Accelerating Islamic Economy and Finance through Financial Technology: Challenges and Potential in the Digital Age
Abstract
The Islamic financial industry is increasingly experiencing rapid change and growth with technological advances, especially in the form of Financial Technology (FinTech). This research aims to analyze the regulatory challenges in the application of Financial Technology in the Islamic financial industry in Indonesia. This research uses a qualitative method with a literature study to collect and analyze data from various sources related to the application of FinTech in the Islamic financial industry and the associated regulatory challenges. The research findings show that several regulatory challenges need to be addressed in implementing FinTech in the Islamic finance industry in Indonesia. These challenges include Islamic perspectives on FinTech, efforts from government regulations and policies to encourage Islamic FinTech and the importance of collaboration between financial institutions and regulatory authorities. This research provides insight into the regulatory challenges faced in the implementation of FinTech in the Islamic finance industry in Indonesia. This research can guide the government, Islamic financial institutions, Islamic FinTech companies, and regulatory authorities in developing a regulatory framework conducive to the growth of Islamic FinTech.
References
Abdeldayem, M., & Aldulaimi, S. (2022). Developing an Islamic crowdfunding model: a new innovative mechanism to finance SMEs in the Middle East. International Journal of Organizational Analysis, ahead-of-print(ahead-of-print). https://doi.org/10.1108/IJOA-02-2022-3159
Akbar, M., Akbar, A., Yaqoob, H. S., Hussain, A., Svobodová, L., & Yasmin, F. (2023). Islamic finance education: Current state and challenges for Pakistan. Cogent Economics \& Finance, 11(1), 2164665. https://doi.org/10.1080/23322039.2022.2164665
Alaassar, A., Mention, A., & Aas, T. H. (2020). Exploring how social interactions influence regulators and innovators: The case of regulatory sandboxes. Technological Forecasting and Social Change, 160, 120257. https://api.semanticscholar.org/CorpusID:221760248
Alam, A., Hendratmi, A., Wati, M. S., & Hakim, L. (2022). The impact of mobile banking use on the Islamic financial institutional interest: A study in Indonesia. Banks and Bank Systems. https://api.semanticscholar.org/CorpusID:250715603
Ali, H., Mohamed, H., Hashmi, H. S., & Hassan, M. T. (2019). Global Landscape of the Islamic Fintech: Opportunities, Challenges and Future Ahead. https://api.semanticscholar.org/CorpusID:213574274
Ali, M. A., Nazim, D., Hussain, S., Rehman, J., & Rehman, S. U. (2021). Impact of Islamic Financial Literacy, Subjective Norms, Risk Perception and Perceived Behavioral Control on Adoption of Islamic Banking in Pakistan. Revista Gestão Inovação e Tecnologias, 11, 220–233. https://doi.org/10.47059/revistageintec.v11i3.1929
Alshater, M. M., Saba, I., Supriani, I., & Rabbani, M. R. (2022). Fintech in islamic finance literature: A review. Heliyon, 8(9), e10385. https://doi.org/10.1016/j.heliyon.2022.e10385
Arner, D. W., Buckley, R. P., Zetzsche, D. A., & Veidt, R. (2019). Sustainability, FinTech and Financial Inclusion. European Business Organization Law Review, 21, 7–35. https://api.semanticscholar.org/CorpusID:204497843
Ascarya, A. (2021). The role of Islamic social finance during Covid-19 pandemic in Indonesia’s economic recovery. International Journal of Islamic and Middle Eastern Finance and Management. https://api.semanticscholar.org/CorpusID:239263966
Aysan, A. F., & Unal, I. M. (2023). Challenges in Islamic Fintech and Digitalization: An Extensive Literature Review. World Scientific Annual Review of Islamic Finance. https://api.semanticscholar.org/CorpusID:257611870
Azman, S. M. M. S., & Ali, E. I. E. (2019). Islamic social finance and the imperative for social impact measurement. Journal of the International Institute of Islamic Thought and Civilization. https://api.semanticscholar.org/CorpusID:211782079
Bank, I. D. (2023). Innovations in Islamic Finance, Wright, C.
