Purpose The purpose of this study aims to examine the effect of fintech on pre- and post-financing credit risks faced by the Islamic banks. Design/methodology/approach This research uses primary data for fintech awareness and adoption and secondary data of various financial and economic variables from 2009 to 2021. It uses baseline regression to identify moderation of fintech controlling gross domestic products, size, return on assets and leverage. The findings are confirmed using robustness against key variable bias. It also uses a dynamic panel two-stage generalized method of moments for endogeneity. Findings The study finds that the fintech awareness and adoption are not the same across all Islamic countries. The Asia Pacific region is far ahead of the other two regions where Indonesia is ahead in terms of fintech awareness and adoption, and Malaysia is ahead in terms of reaping its benefits in credit risk management. Fintech affects prefinancing credit risk significantly more than postfinancing credit risk. Also, the study finds that Islamic banks suffer from the problem of “Adverse selection under Shariah compliance.” Practical implications This research invites regulators to introduce fintech in Islamic banks on war footing. Similar studies can be conducted on the role of other risks such as operational and market risks. Fintech will also help in improving the risk profile and stability of Islamic banks against systemic risks and financial crises. Originality/value This research has variety of originalities. First, it is the pioneering study that addresses the effect of fintech pre- and post-financing credit risks in Islamic banks. Second, it identifies “Adverse selection under Shariah compliance” for Islamic banks. Third, it helps identify how fintech can be useful in reducing credit risk that will help in reducing capital charge for regulatory capital.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
customersupport@researchsolutions.com
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.