Artificial Intelligence Capabilities, Fintech Innovation, and Islamic Bank Performance: A Cross-Country Panel Analysis of Indonesia, Malaysia, and GCC (Journal of Intelligent Decision Making and Information Science)

Summary

• Global Islamic banking expanded significantly to exceed USD 3.5 trillion in total asset value in 2023, representing a share of approximately 6% in global banking assets.p.1
• The study analyzes a balanced panel dataset of 28 Islamic banks across Indonesia, Malaysia, and the GCC across 252 bank-year observations from 2015 to 2023.p.2
• The structural cost-efficiency BOPO differential between Islamic banks in Indonesia and those in the GCC stands at 35.7 percentage points.p.11

Key insights

1. Random Effects GLS estimation is optimal for evaluating Return on Assets, whereas Fixed Effects within-estimation is required for ROE, NPF, and DEA technical efficiency.p.8
2. Digital adoption and dynamic capabilities significantly predict Return on Assets in Islamic banking.p.1
3. Process-level prudential standards such as IFSB adoption generate faster profitability returns than disclosure-intensive AAOIFI governance standards.p.10
4. Technical efficiency exhibits minimal persistent bank-level advantage, with an Intraclass Correlation Coefficient of only 0.007.p.8
5. A one-standard deviation increase of 0.83 index points in dynamic capabilities corresponds to approximately 0.18–0.22 percentage points of higher Return on Assets.p.10