Barus, E. E. (2021). Collaboration In Developing Islamic Micro Finance Institutions (IMFs) Based On Financial Technology. At-Tijaroh: Jurnal Ilmu Manajemen Dan Bisnis Islam. https://api.semanticscholar.org/CorpusID:246762313
Butary, B. Al, Soemitra, A., & Amelia, A. (2022). Analysis of the Presence of the First Islamic Financial Institution and the Contribution of Muslim Scholars in Indonesia. Proceeding of International Conference on Science and Technology. https://api.semanticscholar.org/CorpusID:257421884
Das, S. R. (2019). The future of fintech. Financial Management. https://api.semanticscholar.org/CorpusID:199555122
Dawood, H. M., Zadjali, D. F. Al, Rawahi, M. Al, Karim, D. S., & Hazik, D. M. (2022). Business trends \& challenges in Islamic FinTech: A systematic literature review. F1000Research, 11. https://api.semanticscholar.org/CorpusID:247557333
Dinc, Y., Çetin, M., & Jahangir, R. (2023). Revisiting the concept of Islamic financial literacy in a boundaryless context: cross-country comparison of Islamic financial literacy. Journal of Islamic Accounting and Business Research. https://api.semanticscholar.org/CorpusID:256804677
Fianto, B. A., Gan, C., & Hu, B. (2019). Financing from Islamic microfinance institutions: evidence from Indonesia. Agricultural Finance Review. https://api.semanticscholar.org/CorpusID:204439527
Firmansyah, E. A., & Anwar, M. (2019). ISLAMIC FINANCIAL TECHNOLOGY (FINTECH): ITS CHALLENGES AND PROSPECT. Proceedings of the Achieving and Sustaining SDGs 2018 Conference: Harnessing the Power of Frontier Technology to Achieve the Sustainable Development Goals (ASSDG 2018). https://api.semanticscholar.org/CorpusID:169863009
Furqani, H. (2019). Fintech and Islamic finance. Fintech In Islamic Finance. https://api.semanticscholar.org/CorpusID:197878470
Hakeem, M. M. (2019). Innovative solutions to tap “Micro, Small and Medium Enterprises” (MSME) market. Islamic Economic Studies, 27(1), 38–52. https://doi.org/10.1108/IES-05-2019-0002
Hasan, R., Hassan, M. K., & Aliyu, S. (2020). Fintech and Islamic Finance: Literature Review and Research Agenda. https://api.semanticscholar.org/CorpusID:212711580
Hassan, M. K., Khan, A., & Paltrinieri, A. (2021). Islamic Finance: A Literature Review. Research Papers in Economics, 77–106. https://api.semanticscholar.org/CorpusID:239742897
Iqbal, M., Sumantri, R., & Khoirunnisa, R. (2022). ACCELERATION OF FINANCIAL TECHNOLOGY GROWTH IN ISLAMIC BANKS AS AN EXISTENCE EFFORT TO FACE THE PANDEMIC OF COVID-19. Al-Masraf: Jurnal Lembaga Keuangan Dan Perbankan. https://api.semanticscholar.org/CorpusID:258857467
Jan, A., & Marimuthu, M. (2019). The nexus of sustainability practices and financial performance: From the perspective of Islamic banking. Journal of Cleaner Production. https://api.semanticscholar.org/CorpusID:159208632
Kamaruddin, M. I. H., Muhamed, N. A., Radzi, R. M., Nazarie, W. N. F. W. M., & Kamarubahrin, A. F. (2023). Financial management practices in Islamic donation-based crowdfunding (DCF) platforms in Malaysia. Future Business Journal, 9(1), 32. https://doi.org/10.1186/s43093-023-00210-7
