Islamic Banking and Finance Review

Application of Extended Theory of Planned Behavior on Muslims Intentions: Case of Islamic Banking in Spain

MUHAMMAD MUSA, Rusni Bt Hassan Rusni Bt Hassan, Nur Rusni Bt Hassan — Mon, 01 Dec 2025 00:00:00 +0000

Spain has seen a significant rise in the presence of Islam in the recent years, largely attributed to increased immigration from Muslim-majority countries to Europe. This demographic shift positions Spain as a potential emerging market for Islamic banking and finance (IBF). Hence, it is relatable to examine the perceptions of Muslims towards Islamic banking systems. This study aims to examine the determinants influencing Muslims' intentions towards Islamic banking in Spain. Using the Theory of Planned Behaviour (TPB), the study investigates the relationship between attitude, subjective norms, perceived behavioral control (PBC), awareness and knowledge, religiosity, service quality, and intention of Muslims to use Islamic banking. The study employed a 36-item structured survey instrument to gather data from 300 Muslim respondents residing in Catalonia, Spain. Descriptive statistics, reliability and validity analysis, and PLS-SEM technique was applied to test the hypothesized relationship among the variables. Smart PLS was used to analyze the data. The study finds that attitude, subjective norms, PBC, awareness and knowledge, and service quality have a significant impact on the intention to use Islamic banking products and services among Muslims. Furthermore, the study also asserted that religiosity did not demonstrate a statistically significant influence on behavioral intention. This research contributes to the growing body of Islamic behavioral finance literature by providing evidence from a non-Muslim-majority context. It offers novel insights into how Muslim minorities make financial decisions, and identifies key predictors that Islamic banks should target to enhance service adoption in Spain. The findings suggest that Islamic banking institutions can expand their outreach in Spain by focusing on customer-centric strategies that enhance awareness, highlight service quality, and leverage social influence.

The Moderating Role of Corporate Governance in the Nexus between Digital Transformation and Corporate Restructuring: Evidence from Shariah-Compliant Firms of Pakistan

Abida Irum, Rafiullah Sheikh — Mon, 01 Dec 2025 00:00:00 +0000

The current research analyses how digital transformation (DT) influences the outcomes of corporate restructuring (CR) with respect to Shariah-compliant companies emphasizing four dimensions, namely financial (FR), operational (OR), asset (AR), and governance restructuring (GR). It also addresses the moderating effect of corporate governance (CG), especially board size, on such a relationship. The study fills the literature gap regarding the role of digital transformation, as well as governance practices, in restructuring problems in Shariah-compliant firms by examining a sample of 100 such firms listed on the Pakistan Stock Exchange (PSX) between 2018-2023. Using the principles of the Knowledge-Based View (KBV), the study conceptualizes digital capabilities as organizational knowledge assets capable of driving organizational reconfiguration when backed by governance systems that are in line with Islamic ethical principles. The research implements a two-step System GMM estimator to overcome endogeneity as well as the bias of missing variables. It also assesses the effects of digital transformation and board aspects in influencing the form of corporate restructuring outcomes. Notably, it introduces a novel text-mining methodology to quantify digital transformation based on the information extracted from the firms’ annual reports, offering a replicable and innovative approach for future research. - The study uncovers that digital transformation significantly enhances financial restructuring, while its effects on operational, asset, and governance restructuring are not straightforward, rather they are mixed. Board size is found to positively influence asset restructuring but has limited or no effect on other dimensions. Notably, the interaction between digital transformation and corporate governance yields a negative moderation effect in financial and governance restructuring, suggesting that larger boards may inhibit the transformative impact of digital initiatives, potentially due to strategic inertia or insufficient digital literacy. The study significantly contributes to the Knowledge-Based View (KBV) and Islamic governance literature by illustrating the dual role of corporate governance, both as an enabler and a constraint in digital transformation. It also develops a new text-mining formula to measure digital transformation using annual reports, as well as potential introduction of a replicable and innovative mechanism to estimate it in annual reports of upcoming studies.

Behavioral Approach Towards Islamic Finance inPakistan: A Preliminary Investigation

Huma Nawaz, Shamaila Nawaz — Mon, 01 Dec 2025 00:00:00 +0000

Islamic financial practices emphasize on the instillation of Islamic laws in the practices that are considered ethical in this world. The purpose of this paper is to determine the factors of Islamic banking promotion among Pakistani educated community. Demographic factors, attitude and financial recommendation items were examined to determine the influence of these factors in promoting ethical financial instruments. The paper follows quantitative research in nature. It explored more than two theories. After a conceptual analysis of the theory of reasoned action (TRA) and theory of planned behavior, this paper investigates the impact of ethical behavior towards the selection of Islamic financial products and services in Pakistan. The descriptive and inferential techniques were used on 194 respondents of Pakistan. There are some positive and significant relationships between behavior intuition and promotion of Islamic products and services. To trigger a specific financial sector of an economy, managers in the Islamic banks should account best individual outcome on ethical decision, rule-based ethical decisions in which the rational approach is not adopted. This study implies that promotion of financial services is achieved when there is improvement in awareness about ethical financial products and services.

Institutional Transformation of Zakat Towards a Maqashid Shariah-Based Distribution System and Econophysics Model: A Critical Conceptual Study from an Islamic Economic Perspective

MALIATU FITRIAH — Mon, 01 Dec 2025 00:00:00 +0000

This article proposes a new approach in designing zakat institutions based on maqashid shariah by integrating an econophysics distribution model as a conceptual solution. Criticism of the dominance of legal-formal and consumptive approaches in zakat institutional practices underlies efforts to reconstruct a more participatory and outcome-based zakat distribution system. Through a normative-conceptual approach, this article presents a dynamic zakat distribution model based on surplus stock and wealth flow from a social physics perspective. The study also suggests strengthening zakat institutions through digitalization, hybrid governance, and the development of a maqashid index. These findings offer a significant contribution to the development of a transformative and sustainable zakat institution.

PRICING BENCHMARKING FOR ISLAMIC BANKING PRODUCTS: APPLICATION AND IMPACT

Mohammad Qutaiba, Mohd Owais — Mon, 01 Dec 2025 00:00:00 +0000

Islamic property financing (IPF) in Malaysia has evolved into a well-established system that adheres to Shariah principles while competing with conventional financial models. However, the continued reliance on interest-based benchmarks in pricing remains a challenge. This study critically examines the feasibility of establishing an independent price benchmarking system for (IPF) that ensures profitability while complying with Shariah principles. It explores the implications of using conventional benchmarks, investigates alternative pricing models, and evaluates the impact of displaced IRs on Islamic banks. Various methodologies, including the rate of profit mechanism model, Tobin’s Q theory, and rental-based pricing, are analyzed as potential solutions to replace conventional interest-based benchmarks. The research highlights the necessity of balancing financial sustainability with ethical Islamic banking practices in order to create a more independent and competitive Islamic financial system.