Fintech innovations and Islamic banking performance: Post-pandemic challenges and opportunities
-
DOIhttp://dx.doi.org/10.21511/bbs.18(4).2023.23
-
Article InfoVolume 18 2023, Issue #4, pp. 281-292
- 585 Views
-
525 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study explores the pivotal role of financial technology (FinTech) in the performance of Islamic banks and financial institutions, considering both challenges and opportunities encountered during the pandemic-induced market disruptions. Amid lockdowns and economic uncertainties, the study delves into the strategies adopted by several countries, with a particular emphasis on Gulf Cooperation Council (GCC) countries, along with Jordan, Indonesia, Malaysia, and Pakistan, underscoring the importance of technological innovation in fostering a dynamic Islamic finance sector. Utilizing a data analysis approach, the study assesses the impact of heightened digitalization and the integration of FinTech on the resilience of the Islamic finance industry within an inherently volatile environment, marked by challenges during pre and post pandemics. The findings reveal that the adoption of FinTech fortifies the industry’s resilience and unveils novel growth prospects. However, the study also identifies potential avenues for expansion, particularly in Sukuk issuance, through the implementation of regulatory guidelines and faster adoption. The research underscores the transformative influence of financial technology reforms on the growth trajectory of Islamic banks. In light of the superior performance of Islamic banking in selected domains, this study advocates for a paradigm shift within the industry, encouraging the robust development of FinTech solutions to enhance its global market presence.
Acknowledgment
The authors would like to acknowledge that this research work was partially financed by Kingdom University, Bahrain from the research grant number: 2023 - 10 - 012.
- Keywords
-
JEL Classification (Paper profile tab)F36, G24, Q55, Q56
-
References46
-
Tables0
-
Figures7
-
- Figure 1. Growth of Islamic financial assets
- Figure 2. Global Islamic finance asset distribution
- Figure 3. Sukuk’s outstanding sector-wise
- Figure 4. Islamic banking asset share of total banking assets in selected economies
- Figure 5. Islamic banking vs conventional banking assets by share and asset by growth during COVID-19
- Figure 6. Islamic equity indices (2011–2021 YTD)
- Figure 7. Sector breakdown
-
- Ajmal, M. M., Khan, M., Shad, M. K., AlKatheeri, H., & Jabeen, F. (2021). Empirical examination of societal, financial and technology-related challenges amid COVID-19 in service supply chains: evidence from emerging market. The International Journal of Logistics Management, 34(4), 994-1019.
- Aldulaimi, S. H., Abdeldayem, M. M., Muttar, A. K., Aldulaimi, F. H., & Shakir, M. (2022). Entrepreneurship in Islamic Financial Technology Products: Evidence from the Kingdom of Bahrain. 2022 ASU International Conference in Emerging Technologies for Sustainability and Intelligent Systems, ICETSIS 2022 (pp. 111-120).
- Alexakis, C., Izzeldin, M., Johnes, J., & Pappas, V. (2019). Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis. Economic Modelling, 79, 1-14.
- Alnsour, I. R. (2022). Impact of fintech over consumer experience and loyalty intentions: an empirical study on Jordanian Islamic Banks. Cogent Business and Management, 9(1).
- Alshater, M. M., & Othman, A. H. A. (2020). Financial Technology Developments and their Effect on Islamic Finance Education. Journal of King Abdulaziz University, Islamic Economics, 33(3), 161-187.
- Altwijry, O. I., Mohammed, M. O., Hassan, M. K., & Selim, M. (2022). Developing a Shari’ah based FinTech Money Creation Free [SFMCF] model for Islamic banking. International Journal of Islamic and Middle Eastern Finance and Management, 15(4), 739-758.
- Anshari, M., Almunawar, M. N., & Masri, M. (2020). Financial technology and disruptive innovation in business: Concept and application. International Journal of Asian Business and Information Management, 11(4).
- Baber, H. (2020). Impact of FinTech on customer retention in Islamic banks of Malaysia. International Journal of Business and Systems Research, 14(2), 217-227.
- Baber, H., & Baki Billah, N. M. (2022). Fintech and Islamic Banks-an integrative model approach to predict the intentions. Review of Applied Socio-Economic Research, 24(2), 24-45.
