Journal Article

Purpose There is no uniform methodology adopted worldwide for Shariah equity screening. The purpose of this research paper is to suggest reforms required to improve Shariah screening methodologies used for equities using Dow Jones Islamic Market Index, which is the world’s first such methodology adopted. Design/methodology/approach This research uses a qualitative research methodology that goes beyond analysing secondary data on the subject matter. It includes conducting semi-structured interviews with selected subject matter experts to gain insights into the practical issues associated with existing Shariah screening methodologies. The aim is to identify areas for potential reforms that can be implemented in the future. By combining secondary data analysis with first-hand perspectives from experts, this research provides a comprehensive understanding of the challenges and opportunities in Shariah screening, contributing to the development of practical and effective reforms. Findings The study recommends the inclusion of additional filters in Shariah screening methodologies to promote stocks that are not only Shariah-compliant but also socially responsible. It suggests that while a certain level of Shariah non-compliance threshold may be tolerated during the initial screening stage, over time, this accepted threshold should gradually decrease. The ultimate goal is to achieve 0% thresholds for Shariah-compliant equities. By advocating for stricter criteria and a progressive reduction in non-compliance tolerance, the study highlights the importance of continuously improving and refining Shariah screening practices to ensure higher levels of compliance and alignment with Shariah principles. Originality/value It is anticipated that the findings of this research provides original insights and contributions to existing knowledge. It offers novel perspectives, innovative approaches and solutions to address specific areas in need of reform. By focusing on enhancing the effectiveness and standardisation of Shariah-compliant investment practices, the research brings fresh perspectives and adds value to the field. Its unique contribution lies in identifying and addressing emerging challenges and proposing improvements in Shariah screening methodologies.

This paper investigates the effects of Environmental, Social, and Governance (ESG) implementation on banking performance in emerging and developing countries. Applying the Two-step System Generalized Method of Moments (System-GMM) to panel data of 179 banks across 29 countries spanning 2016-2022, we find that ESG implementation significantly enhances overall banking profitability. However, when we assess the implications of ESG on Islamic banks, we find that overall ESG commitment significantly reduces profitability. As for the individual ESG pillar, we note the profit-enhancing effect of environmental pillar on both Islamic and conventional bank profitability. Some evidence is also uncovered for the significant positive effect of social pillar on conventional bank profitability. Finally, we note no significant influences from governance pillar. These results highlight the divergent impacts of ESG implementation on Islamic and conventional banks. We conclude that policymakers should exercise caution in designing and implementing ESG policies, ensuring they are tailored to promote optimal performance across different banking models. This study contributes to the growing body of the literature on sustainable finance and provides valuable insights for regulators and bank managers in emerging and developing economies.

This paper explores the intersection of Intellectual Property (IP) and Islamic finance, proposing a policy framework to integrate IP valuation into Sharia-compliant financing. Focusing on the UK, it also extends to global markets, including ASEAN, GCC, and MENA regions. The paper identifies gaps in current practices, particularly in incorporating IP assets into Islamic financial products, highlighting untapped market potential. It emphasizes the need for regulatory compliance, Sharia board approvals, and robust audit mechanisms to ensure ethical integration. Key recommendations include developing a comprehensive IP frame work, fostering international collaboration, and capacity building through education. The framework aims to align economic growth with ethical financing, enhancing transparency and the robustness of Islamic IP financing globally.

This study aims to investigate the intentions of Muslim cryptocurrency (CC) holders to fulfil their zakat obligations on digital assets, exploring the unique motivations and barriers within this emerging financial landscape. The research uses a quantitative approach and a cross-sectional research design through online surveys, using purposive sampling to gather data from Muslim CC holders. The integrated model, known as the theory of planned behaviour and social cognitive theory (TPB-SCT) model, is used to comprehensively analyse the key factors influencing intentions to pay zakat on cryptocurrencies (CCs). The study reveals that attitude towards zakat on CCs and perceived behavioural control regarding zakat on CCs have a significant and positive effect on the intention to pay. In contrast, subjective norms show no significant influence. CCs-related financial risk exerts a negative impact on intention. Moreover, CCs-related zakat knowledge and adherence to Shariah compliance are strongly associated with intention. These findings provide insights into the intricate dynamics of religious compliance within the evolving realm of digital assets. Outcomes offer profound indications to stakeholders, including financial institutions, zakat agencies, policymakers and the community, on how to integrate zakat into this new and rapidly evolving financial paradigm like CC. A pioneering effort was made in this study by exploring the intentions of Muslim CC holders to fulfil zakat obligations, bridging a significant gap in the existing literature. Developing and validating an integrated model of TPB-SCT in the realm of zakat on CC enriches the literature with a novel theoretical framework.

