Journal of Islamic Monetary Economics and Finance (JIMF)
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An Innovative Financing Instrument to Promote the Development of Islamic Microfinance through Socially Responsible Investment Sukuk
Get PDFSocially responsible investment (SRI) sukuk has a high potential to be an innovative financing mechanism for Islamic microfinance. This paper explores the possibility of implementing SRI sukuk for raising funds to support the microfinance industry and to promote financial inclusion. It also aims to identify the associated issues and challenges in implementing the SRI sukuk for microfinance purpose. The paper uses qualitative research method through a thorough review of existing literature, archives, and library research related to the area of social, sustainable and responsible investment sukuk, Islamic microfinance and their related issues. The SRI sukuk has a high potential to be developed as innovative shariah-compliant mechanism as shown by Malaysian experience in issuing the SRI sukuk to develop socially-related projects including the educational and green energy sectors. The paper also highlights and learn from the successful experience of the European Bank for Reconstruction and Development in issuing the first microfinance bonds. The findings from this study provide inputs to the relevant stakeholders in implementing new financial tools to develop the social sector, especially Islamic microfinance in helping the poor and assist them to become economically independent. New innovative tools for raising funds in microfinance is highly needed to achieve sustainability of the microfinance industry.
Type of paper: Research pape
Monetary Transmission Mechanism under Dual Financial System in Indonesia: Credit-Financing Channel
Get PDFThe presence of Islamic and conventional banking in the dual financial system of Indonesia equally hold the role as financial intermediator which theoretically banks collect fund from the debitors to be distributed to creditors. However, along with the changing of time there has been a development in the financial industry, when financial deregulation occurs, where the role of providing credit is not only owned by the banks but also other financial institutions. As the result, banks are no longer considered as the center of financial intermediation but could be replaced by other financial instruments. This study aims to reconsider the role of banking as financial intermediation in the monetary transmission mechanism using three methodoligal approaches which are Vector Autoregression and Vector Error Correction Model (VAR-VECM), Error Correction Model (ECM), and Autoregressive Distributed Lag (ARDL). The long-term results of ECM and VECM estimations both show that credit and finacing channel are still relevant to be employed in the monetary transmission mechanism after the development of financial sector and the change of monetary policy, yet only have an impact to economy and do not give effect to inflation. While the result of ARDL estimation indicates that none of the variables affect the monetary policy objectives which means that credit and financing channel are considered to be getting weaker in the monetary transmission mechanism.
 
Big Data Algorithms and Prediction: Bingos and Risky Zones in Sharia Stock Market Index
Get PDFEach country with a stock exchange normally calculates various indexes. So is the case
for Malaysia’s Kuala Lumpur Stock exchange (KLSE). FTSE BURSA Malaysia EMAS
Sharia price index (FTBMEMA) is one of its Sharia indexes. In an effort to find which
other indices may forecast this Sharia index, we selected 23 relevant indexes and two
exchange rates. Momentum indicators for short, medium and long term have been
calculated for the variables. The objective of this study is to find predictive indicators
for FTBMEMA out of the population of 188 original and derived variables. Difficulty
arises in reducing the number of variables for regression or other predictive models
like neural networks. In this preliminary study, data mining attribute selection
algorithms along with cross validation criteria have been used, through the use of Java
class library Weka (JCLW), for reducing the number to statistically relevant variables
for our regression estimation in an effort to forecast various performance parameters
for FTBMEMA like performing either in a mean performance range, having jackpots
and bingos or falling into danger zones. Provided the extent of the required predictive
accuracy, the results may bring additional insights for diversifying and hedging
various types of investment portfolios as well as for maximizing returns by portfolio
managers
The Perception on the Contribution of Islamic Banks and Islamic Windows Towards the Growth of Nigerian Economy
Get PDFThis study was to assess the perception on the contribution of Islamic banks and Islamic windows towards the growth of the Nigerian economy. To document this, data were obtained through the use of structured questionnaires. 379 copies of questionnaires were administered based on the sample size obtained via the use of Taro Yamane formula. 367 questionnaires were successfully retrieved. Variables such as deposit activities, loan activities and perception of bank employees were also adopted as explanatory or independent variable and dependent variable respectively. To support the study hypothesis were also formulated. For the analysis, measures of central tendency (tables, frequency and percentages) and inferential statistics (Logit Regression) were used. The result revealed that the variables (i.e. deposit and loan activities) have a positive impact on the growth of Nigeria’s economy because the probability values of the variables (P=0.003 and 0.019) were less than alpha (α =0.05) level of significance. In other words, this implies that Islamic banks and windows have largely supported private consumption, business investments of its customers, aid government spending via sukuk to fund developmental projects of its customers. The study concludes that Islamic banks and windows have contributed towards the growth of the Nigeria’s economy. Furthermore, the study recommends that there is need for creating the necessary legal framework to ensure its smooth operations, intensify efforts on creating public awareness, rolling out more shariah compliant products that can take care of the peculiarities that exist in business environment and training and retraining of staff on effective Islamic banking
