Journal of Islamic Economic Insights

Islamic social finance and socioeconomic development: A systematic literature review

Olivia Putri Dahlan — 2026-01-30

Islamic social finance has increasingly been discussed as a complementary framework for addressing poverty, inequality, financial exclusion, and development financing gaps. Yet the literature remains dispersed across studies of zakat, waqf, digital governance, institutional performance, and the Sustainable Development Goals (SDGs). This article develops a more integrative synthesis by reviewing peer-reviewed studies published mainly between 2013 and 2024 and by organizing the evidence around four linked questions: how zakat contributes to poverty alleviation, how productive waqf supports long-term development, how Islamic social finance aligns with the SDGs, and which governance factors condition institutional effectiveness. The review follows a structured PRISMA-informed process and uses thematic synthesis rather than meta-analysis because the literature contains conceptual papers, case studies, bibliometric mapping, framework-building research, and empirical analyses with heterogeneous designs. The review shows that Islamic social finance performs at least three distinct but interrelated functions. First, zakat operates as a redistributive and welfare-stabilizing instrument that can improve household resilience and reduce selected poverty indicators when targeting and institutional quality are strong. Second, productive waqf creates a longer time horizon by converting endowed assets into sustainable income streams for education, health, microenterprise, and community infrastructure. Third, integration across social and commercial Islamic finance broadens scale, sustainability, and policy relevance. At the same time, the literature consistently identifies governance weaknesses, fragmented databases, weak reporting, limited professionalism among managers, and uneven digital adoption as the main obstacles to impact. The article concludes that Islamic social finance has real developmental value, but its contribution becomes stronger when institutions move beyond charity administration toward integrated governance, data transparency, and outcome-oriented social investment.

Islamic financial literacy: Determinants, measurement, and outcomes

Dimvy Rusefani Asetya — 2026-01-30

Islamic Financial Literacy (IFL) has become an important topic at the intersection of financial literacy, Islamic economics, and inclusive development. Although research on IFL has expanded, the field remains conceptually fragmented because studies vary in how they define, measure, and interpret the construct. This article presents a systematic literature review focused on three issues: determinants, measurement, and outcomes of IFL. The review shows that the most recurrent determinants are education, income, religiosity, demographic background, financial experience, and institutional access, although their effects differ across contexts. The literature also reveals substantial diversity in measurement practices. Some studies adapt conventional financial literacy scales, whereas others develop Islamic-specific instruments covering riba, profit-and-loss sharing, zakat, takaful, sukuk, and other Shariah-compliant concepts. This lack of measurement standardization weakens comparability across studies. In terms of outcomes, higher IFL is generally associated with better financial behavior, stronger intention to use Islamic products, improved financial management, greater market discipline, and higher financial well-being. Overall, the review argues that future IFL research requires clearer construct boundaries, more rigorous measurement, and stronger comparative evidence.

Islamic economic transformation in Pakistan: Prospects, structural impediments, and the imperative of shariah-compliant governance

Waqas Ahmad Watto — 2026-01-30

Pakistan, the world’s second-largest Muslim-majority nation by population, occupies a uniquely consequential position in the global discourse on Islamic economic thought. Decades after its constitutional declaration as an Islamic republic and the formal promulgation of the Objectives Resolution of 1949, the country’s economic architecture remains deeply entangled with interest-based (riba) financial instruments, structurally asymmetric wealth distribution, and governance frameworks that fundamentally diverge from maqasid al-Shariah, the higher objectives of Islamic law. This opinion article contends that Pakistan’s persistent macroeconomic instability, income inequality, and institutional underdevelopment are not merely technical failures of economic management but, at a deeper analytical level, symptoms of an incomplete and often performative engagement with the foundational principles of Islamic economics. Drawing on scholarship in Shariah-compliant finance, comparative institutional economics, and recent empirical literature on Pakistan’s financial sector, this article examines the structural barriers inhibiting genuine Islamic economic transformation, evaluates the current trajectory of Islamic banking and Zakat administration, critically interrogates the role of the state, and proposes a set of evidence-informed and normatively grounded policy directions. The central argument advanced herein is that a coherent, institutionally embedded embrace of Islamic economic principles, encompassing riba elimination, redistributive instruments such as zakat and waqf, ethical investment frameworks, and participatory finance, offers Pakistan not merely a theological aspiration but a practically viable pathway toward sustainable, equitable, and sovereignty-preserving economic development.

Islamic economics under Wilāyat al-Faqīh: Doctrinal foundations, governance structures, and the political economy of sanctions in the Islamic Republic of Iran

Taqi Husaini — 2026-01-30

This letter examines the intersection of Islamic economic thought, the constitutional doctrine of Wilāyat al-Faqīh (Guardianship of the Jurist), and the sustained impact of international economic sanctions on the Islamic Republic of Iran. Drawing on institutional economics, political economy, and Islamic jurisprudence (fiqh), this study argues that Iran's distinctive governance architecture, in which supreme jurisprudential authority is constitutionally empowered over all economic and financial affairs, has produced a hybrid economic system that is simultaneously ideologically constrained and structurally resilient. While the doctrinal foundations of Islamic economics, rooted in the prohibition of ribā (interest), the obligations of zakāt (alms tax), and the principle of adl (justice), provide a normative framework for economic governance, empirical evidence demonstrates that successive rounds of United States-led sanctions, particularly from 2012 and following the reimposition of maximum pressure in 2018, have severely disrupted macroeconomic performance. Per capita GDP declined from approximately USD 8,000 in 2012 to USD 5,000 by 2024 (World Bank, 2024), annual inflation reached 40–50% by 2023–2024, and the Iranian middle class contracted by an estimated 17–28 percentage points between 2012 and 2019. This study contributes to the literature by systematically situating these macroeconomic dislocations within the ideological parameters of the Wilāyat al-Faqīh governance model and assessing the adaptive strategies deployed by the state. The study discusses the policy implications for sanctions design, Islamic economic reform, and institutional resilience.

Sharia mortgage in Indonesia: A critical inquiry into regulatory adequacy, contractual integrity, and market transformation

Cecep Bryan Firdaus — 2026-01-30

This opinion paper critically examines the structural and regulatory architecture of Sharia-compliant mortgage financing, Kredit Pemilikan Rumah Syariah (KPR Syariah), in Indonesia, with particular attention to the normative tensions between classical Islamic jurisprudence and contemporary financial engineering. Drawing on established scholarship in Islamic finance, Indonesian positive law, and institutional economics, this study argues that the existing framework, while formally compliant with Fatwa Dewan Syariah Nasional—Majelis Ulama Indonesia, exhibits persistent ambiguities in contractual taxonomy, inadequate consumer protection architecture, and insufficient harmonization with the broader macroprudential objectives of Bank Indonesia and Otoritas Jasa Keuangan (OJK). This study further contends that the dominant murabahah-based KPR model, despite its widespread adoption, raises unresolved questions regarding risk distribution, profit margin transparency, and the authentic transfer of maqasid al-shari'ah principles into product design to be implemented. The analysis concludes with a normative agenda for reform oriented toward contractual fidelity, regulatory convergence, and genuine financial inclusion.