Journal of Islamic Monetary Economics and Finance (JIMF)
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Measuring the Efficiency of Waqf Fund in Indonesia
Full text linkThis research measures the efficiency of waqf funds managed by philanthropic institutions in Indonesia using the Data Envelopment Analysis (DEA) approach over the 2013-2021 period. The unit of analysis consists of nine philanthropic waqf institutions. In the measurement of efficiency, the study takes human resource expenses and operational costs as inputs and collection and distribution of waqf funds as outputs. The findings indicate that the efficiency of philanthropic organizations in handling waqf funds varies from year to year between 2013 and 2021. The paper also notes that the Covid pandemic has no substantial impact on the efficiency of the waqf institutions. Interestingly, regional institution clusters are more efficient than mass organization and national institution clusters.
Acknowledgment
The authors would like to thank the Faculty of Economics and Business, Airlangga University, Indonesia, for the support that made this study possibl
Sharīʿah-Compliant Fintech Usage among Microentrepreneurs in Malaysia: An Extension of UTAUT Model
Full text linkFintech has been beneficial to the financial services industry and has markedly enhanced financial inclusivity. While the fintech has already made its mark, there has been somewhat limited use of sharīʿah-compliant fintech (such as P2P lending, crowdfunding, wealthtech, e-wallets) by Muslim microentrepreneurs (MEs) in Malaysia. Hence, this study examines the factors that affect sharīʿah-compliant fintech usage and its effect on income sustainability via an extended Unified Theory of Acceptance and Use of Technology (UTAUT). One hundred sixty-five (165) questionnaires were distributed to Muslim MEs who are users of sharīʿah-compliant fintech. This study reveals that performance expectancy and facilitating conditions have positive and significant effects on the use of sharīʿah-compliant fintech. The extended relationship of sharīʿah-compliant fintech adoption and income sustainability also presents a significant and positive relationship in which sharīʿah-compliant fintech has the potential to increase and, more importantly, sustain MEs’ income level
Islamic Stock Portfolio Optimization Using Deep Reinforcement Learning
Full text linkThe Islamic principles in identifying stocks as Shari’ah principles have inevitability restrict the number of stocks that Muslims can invest in and consequently may affect the return from investment. In this paper, we examine the potential of Deep Reinforcement Learning in optimizing the portfolio returns of Islamic stocks. We model stock trading as a Markov Decision Process problem because of its stochastic and interactive nature. Then, we define the trading objective as a problem of maximization, while the DRL agents used are actor-critic algorithms. The selected portfolio consists of 30 most liquid Islamic stocks in Indonesia that constitute JII index and compare with that of the benchmark portfolio, namely the 45 most liquid conventional stocks or LQ45. The performance is compared using several algorithms. The result show that trading on Islamic stocks from January 2019 to December 2020 using the DRL agents could outperform the benchmark index of conventional stocks. Using DRL agents, fund managers would be able to optimize the portfolio on daily basis, minimize risk during crisis or turbulence, and outperform the conventional stocks
Do Islamic Banks in Indonesia Take Excessive Risk in Their Financing Activities?
Full text linkThis study analyzes the risk-taking behavior of Indonesian Islamic Banks by examining whether the relation between financing Growth rate and non-performing financing (NPF). We employ threshold regression models and bank-level data of 24 Islamic banks (full-fledged Islamic banks and Islamic banking windows) covering the period from 2009 to 2019. We find evidence for the excessive risk-taking of Islamic Banks. More specifically, while the relation between NPF and FGR is negative when the one-lagged NPF is below the threshold (estimated to be 5.42%), it turns positive once it is above the threshold. This means that banks with NPF above the 5.42 percent threshold tend to take risky loans
Determinants of Public-Private Partnership Implementation in OIC Countries
Full text linkThis study examines the Private-Public Partnership (PPP) implementation for financing public infrastructure and its determinants for the case of OIC countries during the period 2015–2019. Using the fixed-effects panel model and considering public resource constraints and market, macroeconomic, institutional and cultural variables as potential factors, it documents that the regulatory quality, political stability, Islamicity Index and inflation variables positively influence the implementation of PPP for financing public infrastructure in the OIC region. Meanwhile, aid is found to negatively affect the PPP implementation. These findings suggest that PPP implementation tends to be higher in countries with good institutions, stable macroeconomic conditions, low public resources, low levels of aid and strong adherence to Islamic values. The results are expected to provide insights for policymakers and private sectors involved in the implementation of PPP in OIC countries
Repeated Giving of Cash Waqf: A Case Study of Sabah, Malaysia
