Islamic Practices and Investment Decision: The Role of Money Management Skills and Digital Financial Literacy

Abstract

This study examines the interplay between Islamic financial practices, money management skills, and digital financial literacy in shaping decisions to invest in both Sharia-compliant and non-Sharia-compliant stocks. Using data from 241 investors on the Pakistan Stock Exchange and the SmartPLS model, the results demonstrate that Islamic work ethics and religiosity positively impact decisions to invest in both Sharia-compliant and non-Sharia-compliant stocks, with money management skills playing a mediating role. Contrary to expectations, Islamic social finance does not directly influence decisions to invest in stocks, and digital financial literacy does not moderate the effect of Islamic practices on money management. However, the study highlights that integrating digital literacy with Islamic financial principles can enhance investment decisions. These findings provide actionable insights for investors and policymakers, advocating for tailored educational programs and digital tools to promote responsible, sustainable investments aligned with Islamic values.