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Advances in Social Sciences Research Journal – Vol. 11, No. 2.2
Publication Date: February 25, 2024
DOI:10.14738/assrj.112.2.16418.
Osman, A. A., Abdullah, A., Ab Rahman, S. M., Safian, S. S. S., Ibrahim, N. Z. M., Masdek, N. R. N., & Shaharuddin, N. (2024). The
Role of Justice in Fin-Tech Performance: The analysis of Maqasid al-Syariah Index. Advances in Social Sciences Research Journal,
11(2.2). 413-421.
Services for Science and Education – United Kingdom
The Role of Justice in Fin-Tech Performance: The analysis of
Maqasid al-Syariah Index
Adibah Alawiah Osman
*Corresponding Author: adibahalawiah@uitm.edu.my
Faculty of Business and Management,
Universiti Teknologi MARA Puncak Alam, Selangor
Azwan Abdullah
azwan.a@umk.edu.my
Faculty of Entrepreneurship and Business,
Universiti Malaysia Kelantan
Siti Maziah Ab Rahman
maziah650@uitm.edu.my
Faculty of Faculty of Business and Management,
Universiti Teknologi MARA Machang Kelantan
Sharul Shahida Shakrein Safian
sharulshahida@uitm.edu.my
Faculty of Business and Management,
Universiti Teknologi MARA Puncak Alam, Selangor
Nor Zawani Mamat Ibrahim
nzawani@uitm.edu.my
Faculty of Business and Management,
Universiti Teknologi MARA Puncak Alam, Selangor
Nik Rozila Nik Mohd Masdek
nik_rozila@uitm.edu.my
Faculty of Business and Management,
Universiti Teknologi MARA Puncak Alam, Selangor
Norhasimah Shaharuddin
shimasaha@uitm.edu.my
Faculty of Business and Management,
Universiti Teknologi MARA Puncak Alam, Selangor
ABSTRACT
The essence of justice is how well a person harmonizes with what is right. It is clear
that justice is one of the principles of exalted ethics, especially in terms of Shariah
compliance, since the Quran and Sunnah provide a solid basis for justice.
Integrating Islamic Finance knowledge with Islamic Ethics is crucial for holistically
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assessing Shariah compliance in the world of Finance Technology (FIN-TECH). In
terms of justice, numerous prior researchers have done most of the work. In this
study, secondary data was gathered from Islamic financial institutions of specified
sectors regarding the Maqasid al-Syariah Index on justice. The partial least squares
structural equation modeling (PLS-SEM) method was the main statistical technique
employed in this study. This study aimed to offer a precise mode in which justice
may influence the performance Fin-Tech in Islamic Finance's success. The study of
justice plays a significant role in guiding the direction of Fin-Tech in Islamic Finance
applications.
Keywords: Fin-Tech in Islamic Finance, Justice; Islamic Finance, Maqasid al-Syariah
Index.
INTRODUCTION
The initial stage holds great significance in Fin-Tech in Islamic Finance's evolution. Being in the
right environment can really make a big difference. Financial technology has not been
implemented efficiently in its development as according to justice [1]. In addition, an agreement
must adhere to good ethical principles so that an agreement must have a lawful purpose or, in
other words, it must be clear and cannot conflict with the Islamic law. Fin-Tech in Islamic
Finance faces a major challenge due to the lack of supportive rules and regulations, as well as a
lack of understanding about Islamic finance among consumers and policymakers [2]. Fin-Tech
is revolutionizing the way banks, including Islamic banks, operate. Islamic financial institutions
are encountering increased competition from a growing number of Fin-Tech firms, including
non-Islamic ones. Islamic banks are being challenged by a rising number of Fin-Tech
companies, both within the Islamic finance sector and outside of it. Many new Fin-Tech
companies, whether Islamic or non-Islamic, are posing a greater threat to the traditional
dominance of Islamic banks. In conclusion, they could be used as either options or things that
go well together [3]. It is possible to adapt Fin-Tech tools for the Shariah market, but it is crucial
to recognize the differences between ethical banking based on Syariah law and traditional
banking in the areas of banking and money lending [4]. Utilizing rephrasing technology in
Islamic finance offers a distinctive chance to enhance Islamic finance and finance by assisting
employees in discovering improved solutions for their difficulties [5]. The principles are firmly
established and offer a clear structure for the operation of our Fin-Tech products. Examining
Islamic ethics through Maqasid al-Syariah can provide insights on how Fin-Tech in Islamic
Finance can achieve success and address challenges in implementing the standard. This study
finds the Maqasid al-Syariah variables essential as they integrate ethical, social, and Fin-Tech
elements in evaluating financial report performance. Most Islamic financial studies don't
consider the goals of Sharia law. They just measure financial performance in the same way as
traditional finance. Also, the conventional criteria are insufficient for accurately assessing
Islamic financial institutions. In order to achieve our goal, we must utilize performance based
on the Maqasid al-Syariah [6]. The Maqasid al-Syariah Index (MSI) was created in 2008 [6] to
evaluate the adherence of Islamic Banks to the Maqasid al-Syariah principles.
