Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

Abstract

The decision-making process for Sharia investment needs to consider the individual’s risk tolerance since every type of investment is closely attached to the risk-return trade-off. This study examines whether multidimensional risk tolerance and religiosity influence Sharia investment decisions. The study used 300 potential Muslim investors in Indonesia as the primary data source through an online survey with a convenience sampling method and analysed the data using Partial Least Squares Structural Equation Modelling (PLS-SEM). The results show that three multidimensional risks (risk propensity, risk attitude and risk capacity) have a significant effect on the Sharia investment decision. The research also tested the moderating effect of religiosity levels by performing Multi-Group Analysis (MGA) and found significant differences between risk propensity and sharia investment decisions among moderate and devout religious individuals.

Comparison of Risk Tolerances and Investment Decisions of Participation Bank Customers and Conventional Bank Customers

“…When we examined the results, it is seen that some results are contrary to the expectations (Lestari, Ginanjar, & Warokka, 2021). Our results show that conventional bank clients have a higher average in both overall risk tolerance and financial risk tolerance.…”

“…Investment strategies employing the interest-free instruments need to regard the individual's risk tolerance because every type of Shariah complaint investment is closely related to the risk-return trade-off. Lestari, Ginanjar, & Warokka (2021) investigate whether the multidimensional risk-taking level and religiosity affect on sharia investment decisions in Indonesia. The findings indicate that risk propensity, risk attitude and risk capacity affect the sharia investment decisions, significantly.…”

Cash Waqf Behavior: Explaining Financial Consciousness and The Moderating Role of Religiosity

“…Islamic religiosity has been associated with virtuous giving as a form of individual journey to achieve salvation or falah (Asutay et al, 2023). Religiosity also helps Muslims make good personal financial decisions (Lestari et al, 2021). We therefore argue that religiosity will moderate the financial consciousness of Muslims with their actual behavior towards achieving Maqasid shariah through spending their wealth for philanthropic aims such as cash waqf.…”

Can Zakat and Purification Be Employed in Portfolio Modelling?

“…Recently, there has been a significant growth in Shariah investment assets in Indonesia. According to an OJK report, there was an increase in the contribution of various sukuk, Shariah mutual funds, and market cap ISSI from 2015 to 2019 (Lestari, Ginanjar, & Warokka, 2021). Likewise, the number of Shariah investors in Indonesia in 2019 had increased almost three-fold from that of 2017, totalling 68,599.…”