The Role of Islamic Law in Shaping Sustainable Economic Models: Evidence from Indonesia’s Shariah-Compliant Investment Market
Article Sidebar
-
Keywords: Islamic law, sustainable economy, Shariah-compliant investments, Indonesia, ethical finance.
Abstract
The global shift toward sustainable economic models has sparked interest in the potential of Islamic finance to promote ethical and environmentally friendly investments. Indonesia, as the world’s largest Muslim-majority country, has seen significant growth in its Shariah-compliant investment market. This study explores how Islamic law influences the development of sustainable economic models within this market. The research aims to analyze the role of Islamic law in shaping sustainable economic practices in Indonesia’s Shariah-compliant investment market, identifying key drivers, challenges, and opportunities for growth. A mixed-methods approach is employed, combining quantitative analysis of investment data from Shariah-compliant funds and qualitative interviews with industry experts, Shariah scholars, and investors. Data were analyzed using thematic analysis for qualitative insights and statistical tools for quantitative data. The findings reveal that Islamic law significantly influences sustainable economic practices by promoting ethical investments, risk-sharing, and environmental stewardship. Shariah-compliant funds in Indonesia increasingly prioritize green investments and social impact projects, aligning with global sustainability goals.
Full text article
References
AbdulKareem, I. A., & Mahmud, M. S. (2024). SHARIAH ISSUES OF OWNERSHIP AND POSSESSION OF ASSET-BASED SUKUK STRUCTURE: A SHARIAH SCHOLARS’ PERSPECTIVE. UUM Journal of Legal Studies, 15(1), 171–196. Scopus. https://doi.org/10.32890/uumjls2024.15.1.8
Abdullah, N. A. I. N., Hamid, N. A., & Haron, R. (2024). Issues and Challenges ofSustainable Finance: An Experience From the Islamic Banking Industry. Dalam Islamic Finance and Sustainable Development: A Global Framew. For Achieving Sustainable Impact Finance (hlm. 187–194). Taylor and Francis; Scopus. https://doi.org/10.4324/9781003468653-21
Ahmed, H. (2024). Security tokens, ecosystems and financial inclusion: Islamic perspectives. International Journal of Islamic and Middle Eastern Finance and Management, 17(4), 730–745. Scopus. https://doi.org/10.1108/IMEFM-04-2024-0195
Al Masud, A., & Uluyol, B. (2024). Investors’ demand in Initial Public Offering (IPO): Shariah compliance, corporate governance and macroeconomic factors. Journal of Islamic Accounting and Business Research. Scopus. https://doi.org/10.1108/JIABR-09-2023-0292
Alahouel, F., & Loukil, N. (2024). An Islamic Inter-Temporal Capital Asset Pricing Model: Evidence From GCC Indexes. International Journal of Finance and Economics. Scopus. https://doi.org/10.1002/ijfe.3110
Alajmi, A. E., & Al-Shammari, B. A. (2024). Corporate governance impact on risk disclosure in Shariah-compliant financial firms of Kuwait. Journal of Islamic Accounting and Business Research. Scopus. https://doi.org/10.1108/JIABR-02-2024-0070
Ali, S., Naveed, M., Hanif, H., & Gubareva, M. (2024). The resilience of Shariah-compliant investments: Probing the static and dynamic connectedness between gold-backed cryptocurrencies and GCC equity markets. International Review of Financial Analysis, 91. Scopus. https://doi.org/10.1016/j.irfa.2023.103045
Amin, F. A. M., Jaaman, S. H., & Roslan, N. F. (2024). Analyzing the impact of distinguishing coefficient parameter in grey relational analysis model. Dalam Masseran N., Ishak A.M., Ismail E.S., Tajuddin R.R.M., Chien L.K., Ismail N., & Burhanuddin N.A. (Ed.), AIP Conf. Proc. (Vol. 3150, Nomor 1). American Institute of Physics; Scopus. https://doi.org/10.1063/5.0231308