- Banna, H., Hassan, M. K., Ahmad, R., & Alam, M. R. (2022). Islamic banking stability amidst the COVID-19 pandemic: the role of digital financial inclusion. International Journal of Islamic and Middle Eastern Finance and Management, 15(2), 310-330.
- Feng, S., Chong, Y., Yu, H., Ye, X., & Li, G. (2022). Digital financial development and ecological footprint: Evidence from green-biased technology innovation and environmental inclusion. Journal of Cleaner Production, 380, 135069.
- Gassner, M., & Lawrence, J. (2018). Fintech in Islamic finance: Business models and the need for legal solutions. In Fintech in Islamic Finance: Theory and Practice (pp. 174-182). Taylor and Francis.
- Grassa, R., Sarea, A., El-Halaby, S., & Damak, A. N. (2022). Between Two Crises: Do Islamic Banks Suffer? Journal of Islamic Monetary Economics and Finance, 8(2), 251-274.
- Grira, J., & Labidi, C. (2021). Banks, Funds, and risks in islamic finance: Literature & future research avenues. Finance Research Letters, 41, 101815.
- Hasan, R., Hassan, M. K., & Aliyu, S. (2020). Fintech and Islamic Finance: Literature Review and Research Agenda. International Journal of Islamic Economics and Finance (IJIEF).
- Hassan, M. K., Rabbani, M. R., & Abdullah, Yomna. (2021). Socioeconomic Impact of COVID-19 in MENA region and the Role of Islamic Finance. International Journal of Islamic Economics and Finance (IJIEF), 4(1), 51-78.
- Hui, H. W., Manaf, A. W. A., & Shakri, A. K. (2019). Fintech and the transformation of the Islamic finance regulatory framework in Malaysia. In U. A. Oseni, M. K. Hassan, and R. Hassan (Ed.), Emerging Issues in Islamic Finance Law and Practice in Malaysia (pp. 211-222). Emerald Group Publishing Ltd.
- Irfan, H., & Ahmed, D. (2018). Fintech: The opportunity for Islamic finance. In Fintech in Islamic Finance: Theory and Practice (pp. 19-32). Taylor and Francis.
- Jakšič, M., & Marinč, M. (2019). Relationship banking and information technology: the role of artificial intelligence and FinTech. Risk Management, 21, 1-18.
- Jamaruddin, W. N., & Markom, R. (2020). the Application of Fintech in the Operation of Islamic Banking Focussing On Islamic Documentation: Post-Covid-19. Syariah and Law in Facing COVID-19: The Way Forward, 3(1), 31-43.
- Jubilee, R. V. W., Kamarudin, F., Latiff, A. R. A., Hussain, H. I., & Tan, K. M. (2021). Do Islamic versus conventional banks progress or regress in productivity level? Future Business Journal, 7(1), 22.
- Li, H., Luo, F., Hao, J., Li, J., & Guo, L. (2023). How does fintech affect energy transition: Evidence from Chinese industrial firms. Environmental Impact Assessment Review, 102, 107181.
- Liu, J., Li, X., & Wang, S. (2020). What have we learnt from 10 years of fintech research? a scientometric analysis. Technological Forecasting and Social Change, 115, 120022.
- Mohamed, H., & Ali, H. (2018). Blockchain, fintech, and Islamic finance: Building the future in the new Islamic digital economy. In Blockchain, Fintech, and Islamic Finance: Building the Future in the New Islamic Digital Economy. De Gruyter.
- Mohamed, H., & Ali, H. (2022). Blockchain, fintech, and islamic finance: Building the future in the new islamic digital economy. In Blockchain, Fintech, and Islamic Finance: Building the Future in the New Islamic Digital Economy (2nd ed.). De Gruyter.
- Mohammad, H. S., Khan, S., Rabbani, M. R., & Thalassinos, Y. E. (2020). An Artificial Intelligence and NLP based Islamic FinTech Model Combining Zakat and Qardh-Al-Hasan for Countering the Adverse Impact of COVID 19 on SMEs and Individuals. International Journal of Economics and Business Administration, 8(2), 351-364.