Li, S.-C., Chen, Y.-W., & Huang, Y. (2021). Examining Compliance with Personal Data Protection Regulations in Interorganizational Data Analysis. Sustainability. https://api.semanticscholar.org/CorpusID:239300561
Majid, R., & Mawaddah, H. (2022). FinTech and MSMEs: The role of product knowledge. Asian Journal of Islamic Management (AJIM), 4(1), 15–24. https://doi.org/10.20885/AJIM.vol4.iss1.art2
Masterplan Ekonomi Syariah Indonesia 2019-2024. (2018). Masterplan Ekonomi Syariah Indonesia 2019-2024. Kementerian Perencanaan Pembangunan Nasional/ Badan Perencanaan Pembangunan Nasional, 1–443. https://knks.go.id/storage/upload/1573459280-Masterplan Eksyar_Preview.pdf
Melda Maesarach, R. (2023). Sharia Fintech Prospects (P2p Lending) on MSME Financing In Indonesia. Jurnal Ilmiah Ekonomi Islam, 9(01), 1044–1050. http://dx.doi.org/10.29040/jiei.v9i1.6912
Mohd Haridan, N., Sheikh Hassan, A. F., Mohammed Shah, S., & Mustafa, H. (2023). Financial innovation in Islamic banks: evidence on the interaction between Shariah board and FinTech. Journal of Islamic Accounting and Business Research, 14(6), 911–930. https://doi.org/10.1108/JIABR-11-2022-0305
Muneeza, A., & Mustapha, Z. (2019). Blockchain and Its Shariah Compliant Structure. Halal Cryptocurrency Management. https://api.semanticscholar.org/CorpusID:197887708
Muryanto, Y. T. (2022). The urgency of sharia compliance regulations for Islamic Fintechs: a comparative study of Indonesia, Malaysia and the United Kingdom. Journal of Financial Crime. https://api.semanticscholar.org/CorpusID:249358095
Muryanto, Y. T., Kharisma, D. B., & Nugraheni, A. S. C. (2021). Prospects and challenges of Islamic fintech in Indonesia: a legal viewpoint. International Journal of Law and Management. https://api.semanticscholar.org/CorpusID:244614559
Nastiti, N. D., & Kasri, R. A. (2019). The role of banking regulation in the development of Islamic banking financing in Indonesia. International Journal of Islamic and Middle Eastern Finance and Management. https://api.semanticscholar.org/CorpusID:211331670
Pişkin, M., & Kuş, M. C. (2019). Islamic Online P2P Lending Platform. Procedia Computer Science, 158, 415–419. https://doi.org/10.1016/j.procs.2019.09.070
Qudah, H., Malahim, S., Airout, R., Alomari, M., & Hamour, A. A. (2023). Islamic Finance in the Era of Financial Technology : A Bibliometric Review of Future Trends.
Rabbani, M. R., Bashar, A., Nawaz, N., Karim, S., Ali, M. A. M., Rahiman, H. U., & Alam, M. S. (2021). Exploring the role of islamic fintech in combating the aftershocks of covid-19: The open social innovation of the islamic financial system. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 136. https://doi.org/10.3390/joitmc7020136
Rabbani, M. R., Hassan, M. K., & Rashid, M. (2022). Introduction to Islamic Fintech: A Challenge or an Opportunity? BT - FinTech in Islamic Financial Institutions: Scope, Challenges, and Implications in Islamic Finance (M. K. Hassan, M. R. Rabbani, & M. Rashid (eds.); pp. 1–27). Springer International Publishing. https://doi.org/10.1007/978-3-031-14941-2_1
Senyo, P. K., & Osabutey, E. L. C. (2020). Unearthing antecedents to financial inclusion through FinTech innovations. Technovation, 98, 102155. https://api.semanticscholar.org/CorpusID:225743702