Asadov, A. (2024). Empirical Analysis of Demand for Sukuk in Uzbekistan. Economies, 12(8). Scopus. https://doi.org/10.3390/economies12080220
Billah, M. M., Hassan, R., Haron, R., & Zain, N. R. M. (2024). Islamic Finance and Sustainable Development: A Global Framework for Achieving Sustainable Impact Finance. Dalam Islamic Finance and Sustainable Development: A Global Framew. For Achieving Sustainable Impact Finance (hlm. 211). Taylor and Francis; Scopus. https://doi.org/10.4324/9781003468653
Billah, M. M. S., Hassan, R., Haron, R., & Zain, N. R. M. (2024). Islamic Sustainable Finance: Policy, Risk and Regulation. Dalam Islamic Sustainable Finance: Policy, Risk and Regulation (hlm. 223). Taylor and Francis; Scopus. https://doi.org/10.4324/9781003395447
Bossman, A., Gubareva, M., Agyei, S. K., & Vo, X. V. (2024). Time-frequency comovements between environmental cryptocurrency sentiment and faith-based sectoral stocks. International Review of Economics and Finance, 91, 699–719. Scopus. https://doi.org/10.1016/j.iref.2024.01.068
Bossman, A., Gubareva, M., & Teplova, T. (2024). Hedge and safe-haven attributes of faith-based stocks vis-à-vis cryptocurrency environmental attention: A multi-scale quantile regression analysis. Applied Economics, 56(31), 3698–3721. Scopus. https://doi.org/10.1080/00036846.2023.2208336
Boulanouar, Z., Grassa, R., & Alqahtani, F. (2024). The dynamic interplay of Shariah compliance rank and financial performance: Nonfinancial listed firms in Saudi Arabia as a testing ground. Journal of Financial Reporting and Accounting. Scopus. https://doi.org/10.1108/JFRA-07-2023-0405
Chong, J. K., Lee, H. S., & Liew, P. X. (2024). IS TAKAFUL (ISLAMIC INSURANCE) MORE EFFICIENT THAN CONVENTIONAL INSURANCE? A COMPARATIVE ANALYSIS OF THE MALAYSIAN INSURANCE INDUSTRY. International Journal of Business and Society, 25(2), 509–529. Scopus. https://doi.org/10.33736/ijbs.7611.2024
Chowdhury, M. I. H., Balli, F., & de Bruin, A. (2024). Investment styles of islamic equity funds. International Review of Economics and Finance, 89, 172–187. Scopus. https://doi.org/10.1016/j.iref.2023.10.012
Delle Foglie, A., & Keshminder, J. S. (2024). Challenges and opportunities of SRI sukuk toward financial system sustainability: A bibliometric and systematic literature review. International Journal of Emerging Markets, 19(10), 3202–3225. Scopus. https://doi.org/10.1108/IJOEM-04-2022-0601
El Kharrim, M. (2024). Quantitative framework for shariah-compliant multi-period fuzzy portfolio optimization: A sustainable approach to ethical investing. Journal of Islamic Accounting and Business Research. Scopus. https://doi.org/10.1108/JIABR-02-2024-0052
Ghallabi, F., Bougatef, K., & Mnari, O. (2024). Calendar anomalies and asymmetric volatility of returns in the Indonesian stock market: Conventional vs Islamic indices. Journal of Islamic Accounting and Business Research. Scopus. https://doi.org/10.1108/JIABR-08-2023-0282
Hassan, R., Asri, M. N. M., & Noordin, N. H. (2024). A shariah compliance analysis of virtual reality technology investment. Dalam Entrep. Innov. And Educ. For Perform. Improv. (hlm. 132–154). IGI Global; Scopus. https://doi.org/10.4018/979-8-3693-7903-5.ch006
Jennifer, A., Raymond, A., Raju, V., Rose, R. C., & Watson, A. (2024). Portfolio Management of Private Islamic Banks: Review of Current State of Affairs, Trends, and Islamic Banking in Malaysia. Dalam Sikander A., Zurek-Mortka M., Chanda C.K., & Mondal P.K. (Ed.), Lect. Notes Electr. Eng.: Vol. 1148 LNEE (hlm. 579–587). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-981-97-0154-4_46
