Journal of King Abdulaziz University: Islamic Economics

Institutional Mechanism of Engineering Istisna and Prospects for Its Use in Saudi Arabia

2024-08-20T12:25:26+00:00

The article raises the problem of neo-industrial diversification of Saudi Arabia using the institutional mechanism of engineering istisna. The article shows that Saudi Arabia has all the objective and subjective conditions for the successful creation of a neo-industrial model of the information society in the process of the fourth industrial revolution. A balanced institutional approach is used to analyze this problem, which assumes the unity and interrelation of institutional and technological changes in the process of neo-industrial diversification in Saudi Arabia. The authors conclude that the institute of engineering istisna will allow Saudi Arabia to organize the creation of "smart", automated neo-industrial enterprises by orders of private investors. Thanks to this institutional mechanism, Saudi Arabia in the historical perspective can become the world leader in the controlled process of the fourth industrial revolution, just as England became the leader of the spontaneous process of the first industrial revolution more than two hundred years ago.

Do Board Characteristics and Innovation Impact Bank Performance? Evidence from Conventional and Islamic Banks in Indonesia

2024-12-30T06:43:34+00:00

This study aims to analyze the impact of board characteristics, innovation, and the role of the Sharia Supervisory Board (SSB) on bank performance in Indonesia, with a focus on comparing conventional and Islamic banks. Using panel data from 286 bank observations over the period 2010–2020, the study employs panel regression methods and the Generalized Method of Moments (GMM) to address potential endogeneity issues. The findings reveal that the size of the board of commissioners has a significant positive effect on the performance of Islamic banks, while gender diversity in the board of directors generally has a positive impact on overall bank performance. The educational background of board members shows complex and varied effects between conventional and Islamic banks. Innovation demonstrates a significant positive effect on the performance of Islamic banks in additional tests. Furthermore, the moderating role of the SSB in the relationship between innovation and the performance of Islamic banks is highlighted: the size of the SSB tends to weaken the influence of innovation, whereas gender diversity within the SSB strengthens it. These findings have important implications for bank management practices, the development of Islamic banking governance theory, and banking sector regulations. The study underscores the necessity of considering structural differences between conventional and Islamic banks when designing governance policies.

Impact of audit committees in Islamic banks: Corporate governance and financial risk under Shariah law in Pakistan

2025-01-03T19:37:42+00:00

To explore the impact of corporate governance especially audit committees on the financial risk of Islamic banks in Pakistan under Sharīʿah law. The study used panel data between (2018-2022) of Islamic banks in Pakistan. To facilitate the data analysis, we employed the fixed effect model in panel data regression. The study highlights that Islamic bank in Pakistan maintain a healthy financial position, with an average NPF of 3.91%, indicating strong risk management. Regression analysis confirms significant negative effects of audit committee size (ADC) and return on assets (ROA) on NPF, with coefficients of -0.199 (p = 0.0052) and - 10.2036 (p = 0.0099), respectively. These findings emphasize the importance of profitability and effective audit committees in reducing financial risks. However, SSB1 and SSB2 show no significant relationships, with p-values of 0.3838 and 0.1045, respectively. The fixed-effect model, validated by the Chow test (p = 0.000), ensures the robustness of the analysis. The major limitation of the research is time and resources and the availability of the quality and quantity of data. We conclude that due to the ultimate need to reduce financial risk, auditors must play an important role in banks, including Islamic banks. Our findings suggest that Islamic banks need to ensure audit committees operate efficiently. An effective system in Islamic banks that enhances accountability and transparency will be in the collective interest of society to enhance financial risk
management. First, to the extent of our knowledge, there is no previous research conducted to examine the effect of the effectiveness of audit committees. Second, our study aims to provide empirical evidence on the effect of audit committee effectiveness on financial risk in Islamic banks.