This study pioneers the investigation into the determinants influencing Malaysian investors’ intentions towards Non-Fungible Token (NFT) investments, utilizing an extended Unified Theory of Acceptance and Use ofTechnology (UTAUT) framework. It explores the burgeoning interest in NFTs within the Malaysian market, an emerging economy, and identifies the behavioral adoption determinants critical for NFT investment decisions. Adopting a quantitative methodology, the research engaged 183 experienced Malaysian investors through a structured online questionnaire survey. The study employed regression analysis to assess the impact of Performance Expectancy, Effort Expectancy, Social Influence, Facilitating Conditions, Perceived Usefulness, Social Support and Perceived Trust on NFT investment intentions. The findings reveal that Performance Expectancy and Social Support significantly predict the intention to invest in NFTs, accounting for 47% of the variance in investment intentions. The study highlights the crucial role of perceived benefits and community support in shaping Malaysian investors’ engagement with NFTs, amidst the complexities of the digital asset landscape. The study acknowledges the limitation posed by its sampling method and size, suggesting the need for broader investigations that include a more diverse demographic to enhance the generalizability of the findings. Future research could further delve into the specific behaviors, motivations and challenges of NFT investors and creators. The significant predictive power of Performance Expectancy indicates a primary financial motivation among Malaysian NFT investors, suggesting policymakers consider regulations that foster innovation and growth in the NFT sector while safeguarding investors. The study also underscores the importance of community support, pointing towards the development of platforms that facilitate knowledge sharing among NFT enthusiasts. By demonstrating the pivotal role of social support in the NFT investment decision-making process, the research implies a powerful sense of community among investors in the digital asset space. It suggests the potential of NFTs to foster a more inclusive and accessible market for creative industry entrepreneurs, facilitating direct engagement and profit realization. This research marks a significant departure from existing studies by tailoring the UTAUT model specifically to the NFT investment context in Malaysia. It unveils the nuanced dynamics influencing NFT investment intentions, emphasizing the unique contributions of Performance Expectancy and Social Support, thus providing a fresh perspective on NFT adoption in emerging markets.

This study aims to investigate whether banks’ environmental, social and governance (ESG) activities impact their profitability and stability. The authors also explore whether banking industry competition and the country’s regulatory quality moderate the impact of banks’ ESG on their profitability and stability. The sample includes data from 46 banks in 11 Organization of Islamic Countries (OIC) from 2010 to 2020. The authors have used the generalized method of moments (GMM) as the primary estimation model, with robustness tests to validate research findings. The results show that neither ESG nor its components impact bank profitability. Instead, ESG and its social component decrease bank stability. The findings neither support the stakeholder theory nor the risk-management view, which proposes that ESG activities improve financial performance and reduce unnecessary risks. However, an increase in market power (reduced competition) frees resources for banks, such that they focus more on ESG activities, which improves profitability, albeit at reduced stability levels. This finding supports the competition-related differentiation hypothesis. Finally, a country’s regulatory quality change does not influence bank ESG to impact its profitability or stability. This finding does not support the institutions-ESG proposition. This study has several limitations. First, constrained by data availability, the authors could not examine Islamic banks in OIC countries. Examining the ESG outcomes in Islamic banks would be interesting based on Islamic ethics and corporate social responsibility perspectives. The data set could also be more recent so that the differential impact of COVID-19 on bank ESG and financial performance could be estimated. The coverage of OIC countries was limited in our sample; this could be improved in future research. Banks should evaluate the focus and scope of their ESG activities, communicate their long-term strategic benefits with stakeholders and align ESG with their strategy and business model to offer innovative ESG-based products. They should also recalibrate ESG in their risk management framework to catalyse stability and stakeholders’ trust. Policymakers should control the level of competition so banks can foster ESG without sacrificing financial performance. Also, banks should be given regulatory incentives so ESG becomes integral to bank growth, direction and stability. ESG should be part of banks’ strategy and business model, to maximize its benefits for stakeholders, while maintaining competition and providing regulatory incentives. To the best of the authors’ knowledge, this is the first study to investigate the influence of bank ESG activities on their profitability and stability in OIC countries. The authors also extend the theoretical literature by connecting competition and regulatory quality to ESG-led financial performance.