Research Questions
• How does the Justice as key factor of Islamic ethics affect the Fin-Tech performance?
Objectives of Research
• To examine the Justice as key factor of Islamic ethics affect the Fin-Tech performance.
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Osman, A. A., Abdullah, A., Ab Rahman, S. M., Safian, S. S. S., Ibrahim, N. Z. M., Masdek, N. R. N., & Shaharuddin, N. (2024). The Role of Justice in
Fin-Tech Performance: The analysis of Maqasid al-Syariah Index. Advances in Social Sciences Research Journal, 11(2.2). 413-421.
URL: http://dx.doi.org/10.14738/assrj.112.2.16418
THE LITERATURE REVIEW
The Performance of Fin-Tech in Islamic Finance
The focus of this study was to analyze how technology in Islamic finance adheres to ethical
guidelines and delivers added value. The use of technology in Islamic finance involves
procedures, information, and experience. In Islamic Finance, the rules of Shariah for Fin-Tech
prioritize the community's interests over individual interests, prioritize helping people in
difficult circumstances over making a profit, and prioritize following Islamic ethics when
dealing with losses and harm [4]. Islamic finance has the chance to enhance its finance with the
rise of financial technology and the growing adoption of related solutions. The increasing use
of financial technology in Islamic finance provides a distinctive opportunity for advancing
socially responsible finance within the Islamic finance sector. The integration of financial
technology in Islamic finance presents a unique chance to improve Islamic finance and
prioritize socially responsible finance [7]. The researchers also noted that Shariah principles
will continue to play a significant role in guiding Fin-Tech in Islamic Finance, by Islamic law.
The advantages offered by modern technologies outweigh the reasons for sticking with
traditional funding approaches.
The Roles of Justice
The Islamic financial system involves managing finances in accordance with Islamic principles.
It is important for Islamic banks to verify their adherence to Islamic regulations [8]. Fin-Tech
in Islamic Finance can be utilized by incorporating Shariah principles into it. The guidance of
Islamic jurisprudence is essential in the performance of financial technology, as it ensures that
all transactions are conducted in justice and in line with Islamic ethical guidelines [9]. Islamic
finance requires stakeholders to adhere to four criteria to prevent ethical issues [10]: (a) abide
by the organization's rules and morals, (b) remain transparent and accountable to the
community, (c) support both the community and the institution, and (d) offer financial services
to all. One important rule of doing business is being justice and not cheating others as stated in
chapter 83 (Surah Al-Mutaffifin) of the Quran, verse 1-3:
“1. Woe to those that deal in fraud. 2.Those who when they have to receive by
measure from men exact full measure. 3. But when they have to give by measure or
weight to men give less than due.” (Translation by Yusuf Ali)
Tafseer by Ibn Kathir: “The meaning of the word Tatfif here is to be stingy with measurement
and weight, either by increasing it if it is due from the others or decreasing it if it is a debt. Thus,
Allah explains that the Mutaffifin those whom He has promised loss and destruction, whom are
meant by "Woe'' are (Those who, when they have to receive by measure from men,) meaning,
from among the people demand full measure, they take their right by demanding full measure
and extra as well. (And when they have to give by measure or weight to (other) men, give less
than due.) meaning, they decrease. Verily, Allah commanded that the measure and weight
should be given in full.”
