Muslim Business and Economics Review

Finance and Output Volatity During The Global Financial Crisis

Mansor H. Ibrahim — 2024-06-29

This paper assesses the effectiveness of financial depth and financial inclusion in the mitigation of output volatility during the 2008-2010 Global Financial Crisis. The paper also evaluates whether finance is more effective in countries with more developed financial systems, higher levels of economic developments, sounder banking systems, and better political stability. Employing a cross-sectional dataset covering more than 100 countries, our results indicate the ability of finance in subduing output volatility during the crisis. Our evidence is also concrete in suggesting the success of finance in reducing output volatility in more financially developed, advanced, and politically stable countries. However, the evidence is unclear on whether finance is beneficial for countries characterized by low, intermediate, or high banking stability. In addition to these findings, the preponderance of evidence tends to suggest the better ability of financial usage as compared to financial access in mitigating aggregate fluctuations during the crisis. Finally, our additional analysis reveals that finance functions well in stabilizing output when output volatility is high.

Determinants and Complexities of Halal Logistics in Malaysia: A Systematic Literature Review

Anis Husna — 2024-06-29

This study employs a systematic literature review to examine the challenges of halal logistics in Malaysia, addressing a significant gap in the literature concerning the operational difficulties in maintaining halal integrity throughout supply chain processes. As the world’s Muslim population grows, understanding the complexities of halal logistics becomes crucial for industry stakeholders. Through Google Scholar and Scopus databases, this research identifies and analyzes 14 pertinent articles, focusing on the challenges within halal logistics. The thematic analysis reveals six primary challenges faced in Malaysia: high operational costs, lack of knowledge, limited demand for halal logistics services, operational complexities, inadequate management, and difficulties in the implementation of halal standards. These findings not only enhance the theoretical understanding of halal logistics but also offer practical insights for improving its implementation. By pinpointing these challenges, the study suggests a need for strategic efforts to foster market growth and service competitiveness in the halal logistics sector. Future research should broaden the review scope and explore solutions to these challenges, promoting best practices in halal logistics.

Food Insecurity and Coping Mechanism During COVID-19 Pandemic: Evidence from Indonesia

Ira Eka Pratiwi — 2024-06-29

This study provides empirical evidence with respect to identifying whether the coping mechanism adopted by households in Indonesia significantly influences food security during the COVID-19 pandemic. The data used was from the fourth round of high-frequency monitoring data of COVID-19 impact on households from the World Bank (www.microdata.worldbank.org), which was collected between November 3rd – 15th, 2020 through the phone-based survey. By employing the logit regression model and controlling for demography characteristics such as gender, age, and education level, this study confirms that reducing non-food consumption has been effectively lowering the probability of food insecurity in all forms of indicators, including “were hungry” (3.3 percentage points), “went without eating” (2.0 percentage points), “unable to eat nutritious food” (6.6 percentage points), “food shortage” (9.6 percentage points), and “eat less” (5.6 percentage points). Additionally, households who relied on saving had a lower probability of 13.7 percentage points of being unable to eat nutritious food, while households who received assistance from the government had a lower chance of 2.4 percentage points of experiencing hunger during the pandemic. This study emphasizes that temporary strategies or short-term coping mechanisms such as relying on support from relatives, taking loans, and engaging in additional income-generating activities, as well as reducing food consumption may not contribute effectively to food security, instead, these types of coping mechanisms may exacerbate food insecurity. The findings of this study offer several implications in regard to enhancing the capacity of households to cope with the difficulties during crises as well as policy implications to design effective interventions in dealing with future shocks.

Symmetric and Asymmetric Response of the Renewable Energy Market to Indonesian Economic Trends