- Musabegović, I., Özer, M., Đuković, S., & Jovanović, S. (2019). Influence of financial technology (fintech) on financial industry. Ekonomika Poljoprivrede, 66(4), 1003-1021.
- Naifar, N. (2019). Impact of financial technology (FinTech) on Islamic finance and financial stability. In Impact of Financial Technology (FinTech) on Islamic Finance and Financial Stability. IGI Global.
- Naim, N. (2020). Islamic Finance as a Vehicle to Promote Improved Intellectual Property Rights in the Gulf Cooperation Council. Law and Development Review, 13(2), 407-442.
- Oladapo, I. A., Hamoudah, M. M., Alam, M. M., Olaopa, O. R., & Muda, R. (2022). Customers’ perceptions of FinTech adaptability in the Islamic banking sector: comparative study on Malaysia and Saudi Arabia. Journal of Modelling in Management, 17(4), 1241-1261.
- Phan, D. H. B., Narayan, P. K., Rahman, R. E., & Hutabarat, A. R. (2020). Do financial technology firms influence bank performance? Pacific-Basin Finance Journal, 62, 101210.
- Rabbani, M. R., Ali, M. A. Mohd., Rahiman, H. U., Atif, Mohd., Zulfikar, Z., & Naseem, Y. (2021a). The Response of Islamic Financial Service to the COVID-19 Pandemic: The Open Social Innovation of the Financial System. Journal of Open Innovation: Technology, Market, and Complexity, 7(1), 85.
- Rabbani, M. R., Hassan, M. K., Khan, S., & Ali, M. A. M. (2021b). Artificial intelligence and Natural language processing (NLP) based FinTech model of Zakat for poverty alleviation and sustainable development for Muslims in India. In ICOVID-19 and Islamic Social Finance: 104.
- S&P Global. (2022). Islamic Finance Outlook.
- Shafiq, A. (2022). Institutional Islamic Economics and Finance. Taylor and Francis.
- Sidaoui, M., Ben Bouheni, F., Arslankhuyag, Z., & Mian, S. (2022). Fintech and Islamic banking growth: new evidence. Journal of Risk Finance, 23(5), 535-557.
- Suzuki, Y., & Miah, M. D. (2022). Digital Transformation in Islamic Finance: A Critical and Analytical View. Taylor and Francis.
- Tandon, A., Kaur, P., Mäntymäki, M., & Dhir, A. (2021). Blockchain applications in management: A bibliometric analysis and literature review. Technological Forecasting and Social Change, 166, 120649.
- Uddin, M. H., Mollah, S., & Ali, M. H. (2020). Does cyber tech spending matter for bank stability? International Review of Financial Analysis, 72, 101587.
- Ullah, N., Al-Rahmi, W. M., Alfarraj, O., Alalwan, N., Alzahrani, A. I., Ramayah, T., & Kumar, V. (2022). Hybridizing cost saving with trust for blockchain technology adoption by financial institutions. Telematics and Informatics Reports, 6, 100008.
- UNCTAD. (2022). World Investment Report 2022.
- Wang, X., Sadiq, R., Khan, T. M., & Wang, R. (2021). Industry 4.0 and intellectual capital in the age of FinTech. Technological Forecasting and Social Change, 166, 120598.
- Yarovaya, L., Brzeszczyński, J., Goodell, J. W., Lucey, B., & Lau, C. K. M. (2022). Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic. Journal of International Financial Markets, Institutions and Money, 79, 101589.
- Yudaruddin, R. (2023). Financial technology and performance in Islamic and conventional banks. Journal of Islamic Accounting and Business Research, 14(1), 100-116.
- Yudaruddin, R., Soedarmono, W., Nugroho, B. A., Fitrian, Z., Mardiany, M., Purnomo, A. H., & Santi, E. N. (2023). Financial technology and bank stability in an emerging market economy. Heliyon, 9(5), e16183.
- Zarrouk, H., Ghak, T. El, & Bakhouche, A. (2021). Exploring economic and technological determinants of fintech startups’ success and growth in the United Arab Emirates. Journal of Open Innovation: Technology, Market, and Complexity, 7(1), 50.