Financial technology has not been implemented efficiently in its development as according to
justice [1]. In addition, an agreement must adhere to good ethical principles so that an
agreement must have a lawful purpose or, in other words, it must be clear and cannot conflict
with the Islamic law. A major obstacle when exploring Fin-Tech in Islamic finance is
ascertaining whether those in positions of authority are prioritizing their customers’ best
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interests [12]. The researcher is interested in utilizing blockchain technology to ensure that the
Islamic bank is accountable and transparent. In numerous nations that utilize Islamic finance,
smart contracts have not been embraced by the legal system or overseen by the government.
Islamic finance has the potential to increase its competitiveness and accessibility by expanding
its range of products and services, reducing costs, and facilitating greater access to credit in
Islamic nations [3]. Shariah played a role in stimulating the growth of the Muslim economy by
promoting innovation, while the Islamic finance system contributed value and emphasized
ethical principles [13]. Equitable treatment can contribute to attaining positive values essential
for tackling emerging world challenges.
Examining Islamic ethics through Maqasid al-Syariah Index can provide insights on how Fin- Tech in Islamic Finance can achieve success and address challenges in implementing the
standard. This study finds the Maqasid al-Syariah variables essential as they integrate ethical,
social, and Fin-Tech elements in evaluating financial report performance. Hence, the research
framework as presented below.
Figure 1: Research Framework
The indication of MSI adopted from Mohammed, Razak, and Taib (2008) and the indication of Fintech
Performance has been adopted from Yudaruddin (2023).
Theories Underpinning the Conceptual Framework
Numerous significant theories are founded on the principles of Al-Quran and Sunnah, as well
as other associated sources. In Islam, the Quran emphasizes the importance of displaying one's
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Osman, A. A., Abdullah, A., Ab Rahman, S. M., Safian, S. S. S., Ibrahim, N. Z. M., Masdek, N. R. N., & Shaharuddin, N. (2024). The Role of Justice in
Fin-Tech Performance: The analysis of Maqasid al-Syariah Index. Advances in Social Sciences Research Journal, 11(2.2). 413-421.
URL: http://dx.doi.org/10.14738/assrj.112.2.16418
faith through their actions and behaviors towards others. The theoretical framework of Islamic
Ethics based on chapter 16 (Surah An-Nahl) of theQuran, verse 89:
“One day We shall raise from all Peoples a witness against them, from amongst
themselves: and We shall bringthee as a witness against these (thy people): and We
have sent down to thee the Book explaining all things, a Guide, a Mercy, and Glad
Tidings to Muslims)”. (Translation by Yusuf Ali)
Tafseer by Ibn Kathir: “(And We revealed the Book (the Qur'an) to you as an explanation of
everything,) Ibn Mas`ud said: "﴿Allah ﴾made it clear that in this Qur'an there is complete
knowledge and about everything.''
The Qur'an contains all kinds of beneficial knowledge, such as reports of what happened in the
past, information about what is yet to come, what is lawful and unlawful, and what people need
to know about their worldly affairs, their religion, their livelihood in this world, and their
destiny in the Hereafter”.
The Divine Command Theory
The divine command theory, first introduced [14] in 1973, argues that morality is influenced
by theology. The beliefs of the Jewish and Christian religions, which are considered to be divine,
are what the dependency is based on. According to this idea, both Jewish and Christian religions
believe that what is right and wrong is based on the moral duty as commanded by God. This
idea has caused big problems for both people who believe and those who don't believe. Atheists
don't believe in God, so they don't accept the theory. If there is no God, it doesn't make sense to
use God's rules for deciding what is right or wrong. However, some religious people do not
agree with this theory because they are concerned about its origins. Socrates pondered whether
goodness is defined by God's instructions, or if God's instructions are based on what is
inherently good. The theory is dismissed due to lack of understanding of the purpose of human
existence [15].
