Chapter in Book

The growth of Islamic finance in Commonwealth of Independent States (CIS) countries generally is slower in the Central Asia region compared to other regions in the world. With its population of more than 34 million, Uzbekistan is probably one of the most promising markets for Islamic finance in Central Asia. Therefore, the emergence of intensive public debates around this matter and officially announced plans of the government to create an infrastructure for Islamic finance prompt that the relevant authorities are taking a drastic U turn regarding the sector because the country has not clasped the potential of Islamic finance. This research aims to examine the challenges facing pioneering Islamic finance in Uzbekistan. Specifically, it attempts to explore the current state of Islamic finance within the country, identify the current obstacles it faces and recommend practical ways to resolve the obstacles identified. Apart from that, the research investigates the Islamic financial products and services suitable in Uzbekistan. The findings of this research suggest some specific challenges facing the country in this regard. Inexistence of robust legislation and transparent regulatory framework coupled with lack of talents and those who are ready to contribute to the development of the new financial system in Uzbekistan are the major challenges, followed by public awareness and fully understanding the new financial system, that the country is facing. Introduction of the Banking Act that will suit the implementation of the Islamic finance for all three segments and talent acquisition with necessary skills and knowledge are practical recommendations to solve the challenges. This will in turn provide better promotion of the new system, increase demand from the population and diversify the range of products offered. It is therefore anticipated that the outcome of this research would assist government officials, policymakers, all other stakeholders as well business leaders to deeply understand and review the results and findings.

Indonesia's micro, small and medium enterprises (MSMEs) sector, with over 65 million businesses, is globally the largest. The sector accounts for more than 60 per cent of the country's GDP and employs over 97 per cent of its workforce. Yet, lack of access to finance due to the nature of the business, has constrained development of the sector. This study aims to examine usage of blockchain to aid microfinance and expedite MSMEs' access to finance in Indonesia. Employing qualitative research techniques, the study focuses on Baitul Maal Wa Tamwil's use of blockchain in providing micro sukuk for financing MSMEs. The study finds that using blockchain to offer microfinance services facilitates greater transparency about MSMEs, enables efficiency and accountability in their access to finance. It bridges the gap to MSMEs' access to finance, reduces cost of transactions and mitigates setbacks related to them. As blockchain drives the evolution of enterprises and microfinance institutions in Indonesia, regulatory bodies must stay abreast of these advancements to ensure that innovation progresses in tandem with appropriate regulations. As a learning experience, appropriate governance and legal framework needs to be phased in to accommodate blockchain, its peculiarities, and for it to foster financial access and deepen inclusion.

Islamic digital banks are the forefront of financial technology which means they can offer innovative products and services in line with Shariah. However, having only recently set foot in Malaysia has its own set of challenges. In countries where technology advances, coupled with significant Muslim audiences, such as Dubai and Kuwait, prominent Islamic digital banks paved their way. In 2022, the Central Bank of Malaysia (BNM) announced five successful digital banking licence applicants. In the spirit of financial inclusion and regulatory support, two of the applicants are establishing Islamic digital banks. The purpose of this study is to examine the Islamic digital framework in Malaysia and identify the obstacles associated with it. Qualitative case study research has been optimized by collecting data from professional experts in the Islamic finance industry from four different countries through semi-structured interviews. This chapter then finds six main challenges, namely operational risks, lack of compliance and Shariah adherence, profitability, scarcity of Islamic finance experts, technology adoption and lack of trust and regulatory compliance. This study is amongst the pioneers in Malaysia that explores the challenges in establishing Islamic digital banks. The outcomes of the study are relevant to governments, regulators, institutions, and central banks to structure the right interventions to counter the hurdles. Future regulatory enhancements are required to spearhead the development of Islamic digital banks in Malaysia.

Islamic economics is ethical as its principles are derived from the religion Islam that gives paramount consideration to application of moral principles in all aspects of human lives. As such, there is no need to mention the word ethics with Islamic economics to describe its moral dimension since ethical values are inherently included in Islamic economics. This chapter provides a basic overview of the lex loci applicable to Islamic economics, which is Shariah, in order to understand the Islamic world view surrounding the subject and its economic teachings derived from tawheed. Furthermore, the differences between an Islamic economic system, on the one hand, and socialism and capitalism, on the other hand, are also provided, followed by a discussion of Islamic economic governance via the institution of hisbab and the practice of Islamic economics in classical and contemporary times. This chapter aims to provide readers with an understanding of Islamic economics by presenting the theoretical foundations undergirding it contemporaneous practical application.

This chapter aims to evaluate the Hajj financial management system by Hajj Financial Management Agency (BPKH) with challenges that have the potential to impact the financial sustainability of hajj funds; assesses the effectiveness of the implementation of the hajj fund subsidy system associated with the financial sustainability of the hajj fund; and proposes solutions to overcome the hajj financial management system and hajj fund subsidy system. A qualitative research approach through interviews along with a documents review was used to collect data and achieve the research objectives. The results of the analysis show that there are challenges in the hajj fund management system in terms of regulation, which are the issuance of Law Number 8 of 2019, about the Management of Hajj and Umrah that regulates different things for the same substance in Law Number 34 of 2014 about Hajj Financial Management. This resulted in the unclear relationship and flow of hajj financial management related to the implementation of the hajj pilgrimage between two related institutions, which are the Ministry of Religion and the BPKH. In addition, regarding the financial sustainability of the hajj in the practice of providing subsidies for the implementation of the hajj, it can be stopped gradually. If the subsidy system is to be continued, it will make hajj finances unsustainable and not in accordance with Sharia principles and justice. This study is the first of its kind to examine the financial sustainability of the Hajj Financial Management Agency (BPKH) in Indonesia. In addition to being a reference for future researchers, this study could also serve as an impetus for policymakers to design strategies that overcome the weaknesses of the hajj financial management system and the hajj fund subsidy system.

Sukuk is an innovative Islamic finance product used in the capital markets which is often described as the financial product which is equivalent to a conventional bond. However, sukuk is a much more complex product than a conventional bond from the perspective of structuring it for all types of projects, irrespective of the modus operandi of the project, in structuring conventional bonds, the structure used will be uniform whereas for sukuk it is not. The objective of this paper is to explore the role of sukuk in developing real estate projects by presenting some case studies. The paper uses a qualitative research approach where the case studies originate from the public domain to show the role of sukuk in developing real estate projects. The findings of this research suggest that sukuk is an instrument which has been successfully used in various parts of the world in financing real estate projects and there are various Shariah compliant contracts used in these projects showing that even in the future, the same contracts can be utilized for the same purpose. It is also found that there is scope to utilize technology in these sukuk structures in the future to enhance them and the digitalization of sukuk will further enhance its role in financing real estate projects. It is anticipated that the findings of this research will assist stakeholders to comprehend the existing role of sukuk and its potential in the future in financing real estate projects.