Sustainable Islamic Finance

This article provides a roadmap for sustainable recovery that can aid policymakers in implementing sustainable recovery and improving the well-being of people. The roadmap will prioritize three areas of action: sustainabi- lity, digitalization, and inclusivity. This article emphasizes the involvement of the private sector and innovative financing solutions (including Islamic finance) in meeting the financing gap for investment in relevant infras- tructure for all three pillars.

The recent unprecedented economic downturn and global supply chain disruption by the COVID-19 pandemic is accelerating the urgency for sustainable financing infrastructure that is agile, adaptable, and transformable. Sustainability and the 4th Industrial Revolution are about more than just technology-driven change; it is an opportunity to help everyone, including leaders, policymakers and people from all income groups and nations, to navigate industry disruptions and transitioning to a new normal by harnessing converging technologies in order to create an inclusive, human-centered future.

The growing number of Islamic financial institutions (IFIs) across jurisdictions and the sophistication of Islamic Finance instruments require standardizations or at least harmonization1 of Islamic Finance contracts and services to regulate the markets in order to promote their transparency and improve their stability and ultimately create a fair and equitable financial system.

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Using a dataset of 91 Islamic and 78 conventional funds from 2007 to 2016, this study analyzes the flow–return relation of Islamic and conventional funds in Malaysia. We find that the fund flow–return relation for Islamic funds is positive and stronger than that of conventional funds for positive performers. Moreover, Islamic funds still attract fund flows, while conventional funds experience capital outflow during a negative performance. Besides, this study is unique by its attempt to capture the effect of the month of