Islam stands out from other religions due to its explanation of the meaning of life. It is a
comprehensive faith that delves into every aspect of life with a profound understanding,
evidently as stated in chapter 18 (Surah Al-Kahf) of the Quran, verse 110:
“Say: "I am but a man like yourselves (but) the inspiration has come to me that your
Allah is one Allah: whoever expects to meet his Lord let him work righteousness and
in the worship of his Lord admit no one as partner.” (Translation by Yusuf Ali)
Tafseer by Ibn Kathir: This is what is meant by seeking the pleasure of Allah alone with no
associate or partner. These are the two basic features of acceptable deeds: their intent is for the
sake of Allah alone and are done in accordance with the way of the Messenger of Allah”.
Even in much earliest time, Al-Shafi’i (d.820) The Islamic scholar talks about how God's orders
influence ethical decisions in his book "Principles of jurisprudence". This includes all ethical
issues that concern people [16]. Hence, for Muslims, what is good and bad is clearly taught in
the word of Allah. (Al-Quran 16: 89) and the Sunnah of the Prophet Muhammad. These are two
important foundations that Muslims believe in: the fact that conduct is right if Allah s.w.t. or His
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Prophet Muhammad commanded it, and the belief that Allah knows what is right and wrong
and has dictated it for the Muslims to follow. (Al-Quran 58:7; [17].
The study looks at how Islamic Divine Command Theory can help make sure that Fin-Tech is
used in a way that benefits everyone in society and promotes social well-being.
RESEARCH METHODOLOGY
Sampling and Data Collection
Since the purpose of this research is to identify the performance of Fin-Tech in Islamic Finance
through MSI in Malaysia, hence the samples were selected based on the following criteria to
meet the objection of this study. Samples should be listed in main market of Bursa Malaysia and
syariah compliance. The selection was made mostly because of its credentials and properly
documented annual reports. A total of 7 companies were selected. The companies include:
1. Al-Salam Real Estate Investment Trust [S]
2. Ame Real Estate Investment Trust [S]
3. Axis Real Estate Investment Trust [S]
4. Bimb Holdings Berhad [S]
5. Bursa Malaysia Berhad [S]
6. Syarikat Takaful Malaysia Keluarga Berhad [S]
7. Rce Capital Berhad [S]
Data Analysis
Through the data that have been collected, the performance ratio will be conducted for the
purpose of the general analytical overview of Maqasid al-Syariah. While the reliability test will
be conducted to examine whether it is dependable and accurate among measurement, then
generate all results by using PLS SEM.
Quantitative Method
The quantitative method aims to quantify the ethical and social indicators and analyse Islamic
Financial Institutions performance in achieving Maqasid al-Syariah. Thus, after extracting
information related to the MSI from IF’s annual reports, the index is constructed based on
several indicators, dimensions, and elements illustrated in Table 1. Accordingly, the index was
conducted as measurement by using PLS SEM in order to see the correlation. The MSI is used
as a benchmark to identify Fin-Tech in Islamic Finance’s score of best practice in Islamic
financial market.
Table 1: Maqasid al-Syariah Index Variables
Variable Dimension Element Performance ratio
Justice D4. Fair Returns E5. Fair returns R5. Profit Equalisation Reserve
(PER)/Net or Investment Income
D5. Cheap product and services E6. Functional
Distribution
R6. Mudharabah and Musharakah
Modes/ Total Investment Modes
D6. Eliminations of negative
elements that breed injustice
E7. Interest-Free
Product
R7. Interest-free income/ Total
Income
Note: The table shows the MSI variables [6].
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Osman, A. A., Abdullah, A., Ab Rahman, S. M., Safian, S. S. S., Ibrahim, N. Z. M., Masdek, N. R. N., & Shaharuddin, N. (2024). The Role of Justice in
Fin-Tech Performance: The analysis of Maqasid al-Syariah Index. Advances in Social Sciences Research Journal, 11(2.2). 413-421.