ESG Disclosure and Financial Stability of Islamic and Conventional Banks

2024-04-22T11:39:00+00:00

The recurrence of banking and financial crises has revealed the complexity and vulnerability of the conventional financial and banking system. In this paper, we empirically investigate the impact of Environmental, Social, and Governance disclosure (ESG) on banking stability, as well as the individual effect of each dimension of ESG, with particular attention to the moderating role of capital structure. Using a mixed sample composed of 18 Islamic banks and 22 conventional banks from 2014 to 2022, the results indicate a positive and significant effect of ESG, measured by the ESG score, on banking stability. Among the dimensions of the ESG score, only environmental and governance practices have shown a significant positive link with banking stability. However, the social dimension did not have a significant effect on this variable. Additionally, our results suggest that the Islamic character further enhances the positive relationship between ESG and financial stability due to ethical foundations. Furthermore, we find that the financial stability of Islamic and conventional banks primarily depends on capital structure, specifically the adequacy of equity, and credit risk management. Our study sheds light on the essential role of capital structure in moderating the benefits of ESG disclosure, an effect that has not been extensively examined in previous studies.

Blockchain Technology for Efficient Zakat Management in India: An Exploratory Study

2024-08-22T12:46:43+00:00

This review explores how blockchain technology can revolutionize Zakāh management in India, addressing persistent transparency and trust issues. Zakāh, a core Islamic practice aimed at reducing socioeconomic inequality, often falls short of its potential due to inefficiencies and a lack of accountability in the current system. By analyzing secondary sources, this study highlights how blockchain and smart contracts can transform Zakāh collection and distribution. The proposed model promises greater transparency, trust among donors, and more efficient fund allocation, which could boost formal contributions and significantly reduce poverty in the Indian Muslim community. A critical insight is the lack of research on blockchain’s role in Zakāh distribution and its societal impact in India. Additionally, outdated data on Zakāh funds underscores the need for modernization. The study synthesizes existing knowledge through a systematic review while addressing ethical concerns and methodological limitations. Adopting a qualitative approach, it provides a fresh perspective on blockchain’s potential to enhance Zakāh systems and offers a practical framework for policymakers and religious leaders to implement meaningful changes.

Halal Tourism Trend: A Systematic Literature Review

2024-09-05T21:31:02+00:00

This research aims to systematically review and map the research topics and themes related to Ḥalāl tourism. A total of 333 articles were reviewed from the Scopus database using the Systematic Literature Review (SLR) method and the VOSviewer application. The results showed that there were 159 Ḥalāl tourism researchers, with 59 research clusters and the highest number of documents held by a researcher being 12. Indonesia emerged as the leading country in Ḥalāl tourism research, with 132 research documents. This is due to the country's focus on developing its Ḥalāl tourism potential, which is supported by its 742 languages and 17,100 islands, making it the country with the largest archipelago. Indonesia also has the highest Muslim population worldwide, with 88% of its total population being Muslims and 12% of Muslims worldwide being in Indonesia. The study categorized the findings into three groups, namely cluster based on topic cluster based on discussion time, and cluster based on dominant and non-dominant topics. For Topic Clusters, research related to Ḥalāl tourism consists of 6 main clusters, namely Market, Islamic Tourism, Value, Ḥalāl Tourism Destination, Intention, and Dimension. In terms of Topic Discussion Time, the newest topics consist of COVID-19, Ḥalāl Tourism Policy, Intention, Value, Ḥalāl Tourism Destination, Trust, and Loyalty. Meanwhile, the most discussed topics consist of Market, Islamic Tourism, Opportunity, Potential, and Islam. The final finding is the dominant and non-dominant discussion topics (Density Visualization). The dominant categories of discussion topics consist of Value and Market, Quality, Intention, and Standard. Meanwhile, the non-dominant categories are topics about COVID-19, Ḥalāl service, Ḥalāl tourism products, and prices. The results of this research serve as a reference for the development of ḥalāl tourism. The data in this research is still limited to secondary data sourced from the Scopus database. Future research needs to conduct a Comparative Study between Regions.