Kashif, U., Ahmed, S., & Nawaz, F. (2024). Shar?’ah-Compliant Investing: Examining Ij?rah-?uk?k Market Determinants in Pakistan. Journal of King Abdulaziz University, Islamic Economics, 37(1), 79–99. Scopus. https://doi.org/10.4197/Islec.37-1.5
Mahomed, Z., & Mahbot, A. (2024). Sustainable and responsible investment (SRI) Sukuk: Lessons from Khazanah’s Sukuk Ihsan. International Journal of Islamic and Middle Eastern Finance and Management, 17(6), 1065–1081. Scopus. https://doi.org/10.1108/IMEFM-05-2024-0219
Marwan, S., Ismail, S., Engku Ali, E. R. A., & Mohamed Haneef, M. A. (2024). Factors influencing intention to invest in Shariah-compliant social impact bonds in Malaysia. Journal of Islamic Accounting and Business Research, 15(8), 1338–1358. Scopus. https://doi.org/10.1108/JIABR-12-2022-0340
Mertzanis, C., Hamill, P. A., Pavlopoulos, A., & Houcine, A. (2024). Sustainable investment conditions and corporate cash holdings in the MENA region: Market preparedness and Shari’ah-compliant funds. International Review of Economics and Finance, 93, 1043–1063. Scopus. https://doi.org/10.1016/j.iref.2024.05.005
Mohamad Ariff, A., Abd Majid, N., Kamarudin, K. A., Zainul Abidin, A. F., & Muhmad, S. N. (2024). Corporate ESG performance, Shariah-compliant status and cash holdings. Journal of Islamic Accounting and Business Research, 15(3), 534–552. Scopus. https://doi.org/10.1108/JIABR-08-2022-0217
Mohd Amin, F. A., Udin, M. N., Binti Zulkefli, H. N., Binti Che Halim, I. N., Ahmad Shafie, S. N. B., & Zainol Abidin, S. N. (2024). Performance Evaluation of Shariah-Compliant Portfolios Using Grey Relational Clustering and Markowiz Model. Int. Conf. Artif. Intell. Data Sci., AiDAS - Proc., 175–179. Scopus. https://doi.org/10.1109/AiDAS63860.2024.10730113
Mustapha, Z., Kunhibava, S., Muneeza, A., & Khalid, M. (2024). Navigating the Paradigm Shift in Malaysia’s Sustainable Responsible Investment Sukuks. Manchester Journal of Transnational Islamic Law and Practice, 20(3), 457–464. Scopus.
Noor, A. B. M., & Masruh, M. M. B. M. (2024). Bay’ al-Salam-Based Islamic Sustainable Finance. Dalam Islamic Finance and Sustainable Development: A Global Framew. For Achieving Sustainable Impact Finance (hlm. 141–147). Taylor and Francis; Scopus. https://doi.org/10.4324/9781003468653-16
Qabhobho, T., Mpuku, C., Anyikwa, I., & Phiri, A. (2024). Tail-spillover effects between African currencies, bitcoin, gold and oil during two recent black swan events. Cogent Business and Management, 11(1). Scopus. https://doi.org/10.1080/23311975.2024.2343411
Rahman, M. N. B. A. (2024). Exploring the Experimental Analysis of Deep Learning Based Risk Management and Corporate Governance in Islamic Finance. Proc. Int. Conf. Sci., Technol., Eng. Manag., ICSTEM. Proceedings of 2024 International Conference on Science, Technology, Engineering and Management, ICSTEM 2024. Scopus. https://doi.org/10.1109/ICSTEM61137.2024.10560778
Rahman, S. M. K., Chowdhury, M. A. F., Hossain, M. M., Islam, F., Mim, T. H., & Nirjon, N. A. (2024). SHARIAH COMPLIANCE OF BANGLADESHI ISLAMIC BANKS: DOES IT DIFFER ACROSS BANK MODALITIES? Journal of Islamic Monetary Economics and Finance, 10(2), 329–356. Scopus. https://doi.org/10.21098/jimf.v10i2.1887
Shaikh, Z. H., Irfan, M., Nomran, N. M., & Abey, J. (2024). DOES COVID-19 AFFECT SHARIAH COMPLIANT STOCK? EVIDENCE FROM SELECTED OIC COUNTRIES. Jurnal Ilmiah Ilmu Terapan Universitas Jambi, 8(2), 720–731. Scopus. https://doi.org/10.22437/jiituj.v8i2.33159
Sood, S., & Peters, M. S. (2024). Navigating the Islamic Finance in Türkiye – Legal Analysis of Shariah Compliant Participation Banks. Manchester Journal of Transnational Islamic Law and Practice, 20(1), 331–337. Scopus.
Authors
Copyright (c) 2025 Dadin Solihin, Haziq Idris, Rinah Farah
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