URL: http://dx.doi.org/10.14738/assrj.112.2.16418
According to Table 1, The MSI is the sum of independent variables of the study. Each
performance ratio represents an element and dimension to determine Fin-Tech in Islamic
Finance.
The dimensions are translated into measurable behaviours or elements (E), as shown in Table
1.
According to the above MSI, there are 3 performance ratios; however, this study also includes
the Fin-Tech performance ratio [2] in order to clearly illustrate the relation of ethics and Fin- Tech. Consequently, the results were illustrated as in Table 2.
Table 2: Maqasid al-Syariah Index Variables for each company
Note: The table shows the Maqasid al-Syariah variables and Fin-Tech performance ratio. The MSI table [6] and
Fin-Tech Performance ratio [2].
RESULTS
Variance Inflation Factor (VIF)
A connected measure of collinearity is the Variance Inflation Factor (VIF) [18]. In the context of
PLS-SEM, a VIF value of 5 and higher indicates a potential collinearity problem [18].
Table 3: Result of collinearity (VIF)
Justice -> Fin-Tech in Islamic Finance 1.299
Based on the Table 3 above, this study accessed Education, Justice and Welfare as predictor for
Fin-Tech in Islamic Finance. As can be seen the VIF value is below the threshold of 5 means the
collinearity among the predictor construct is not the critical issue in the structural model.
Path Coefficient
The path coefficient test was performed to examine the significance of the path relationship in
the inner model.
Table 4: Path Coefficients
Path coefficients
Justice -> Fin-Tech in Islamic Finance 0.52
Path coefficient that close to +1 is represents strong positive relationship [19]. Based on the
Table 4 above, the driver for Fin-Tech in Islamic Finance for justice (0.52).
LIMITATION OF THE STUDY
Among the limitations for this study were the usage of limited data on a few companies selected
and needs to support with expert’s validation pertaining to the use of variables.
AL-SALAM AME AXIS BIMB BURSA TAKAFUL RCE
R5 Functional Distribution 0.00520 0.00520 0.56400 0.00820 0.76900 0.00910 0.24820
R6 Profit ratio 0.02570 0.08060 0.04470 0.02400 0.05330 0.27580 0.10990
R7 Personal Income 0.00260 0.00001 0.00001 0.00014 0.00180 0.00064 0.00163
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CONCLUSION
The latest study has expanded our understanding, but further research is needed to determine
its potential impact on businesses and society. By evaluating how justice correspond under
Maqasid al-Syariah Index, we can better understand the potential use of Fin-Tech in standard
Islamic finance.
DISCUSSION
It is essential for future investigations to consider the strong correlation between justice and
the functionality of Fin-Tech in Islamic finance. The findings indicate a correlation between
justice and the performance of Fin-Tech in Islamic Finance in Malaysia, aligning with prior
studies [11][12]. The study integrates Maqasid al-Syariah Index with Fin-Tech performance
ratio for enhanced results.
MANAGERIAL IMPLICATIONS AND RECOMMENDATIONS
It will be essential to gather both quantitative and qualitative data and analyze them together
in order to obtain meaningful results from the research. Additionally, further investigation is
necessary to explore the veracity of the allegation on a broader scale.
The new design or model can assist Fin-Tech in Islamic Finance to improve their performance
in Malaysia by adhering to Islamic Finance principles. It can also provide insight into the
functioning of the Islamic Financial market. Therefore, this study is significance with the
government’s Shared Prosperity Vision 2030. The plan underscores the importance of the
digital economy and Islamic finance in realizing its objectives.
ACKNOWLEDGEMENT
The authors extend their appreciation to the GERAN PEMBUDAYAAN PENYELIDIKAN UiTM
CAWANGAN SELANGOR (DUCS-P) TAHUN 2022: 600-UiTMSEL (P.1 5/4) (063/2022).
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