Full text linkThis study examines repeated waqf contributions in Sabah State, Malaysia. Religious obligation, benevolence, and familiarity with and trust in the waqf institution are the variables that are expected to have a positive relationship with the repeated behaviour of giving waqf cash. These antecedents are drawn from previous empirical studies. A total of 200 respondents who have repeatedly contributed to cash waqf shared their opinions through a survey form distributed by using the "convenience sampling" method. The collected data were then tested employing variance-based structural equation modelling and the partial least squares path modelling method using SmartPLS 3.3 software. The results of the analysis show that all the variables, namely religious adherence, benevolence, familiarity with the waqf institution, and trust in the waqf institution significantly influence the behaviour of repeated cash waqf contributions. The study findings could be used by future researchers as a point of reference. In practice, waqf institutions could also benefit from the findings by better understanding their donors' wishes and preferences
The Adjusted Market Power, Competition, and Performance: Islamic vs Conventional Banks
Full text linkThis study explores the relationship between competition and performance in a dual-banking setting. More specifically, we compare whether using the Traditional Lerner index (TLI) the efficiency-adjusted Lerner index (EALI) would yield different conclusions. We take data from 2008 to 2020 and take Malaysia as a case study. Considering the nature of the dataset and the variables within, we employ the system Generalized Method of Moments. Our findings reveal contradictory results when market power is measured differently. Based on the overall sample, the models using the adjusted market power is supportive of the ‘competition-stability view’ while the models with TLI report evidence in favor of the ‘competition-fragility view.’ The Islamic banks' results support the ‘competition-fragility view’ when competition is measured with the efficiency-adjusted Lerner index (EALI) and the ‘competition-stability view’ when measured with the TLI. These findings are robust to different econometric estimators and carry important policy implications
The Default in Islamic Peer-to-Peer Lending: An Application of the General Strain Theory
Full text linkWhile the Islamic peer to peer (P2P) lending is useful especially during the present Covid-19 Pandemic, its default risk remains high. In this study, we apply the extended general strain theory to investigate borrowers’ default intention on the Islamic P2P lending during the pandemic period. Using the SEM-PLS method to analyse data gathered from a survey, we find economic pressure and socialization difficulty to be significant in increasing negative affects (life dissatisfaction, perceived unfairness, and inferiority feeling) and hence indirectly affecting the willingness to repay. Further, we find that socialization difficulty does not seem to have direct influences on default intention. Finally, moral norms appear to be a significant moderating factor in the framework. These should contribute to a better scoring system of the Islamic P2P lending
Religious Responses to Sustainable Development Goals: An Islamic Perspective
Full text linkThis paper investigates the role of religion in Sustainable Development (SD) and offers an Islamic perspective to Sustainable Development Goals (SDGs). Applying a multidimensional approach to development, this paper presents 17 SDGs into the six dimensions —i.e.,Social, Human Capital, Economic, Sustainable Lifestyle, Environmental, and Institutional. From the discusions of the dimensions from Islamic perspective, some key findings are: Islam lays emphasis on human capital development (SDG 3 and 4) which is a key element in accelerating economic Growth (SDG-8). Islam also offers a wide range of social financial tools such as Zakat, waqf that can be used to address SDG 1 (poverty), 2 (hunger), 5 (gender eqaulity), and 10 (reducing inequality). Islamic finance offers a number of tools for long-term financing such as sukuk that can masterfully be used for building sustainable infrastructure (SDG-9) and sustainable cities (SDG-11). This study also reviews some Islamic principles from the Holy Qur'an that can positively promote several SDGs. Wasatiyyah (Moderation) principle can be used for sustainable consumption and production (SDG-12), Khalifah ( God’s vicegerent on Earth) for utilizing Water and sanitation (SDG-6) and energy (SDG-7). Maslahah ( public interest) for dealing with natural resources; Salam (peace), ‘Adl wa al-Ihsan (justice and benevolence) for SDG-16 (peace, justice and strong institutions) and Ta‘āwanū ‘alal-Birri (cooperation one another in goodness) for SDG-17 (partnerships for the goals)
Incentives, Social Norms, and Business Cycle: An Example of Business Loans Provision by Islamic Banks
Full text linkThe interaction of social norms and incentives is a subject of growing interest in economic literature. Basov and Bhatti (2013) pointed out that invoking a social norm is both a blessing, since it allows mitigating moral hazard problem, and a curse, since it restricts the class of admissible contractual arrangements. In this paper, we reiterate this point using particular example of the effects of restrictions imposed on contracts by Shariah law on the optimal risk-incentive trade-off. We show that extra rigidity imposed by Shariah law leads to a greater reluctance to invest into daring new ideas, which are profitable in expectation, but may also result in significant losses. A shared set of social norms between the lender and the entrepreneur allows mitigating adverse consequences of the excess rigidity through creation of good will and may even lead to an improved performance. The adverse consequences may vary according to the stages of business cycle. As a result, recessions can have negative long-term effects and longer booms may be followed by longer recessions. We also hypothesize that turning a social norm into a law will deprive it of the ability to generate good will, while leaving the negative aspects intact. We find a tentative support of this hypothesis by comparing relative performance of Islamic banks in three regions: South East Asia (primarily, Malaysia), Middle East, and the UK