Safiullah Junejo — 2024-06-29

This study digs into the complex interplay between renewable energy market development and Indonesian economic trends. Our rigorous study aims to investigate the impact of crucial economic indicators, including gross domestic product (GDP), exchange rates, inflation, real interest rates, net inflow of foreign direct investment (FDI), and urbanisation, on the renewable energy landscape in Indonesia between 1973 and 2022. This study provides a novel insight by investigating both symmetric and asymmetric impacts in the context of Indonesia. While previous studies have limited scope with linear relationships, this study fills a gap by capturing the dynamic interplay between renewables and economic indicators. By employing a robust econometric model, we reveal interesting patterns highlighting the multidimensional nature of the renewable energy market's responses to economic trends and find that there is a long-term interplay among the variables under linear and non-linear models. We found empirical evidence indicating that the nexus is asymmetric. However, in the long term, GDP exhibits an asymmetric positive impact on renewable energy consumption in the linear model. This shows that economic growth positively correlates with Indonesia's adoption of sustainable renewable energy sources. Similarly, urbanisation shows a positive response, with expanding cities boosting demand for cleaner and greener energy. Surprisingly, exchange rates show an asymmetric response, demonstrating that depreciation of local currency has a disproportionate negative impact on renewable energy investment during economic downturns. Inflation also exhibits a negative asymmetric response due to eroding purchasing power that reduces investment in renewables. Meanwhile, net inflow of FDI emerges as a critical driver in favourable economic conditions, dramatically amplifying renewable energy capacities. Therefore, during economic recessions, FDI’s impact diminishes and emphasises the significant importance of tailored interventions. Based on the findings of this study, which demonstrate the profound interplay of how the Indonesian economy shapes and is affected by the renewable energy market, we encourage the adoption of policies that promote sustainable energy development while increasing economic resilience. We recommend that policymakers support renewable energy diversification to lessen the vulnerability of exchange rate fluctuations. Attracting FDI is also crucial, as policies can help strengthen the investment climate and bolster the renewable energy sector. Inflation-indexed incentives can help maintain confidence and foster economic growth.

The Role of the Core Banking System: The Case of Bank Aceh’s Syariah Conversion

Deni Amin Sujana — 2024-06-29

The aim of this study is to assess the transformation of a traditional banking system into an Islamic banking system. Utilizing a case study approach and drawing on asset-liability theories, Bank Aceh is chosen for examination of both pre- and post-conversion. The results indicate that the implementation of Qanun (Islamic law) expedited the conversion process in Aceh, by mandating that financial institutions in the province operate under Islamic principles. A unique aspect of this research is the exploration of the conversion process from an information technology perspective, specifically examining the role of the core banking system in transitioning from conventional to Islamic banking. Additionally, the study sheds light on the accounting treatment within the core banking system during the conversion process, a previously unexplored aspect.

ZISWaf Intention Through Islamic Philanthropy Organizations: Does Empathy Matter? The Role of the S-O-R Framework and TPB

Yudi Saputra — 2024-06-29

This research aims to examine the variables that affect people’s intention to pay zakat, infaq, shodaqoh, and waqf (ZISWaf) through Islamic philanthropy organizations (IPOs) in Indonesia. This research uses the Stimulus-Organism-Response (S-O-R) framework and the Theory of Planned Behavior (TPB) as the model framework. This research is quantitative with primary data, obtained through online surveys by random sampling method, with 145 respondents participating in further analysis stages using SEM-PLS. From the analysis carried out, Islamic religiosity is found to be the variable that most influences ZISWaf intention. As an indirect effect, perceived credibility is significantly proven to mediate the relationship between transaction convenience and ZISWaf intention. On the other hand, empathy is not found to have a relationship with ZISWaf intention. Several arguments may explain why empathy is not proven to be influential variable in the context of ZISWaf. These findings can be used as an academic foundation for IPOs as ZISWaf fund managers, to develop the credibility issues as a strategic step in increasing intention to pay ZISWaf through IPOs. This study makes several recommendations, including the separation of donation types based on time periods. This research offers a comprehensive model, while still considering the proven theoretical framework. From an academic perspective, this research provides a fresh viewpoint to Islamic philanthropy from an empirical-based approach.

The Commonalities of Socially Responsible Investment With Islamic Finance: A Bibliometric Analysis

Ecky Imamul Muttaqin — 2024-06-29

This study aims to evaluate the number of overviews on the commonalities of socially responsible investment (SRI) with Islamic finance by providing critical thinking in terms of the investment screening process. The main critical reviews are obtained from the articles, paperwork, and previous related studies from reputable open access journals such as Emerald, SSRN databases, and other indexed-Scopus on the Web of Science. This study finds that the commonalities of socially responsible investment with Islamic finance has seemingly been characterized as a slow-moving but unstoppable works since global movements aspire to prevent a transgression of Earth's boundaries towards financial risks. Intertemporal choice accounts for how reliable constitutes for transitioning and adapting planetary boundaries in investment decisions. The challenge is to bridge the postulated gap on the commonalities of SRI with Islamic finance leading into social and financial return aspects in order to construct long-term predictions and scenarios embodying the Islamic finance concept through environmental, social and governance (ESG) approach.