Shinkafi, A. A., Yahaya, S., & Sani, T. A. (2019). Realising financial inclusion in Islamic finance. Journal of Islamic Marketing. https://api.semanticscholar.org/CorpusID:195527738
Syarifuddin, S., Muin, R., & Akramunnas, A. (2021). The Potential of Sharia Fintech in Increasing Micro Small and Medium Enterprises (MSMEs) in The Digital Era in Indonesia. JURNAL HUKUM EKONOMI SYARIAH. https://api.semanticscholar.org/CorpusID:235556756
Wang, Y., Sui, X., & Zhang, Q. (2021). Can fintech improve the efficiency of commercial banks? —An analysis based on big data. Research in International Business and Finance, 55, 101338. https://api.semanticscholar.org/CorpusID:224937548
Akbar, M., Akbar, A., Yaqoob, H. S., Hussain, A., Svobodová, L., & Yasmin, F. (2023). Islamic finance education: Current state and challenges for Pakistan. Cogent Economics \& Finance, 11(1), 2164665. https://doi.org/10.1080/23322039.2022.2164665
Alaassar, A., Mention, A., & Aas, T. H. (2020). Exploring how social interactions influence regulators and innovators: The case of regulatory sandboxes. Technological Forecasting and Social Change, 160, 120257. https://api.semanticscholar.org/CorpusID:221760248
Alam, A., Hendratmi, A., Wati, M. S., & Hakim, L. (2022). The impact of mobile banking use on the Islamic financial institutional interest: A study in Indonesia. Banks and Bank Systems. https://api.semanticscholar.org/CorpusID:250715603
Ali, H., Mohamed, H., Hashmi, H. S., & Hassan, M. T. (2019). Global Landscape of the Islamic Fintech: Opportunities, Challenges and Future Ahead. https://api.semanticscholar.org/CorpusID:213574274
Ali, M. A., Nazim, D., Hussain, S., Rehman, J., & Rehman, S. U. (2021). Impact of Islamic Financial Literacy, Subjective Norms, Risk Perception and Perceived Behavioral Control on Adoption of Islamic Banking in Pakistan. Revista Gestão Inovação e Tecnologias, 11, 220–233. https://doi.org/10.47059/revistageintec.v11i3.1929
Alshater, M. M., Saba, I., Supriani, I., & Rabbani, M. R. (2022). Fintech in islamic finance literature: A review. Heliyon, 8(9), e10385. https://doi.org/10.1016/j.heliyon.2022.e10385
Arner, D. W., Buckley, R. P., Zetzsche, D. A., & Veidt, R. (2019). Sustainability, FinTech and Financial Inclusion. European Business Organization Law Review, 21, 7–35. https://api.semanticscholar.org/CorpusID:204497843
Ascarya, A. (2021). The role of Islamic social finance during Covid-19 pandemic in Indonesia’s economic recovery. International Journal of Islamic and Middle Eastern Finance and Management. https://api.semanticscholar.org/CorpusID:239263966
Aysan, A. F., & Unal, I. M. (2023). Challenges in Islamic Fintech and Digitalization: An Extensive Literature Review. World Scientific Annual Review of Islamic Finance. https://api.semanticscholar.org/CorpusID:257611870
Azman, S. M. M. S., & Ali, E. I. E. (2019). Islamic social finance and the imperative for social impact measurement. Journal of the International Institute of Islamic Thought and Civilization. https://api.semanticscholar.org/CorpusID:211782079
Bank, I. D. (2023). Innovations in Islamic Finance, Wright, C.
