evaluate the modified BL for Shariah-compliant stock portfolios in the financial crisis caused by the COVID-19 pandemic. Design/methodology/approach: The Sharia-compliant asset pricing model (SCAPM) with the inflation rate was regarded as the new starting point in the BL model. This proposed model was implemented in Indonesia using monthly returns from the Jakarta Islamic Index (JII) list collected from February 2014 to June 2019. Furthermore, the portfolio performance of BL-SCAPM was compared with two reference portfolios, the mean-variance method and BL-CAPM. Findings: The result presents that the portfolio performance of BL-SCAPM outperformed the MV and BL-CAPM. The impact of the Sharpe ratio of BL-SCAPM was more significant than the reference portfolio. The equal benefit was procured from both portfolios in July and August 2019. After the COVID-19 outbreak was officially declared in January 2020, the performance of BL-SCAPM was still above the BL. Despite a decline in portfolio value before and during the outbreak, the reference portfolio losses were higher than those of BL-SCAPM. Hence, this study manifested that BL-SCAPM outperformed the reference portfolio. Practical implications: The results illustrate the empirical study which can be implemented for the Shariah-compliant stock market in Indonesia. By evaluating portfolio value on the COVID crisis for long investment, replacing CAPM with SCAPM in the BL model can transform the asset proportion. It decreased the portfolio loss during the crisis. Future research can be developed more from the open problems in this implementation to deliver the portfolio model into the Shariah framework with varied SCAPM in BL. Originality/value: The attention to BL studies on portfolio building with Sharia-compliant stocks is rarely focused on the Islamic perspective. Hence, the novelty of this research is the idea of modifying the BL model with a Shariah starting point. More generally, this research enriches Shariah financial literacy regarding the stock market and, specifically, its implementation in the Indonesian stock market. © 2022, Emerald Publishing Limited.
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Islamic fintech is growing fast, especially in the Organisation of Islamic Cooperation (OOIC) member countries. In recent years, it has become one of the driving forces for the Islamic financial industry. Though the pandemic negatively affected global financial business, including conventional and Islamic segments, Islamic fintech has continued its steady development. i-Fintech increases access to Islamic financial services and financial inclusion in general to provide ESG-rich investment opportunities. The rise of Islamic fintech can help countries become financial hubs and promote sustainable development goals. This paper is aimed at designing an original composite indicator of the competitiveness of Islamic fintech adoption in order to perform a comprehensive assessment of the competitive advantages that are being used across various countries. The research methodology includes data for 65 countries where Islamic fintech companies are represented. We analysed 31 variables describing the development of Islamic financial technologies in each country and combined them into five categories included in the composite indicator. Key factors that determine the development of Islamic financial technologies in different countries around the globe are singled out. The economies with the highest scores are analysed to define their strengths and weaknesses. The practices of the leading countries that address identified vulnerabilities are described.