Asian Economic and Financial Review

Evaluating the effectiveness of shariah risk management in Malaysian Islamic financial institutions

Nur Laili Ab Ghani, Noraini Mohd Ariffin, Abdul Rahim Abdul Rahman — Thu, 10 Jul 2025 00:00:00 -0500

Effective Shariah risk management is crucial for Islamic Financial Institutions (IFIs) in ensuring robust identification and mitigation of risks associated with Shariah non-compliance. Incidents related to Shariah non-compliance in Islamic financial activities can lead to a loss of trust and credibility among stakeholders. Although IFIs have implemented Shariah risk management functions to address these risks, their effectiveness remains largely unassessed. This research explores the effectiveness of Shariah risk management in IFIs in Malaysia. A quantitative research methodology was adopted, utilizing a survey questionnaire to collect data from a representative sample of all 47 IFIs in the country. The measurement was based on the Shariah Governance Policy Document (SGPD) issued by Bank Negara Malaysia (BNM), which all IFIs in Malaysia are required to implement. The study found that most IFIs have implemented a moderately effective level of Shariah risk management functions and processes. This research provides valuable insights into the effectiveness of Shariah risk management in IFIs and emphasizes the importance of establishing robust control functions and fostering a culture of Shariah compliance to improve the management of Shariah non-compliance risks.

Debunking the trends and implications of non-bank financial institutions in Bangladesh financial sector

Tanbir Ahmed Chowdhury, Nishat Tamanna Snigdha, Tahiya Ahmed Chowdhury — Thu, 10 Jul 2025 00:00:00 -0500

The purpose of this study is to analyze the trends and implications of selected NBIFs in Bangladesh's financial sector. Several variables were employed to examine the performance of the selected NBFIs, such as total capital, debt to total capital, debt to equity, capital adequacy ratio, total deposits, total loans, loan/deposit ratio, return on deposits, net interest margin, bad debts, ROI, ROA, ROC, net income, etc. Statistical measures like trend equations, R-squared, and correlation matrices were used to analyze the data. To estimate the implications of NBFIs in Bangladesh's financial sector, nine hypotheses were also tested. Seventeen different significant NBIF variables were tested using 85 trend equations and R-squared values. Their steadily rising net income, ROE, and ROA over time indicate their financial stability. NBFIs face difficulties due to restricted regulation, inefficient credit, and a lack of digital transformation. It is anticipated that the study's correlation matrix and trend analysis results will guide the selected NBFIs in Bangladesh to improve their performance. The employed methods should focus on good governance, innovation, and technology integration. This approach will not only strengthen NBFI growth but also contribute to the overall economic landscape of Bangladesh.

How does the audit committee affect ESG performance? A case of China

Thu, 10 Jul 2025 00:00:00 -0500

This study aims to investigate the impact of Audit Committee (AC) characteristics on Environment, Social, and Governance (ESG) performance in China. The research employed foundational theories such as agency theory, legitimacy theory, stewardship theory, and stakeholder theory. A quantitative approach was adopted, encompassing descriptive statistics and Ordinary Least Squares (OLS) regression. The data was collected from a sample of 100 companies listed on the Shenzhen and Shanghai stock exchanges in China from 2020 to 2023. Secondary data was obtained from the Wind database and the annual reports of the sampled companies. The research findings indicate that AC independence has a positive impact on ESG performance, while AC gender diversity exhibits a negative impact. However, AC meeting frequency and size did not reveal significant effects. This study contributes to enriching the theoretical framework concerning the relationship between ACs and ESG performance, while also addressing existing research gaps. Furthermore, the study provides recommendations for the amendment of China's Company Law.

Credit market performance and economic security nexus in the UAE: Evidence from various estimation techniques

Thu, 10 Jul 2025 00:00:00 -0500

This study aims to investigate the association between credit market performance and economic security in the United Arab Emirates (UAE) from 1990 to 2023 using various estimation techniques. The Gregory-Hansen cointegration test, ARDL bounds-testing approach, and DOLS, CCR, and FMOLS estimators were employed. Results from the cointegration tests show a long-term relationship between economic security and credit market performance, even with structural breaks. ARDL estimation indicates that domestic credit supply, nonperforming loans, lending interest rates, and institutional quality negatively affect both short-term and long-term economic security. These findings demonstrate that inefficiencies in the credit market, characterized by a rapid increase in credit supply and nonperforming loans, weak institutions, and a high cost of borrowing, pose a substantial challenge to the UAE's economic security and stability. Moreover, the ARDL findings suggest that oil price increases, public expenditure, foreign capital inflows, and real GDP contribute positively to economic security. These findings are confirmed by the robustness of FMOLS, CCR, and DOLS estimations. Based on these findings, policies, measures, and strategies to strengthen credit risk management in the financial sector, control unchecked credit growth, enhance the quality of economic institutions, and sustain the diversification of the economy away from oil and credit risks are recommended.