Barus, E. E. (2021). Collaboration In Developing Islamic Micro Finance Institutions (IMFs) Based On Financial Technology. At-Tijaroh: Jurnal Ilmu Manajemen Dan Bisnis Islam. https://api.semanticscholar.org/CorpusID:246762313
Butary, B. Al, Soemitra, A., & Amelia, A. (2022). Analysis of the Presence of the First Islamic Financial Institution and the Contribution of Muslim Scholars in Indonesia. Proceeding of International Conference on Science and Technology. https://api.semanticscholar.org/CorpusID:257421884
Das, S. R. (2019). The future of fintech. Financial Management. https://api.semanticscholar.org/CorpusID:199555122
Dawood, H. M., Zadjali, D. F. Al, Rawahi, M. Al, Karim, D. S., & Hazik, D. M. (2022). Business trends \& challenges in Islamic FinTech: A systematic literature review. F1000Research, 11. https://api.semanticscholar.org/CorpusID:247557333
Dinc, Y., Çetin, M., & Jahangir, R. (2023). Revisiting the concept of Islamic financial literacy in a boundaryless context: cross-country comparison of Islamic financial literacy. Journal of Islamic Accounting and Business Research. https://api.semanticscholar.org/CorpusID:256804677
Fianto, B. A., Gan, C., & Hu, B. (2019). Financing from Islamic microfinance institutions: evidence from Indonesia. Agricultural Finance Review. https://api.semanticscholar.org/CorpusID:204439527
Firmansyah, E. A., & Anwar, M. (2019). ISLAMIC FINANCIAL TECHNOLOGY (FINTECH): ITS CHALLENGES AND PROSPECT. Proceedings of the Achieving and Sustaining SDGs 2018 Conference: Harnessing the Power of Frontier Technology to Achieve the Sustainable Development Goals (ASSDG 2018). https://api.semanticscholar.org/CorpusID:169863009
Furqani, H. (2019). Fintech and Islamic finance. Fintech In Islamic Finance. https://api.semanticscholar.org/CorpusID:197878470
Hakeem, M. M. (2019). Innovative solutions to tap “Micro, Small and Medium Enterprises” (MSME) market. Islamic Economic Studies, 27(1), 38–52. https://doi.org/10.1108/IES-05-2019-0002
Hasan, R., Hassan, M. K., & Aliyu, S. (2020). Fintech and Islamic Finance: Literature Review and Research Agenda. https://api.semanticscholar.org/CorpusID:212711580
Hassan, M. K., Khan, A., & Paltrinieri, A. (2021). Islamic Finance: A Literature Review. Research Papers in Economics, 77–106. https://api.semanticscholar.org/CorpusID:239742897
Iqbal, M., Sumantri, R., & Khoirunnisa, R. (2022). ACCELERATION OF FINANCIAL TECHNOLOGY GROWTH IN ISLAMIC BANKS AS AN EXISTENCE EFFORT TO FACE THE PANDEMIC OF COVID-19. Al-Masraf: Jurnal Lembaga Keuangan Dan Perbankan. https://api.semanticscholar.org/CorpusID:258857467
Jan, A., & Marimuthu, M. (2019). The nexus of sustainability practices and financial performance: From the perspective of Islamic banking. Journal of Cleaner Production. https://api.semanticscholar.org/CorpusID:159208632
Kamaruddin, M. I. H., Muhamed, N. A., Radzi, R. M., Nazarie, W. N. F. W. M., & Kamarubahrin, A. F. (2023). Financial management practices in Islamic donation-based crowdfunding (DCF) platforms in Malaysia. Future Business Journal, 9(1), 32. https://doi.org/10.1186/s43093-023-00210-7
Li, S.-C., Chen, Y.-W., & Huang, Y. (2021). Examining Compliance with Personal Data Protection Regulations in Interorganizational Data Analysis. Sustainability. https://api.semanticscholar.org/CorpusID:239300561
Majid, R., & Mawaddah, H. (2022). FinTech and MSMEs: The role of product knowledge. Asian Journal of Islamic Management (AJIM), 4(1), 15–24. https://doi.org/10.20885/AJIM.vol4.iss1.art2
Masterplan Ekonomi Syariah Indonesia 2019-2024. (2018). Masterplan Ekonomi Syariah Indonesia 2019-2024. Kementerian Perencanaan Pembangunan Nasional/ Badan Perencanaan Pembangunan Nasional, 1–443. https://knks.go.id/storage/upload/1573459280-Masterplan Eksyar_Preview.pdf
