Islamic banking and finance (IBF) is primarily banking and financing activities that comply with Shariah (Islamic law) and its practical applications are through the development of Islamic economics. The role played by IBF is undoubtedly an important role in economies, creating jobs, generating income, promoting economic growth and social stability and contributing to the development of a dynamic private sector. IBF itself has developed by leaps and bounds over the years. The global Islamic finance assets are forecasted to reach US$3.69 trillion by 2024, as projected by the Islamic Corporation for the Development of the Private Sector, a private sector development arm of the IsDB. DR RAZALI HARON explores.
With such recorded phenomena in IBF, an abundance of research has been and is still being conducted by academic researchers to explore and analyze the industry with the objective to enhance the industry even further and beef up the body of knowledge in IBF for further improvement.
In any aspect, research is about databases and in academic research, very often researchers utilize databases provided by Scopus (owned by the Elsevier), being the largest bibliographic database containing abstracts and citations for academic journal articles. Therefore, based on the Scopus database, this report will discuss the academic research in IBF.
Topic trends in academic research
First, let us look at the trend of research topics. From the Scopus database, Ghlamallah et al. (2021) (Diagram 1) discovered that over the years (1979–2018), the trend of research focus on IBF has been shifting from one topic to another. The topic on Islamic banks still dominates the IBF research trend over the period since Islamic banking is the central focus for the development of Islamic financial instruments and practice. One important aspect in this topic is the efficiency of Islamic banks.
Topics relating to financial assets, covering Islamic equity and ethical investment and Sukuk, have recently become popular and are among the top chosen topics. For instance, the topic on Shariah compliant equity investment is a topic that is recently gaining popularity.
Philanthropic and inclusive finance, a topic which covers the area of Waqf and Zakat, microfinance and Takaful, is also gaining substantial interest and has recently become the third-most important topic discussed and researched on over the period, compared with its lower importance in the past. This reflects the growing realization and acknowledgment of the significant roles and potentials of Waqf, Zakat, microfinance and Takaful in the context of the economic development of Muslim-majority countries. On the other hand, topics covering economy, philosophy and history, with the focus in defining Islamic economics, are seen to have given way, from being among the top topics in the past to becoming the least popular topics in the academic research.
Source of academic research
Second is the source of research, which is divided according to country and the affiliation of researchers who contributed to the research in IBF. Based on the Scopus database (as at the 8th October 2021), using the keywords ‘Islamic Banking Finance’ to search within ‘Article Title, Abstract, Keywords’, Malaysia holds the first position in contributing to the research in IBF, with 265 articles, followed by the UK (96), the US (80), Indonesia (62), Australia (49), Pakistan (49), Turkey (46) and Saudi Arabia (45). Being at the forefront of the development of Islamic banking, Islamic capital markets and Takaful, Malaysia truly deserves the honor of being at the highest point in the chart. Malaysia has a strong and comprehensive Islamic financial system with a robust business-driven regulatory regime and legal framework. In addition to that, Malaysia is one of the leading global hubs for Islamic finance.
One interesting point worth highlighting is that the contributions from researchers affiliated from the countries such as the UK, the US and Australia provide insight on the potential of IBF at the global front and its ability to act as alternative banking to the conventional. Many more contributions are anticipated from researchers affiliated to these countries in future as a result of global acceptance of IBF and the strengthening of the Islamic financial institutions’ position globally. The country result also captures the fact that the academic research on IBF is non-region-centric where research contributions come from countries of various regions such as Southeast Asia, Middle East, South Asia, North America, Europe, Central Asia and Oceania. The diversity of authors/regions is one vital characteristic to the academic research in IBF for it to become mainstream research. Next is the affiliation of researchers in contributing to the academic research as recorded in the Scopus database.
The International Islamic University Malaysia (IIUM), the International Centre for Education in Islamic Finance and the IIUM Institute of Islamic Banking and Finance (IIiBF) are among the top 20 affiliations which contributed to the academic documents as recorded in the database. The IIiBF captivatingly appears to stand tall among the top contributors, despite being only a Kulliyyah (faculty) at the IIUM. On top of that, the IIiBF is a three-time award recipient for the Best Islamic Research Firm category in the IFN Service Providers Poll by Islamic Finance news, coming in first position in 2019 and third position in 2020 and 2021. The top 20 affiliations were mainly dominated by institutions from Malaysia with other institutions from the US, Australia, Turkey, Bahrain, the UK, Indonesia and Saudi Arabia.
The potential of IBF is very promising moving forward and is supported by strong asset growth. To chart future growth, both the practitioners and the academic scholars in IBF must continue their collaboration. Other than the Shariah scholars serving the Shariah committees of the Islamic financial institutions who mainly come from the academic institutions, the IBF industry is in dire need of a continuous supply of good talent which is first cultivated at the academic institutions for IBF programs. In addition, research that is data-driven is, without a doubt, crucial in providing important inputs for the strategic planning of the IBF industry going forward.