Purpose – This study aims to comprehensively explore and analyse the construct of sharia compliance in marketing to promote innovation and collaboration among Islamic Financial Institutions (IFIs), which will be beneficial for both academics and industry. This study began by exploring the definition of Sharia compliance from highly reputable journal, comparing it with previous research and confirming it to the IFI to construct the Sharia compliance parameters.
Design/methodology/approach – The parameters extracted from the existing literature are subsequently communicated to practitioners in the field of Islamic finance and subjected to Exploratory Factor Analysis (EFA). In the context of this study, it is postulated that each fundamental component represents Sharia Compliance, including Aqad Fulfilment, Maqasid al-Shariah, Accounting Aspects, and Consumer Protection. Three experts in the field were involved in developing the metrics and designing the questionnaire, which was then completed by 48 leaders of IFIs to be processed using EFA. Finally, this study conducted additional interviews with five CEOs to substantiate this assumption and ensure that the Sharia compliance parameters bridge academia and Islamic finance industry. The exploratory Factor Analysis (EFA) questionnaire comprised 27 items and which was distributed to 48 leaders of IFIs in Indonesia, primarily in the Java region.
Findings – This study emphasizes the need to embrace Sharia compliance within IFIs, especially amid the challenges of volatility, uncertainty, complexity, and ambiguity (VUCA). Sharia compliance should be integral part in marketing especially when IFIs collaborate and introduce innovative products, ensuring alignment with the four aspects. These four aspects are Aqad Fulfilment, Maqasid al-Shariah, Accounting Aspects, and Consumer Protection. Based on EFA, four key aspects have been validated as significant factors. The implementation of these factors reinforces Sharia Compliance as the core principles of the Islamic marketing approach to enhance customer confidence and attracting clienteles. Additionally, industry players recognize these four aspects as crucial in the IFIs marketing process, especially when undertaking innovation and collaboration efforts.
Research limitations/implications – This research assists Islamic Financial Institutions in assessing whether their marketing initiatives particularly in areas of innovation and collaboration, adhere to Sharia principles. Moreover, this research will also benefit future research in Islamic finance since it attempts to form the Sharia compliance variable from rigorous academic steps.
Originality: This research contributes original insights by proposing sharia compliance paramaters that combine ideas from Islamic scholars with practitioners' perspectives. To strengthen this idea, this study utilizes EFA to discern factors to emphasize the contemporary relevance of Sharia compliance in a VUCA environment. The parameters can be used as guidance for IFIs to do marketing by way of collaborative innovation with their cross-industries partners