Melda Maesarach, R. (2023). Sharia Fintech Prospects (P2p Lending) on MSME Financing In Indonesia. Jurnal Ilmiah Ekonomi Islam, 9(01), 1044–1050. http://dx.doi.org/10.29040/jiei.v9i1.6912
Mohd Haridan, N., Sheikh Hassan, A. F., Mohammed Shah, S., & Mustafa, H. (2023). Financial innovation in Islamic banks: evidence on the interaction between Shariah board and FinTech. Journal of Islamic Accounting and Business Research, 14(6), 911–930. https://doi.org/10.1108/JIABR-11-2022-0305
Muneeza, A., & Mustapha, Z. (2019). Blockchain and Its Shariah Compliant Structure. Halal Cryptocurrency Management. https://api.semanticscholar.org/CorpusID:197887708
Muryanto, Y. T. (2022). The urgency of sharia compliance regulations for Islamic Fintechs: a comparative study of Indonesia, Malaysia and the United Kingdom. Journal of Financial Crime. https://api.semanticscholar.org/CorpusID:249358095
Muryanto, Y. T., Kharisma, D. B., & Nugraheni, A. S. C. (2021). Prospects and challenges of Islamic fintech in Indonesia: a legal viewpoint. International Journal of Law and Management. https://api.semanticscholar.org/CorpusID:244614559
Nastiti, N. D., & Kasri, R. A. (2019). The role of banking regulation in the development of Islamic banking financing in Indonesia. International Journal of Islamic and Middle Eastern Finance and Management. https://api.semanticscholar.org/CorpusID:211331670
Pişkin, M., & Kuş, M. C. (2019). Islamic Online P2P Lending Platform. Procedia Computer Science, 158, 415–419. https://doi.org/10.1016/j.procs.2019.09.070
Qudah, H., Malahim, S., Airout, R., Alomari, M., & Hamour, A. A. (2023). Islamic Finance in the Era of Financial Technology : A Bibliometric Review of Future Trends.
Rabbani, M. R., Bashar, A., Nawaz, N., Karim, S., Ali, M. A. M., Rahiman, H. U., & Alam, M. S. (2021). Exploring the role of islamic fintech in combating the aftershocks of covid-19: The open social innovation of the islamic financial system. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 136. https://doi.org/10.3390/joitmc7020136
Rabbani, M. R., Hassan, M. K., & Rashid, M. (2022). Introduction to Islamic Fintech: A Challenge or an Opportunity? BT - FinTech in Islamic Financial Institutions: Scope, Challenges, and Implications in Islamic Finance (M. K. Hassan, M. R. Rabbani, & M. Rashid (eds.); pp. 1–27). Springer International Publishing. https://doi.org/10.1007/978-3-031-14941-2_1
Senyo, P. K., & Osabutey, E. L. C. (2020). Unearthing antecedents to financial inclusion through FinTech innovations. Technovation, 98, 102155. https://api.semanticscholar.org/CorpusID:225743702
Shinkafi, A. A., Yahaya, S., & Sani, T. A. (2019). Realising financial inclusion in Islamic finance. Journal of Islamic Marketing. https://api.semanticscholar.org/CorpusID:195527738
Syarifuddin, S., Muin, R., & Akramunnas, A. (2021). The Potential of Sharia Fintech in Increasing Micro Small and Medium Enterprises (MSMEs) in The Digital Era in Indonesia. JURNAL HUKUM EKONOMI SYARIAH. https://api.semanticscholar.org/CorpusID:235556756
Wang, Y., Sui, X., & Zhang, Q. (2021). Can fintech improve the efficiency of commercial banks? —An analysis based on big data. Research in International Business and Finance, 55, 101338. https://api.semanticscholar.org/CorpusID:224937548
Published
2023-12-31
How to Cite
SUPRIADI, Iman; MAGHFIROH, Rahma Ulva; ABADI, Rukhul.
Accelerating Islamic Economy and Finance through Financial Technology: Challenges and Potential in the Digital Age.
International Journal of Islamic Economics, [S.l.], v. 5, n. 02, p. 153-168, dec. 2023.
ISSN 2686-2166.
Available at: <https://e-journal.ejournal.metrouniv.ac.id/IJIE/article/view/7740>. Date accessed: 27 june 2024.
doi: https://doi.org/10.32332/ijie.v5i02.7740.
Section
Articles
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