THE Role of Integrated Islamic Commercial and Social Finance in Reducing Income Inequality in Indonesia
Get PDFRecent years saw the heated debates among prominent economists on the growing
inequality in advanced economies, and accordingly, many solutions to this serious
problem have been put forward. Among the practical-cum-workable solution is
progressive taxation for wealth and income, especially the top one percent. Such a
solution, however, has been implemented in Islamic perspective what so-called,
zakah which is now referred to as social finance. In this paper, using the Gini coefficient data
covering 34 provinces in Indonesia over a decade, we examine whether the role of
social finance in tandem with commercial finance can adequately solve the problem
of wealth distribution in Indonesia, one of the largest Democratic-Muslim countries
in the world. Using the Generalized Method of Moments (GMM) model, the results
demonstrated that Islamic commercial finance solely is proven statistically incapable of
tackling inequality while the social finance (zakah) is performing very well in this matter
over all specifications. Most importantly, when both are incorporated in a model, the
result showed a significant reduction in income inequality implying that the integrated
Islamic finance which can be implemented in both Islamic microfinance institution and
Islamic banking is more capable, as opposed to when both are separated, of helping
address the income inequality problem in Indonesia
Monetary Policy Pass-Through, Excess Liquidity and Price Spillover: A Comparative Study of Conventional and Islamic Banks of Pakistan
Get PDFThis study investigates the comparative pass-through of policy rate to the retail
prices, spillover of prices between Islamic and conventional banking systems, and the
impact of excess liquidity on these pass-throughs using data from interbank market
of Pakistan. The results suggest that the monetary policy shock affect retail prices of
Islamic banks similar to conventional banks, confirming the results of earlier studies.
Moreover, there is a strong spillover between the prices of two systems; Islamic
banks are following (leading) the conventional banks in pricing the lending (deposit)
products. Islamic bank has acquired advantage in the deposit pricing by taping the
religious depositors, which also may have promoted financial inclusion thereby
contributing to the economic growth and improved income distribution in the society.
Our findings suggest that the presence of excess liquidity have no effect on pass-
through of policy rate in the Islamic system, which is contrary to the prevalent notion.
However, excess liquidity significantly affects the spillovers of prices between the
systems. These results support the hypothesis that the Islamic banks are investing in
interest-based government securities indirectly via conventional banks. Our findings
may help in enhancing the regulatory efficiency of the central banks and the conduct of
the monetary policy in the countries where dual banking system exists
THE Single Currency for Islamic Nations: Do Heterogeneities Matter?
Get PDFThe purpose of this study is to assess the readiness of 44 OIC member countries to form a currency union and to test whether the Optimum Currency Area (OCA) criteria remain relevant to a large region like the OIC. Large geographic size is subject to socio-economic and geographic disparities. This study employs the OCA-index to estimate the degree of readiness of the OIC to form a currency union. Five selected criteria –business cycle synchronization, trade openness, inflation similarity, the size of the economy, and distance – were employed to determine the OCA using Ordinary Least Squares regression. The findings of this study estimate that 63 percent of pairs of countries in the OIC are ready to form a currency union. The selected OCA’s criteria present the best-fit variable in explaining the OCA for the OIC. This paper verifies that economic and geographic heterogeneities are not the main obstacle to forming a currency union. This study provides an important contribution to the theory of OCA primarily in clarifying the application of the OCA conditions in a large observation like the OIC, which comprises many countries and many blocs
Designing Integrated Zakat-Waqf Models for Disaster Management
Get PDFThis study aims to analyze four previous conceptual models related to zakat and waqf by Indrawan et al. (2018), Ascarya et al. (2018), Tanjung (2018), Hassan (2010) and also designing various Integrated Zakat and Waqf Models for disaster management and evaluate them as best model which is most suitable in community, local, and national scopes. In-depth interviews and literature study from relevant sources are conducted to develop the models. The proposed models called Integrated Zakat and Waqf Model for Disaster Management (IZWDM) that involves of social and commercial aspects provides of three alternative models according to three steps of disaster management namely IZWDM-A for Relief step; IZWDM-B for Recovery step; and IZWDM-C for Reconstruction step. This study is expected to enhance all parties to do more synergy in managing disasters that happened in Indonesia
Customer-Perceived Value in Creating Customer Satisfaction and Revisit Intention in Sharia Hotels
Get PDFThe purpose of this study was to identify the relationship between Islamic service
quality, Muslim Customer Perceived Value (MCPV), customer satisfaction, and revisit
intention on sharia hotels in Bandung. A systematic random sampling was used to
draw sample of 255 customers. The hotel includes Orange Home Sharia, Sharia
Narapati Hotel, Cottage Daarul Jannah, Daarul Mutmainah, and MQ Guest House.
This research used Structural Equation Modeling to measure the variables of service
quality (Gayatri, 2013) and Muslims Customer Perceived Value (MCPV) (Eid and
Gohary, 2015) to measure the perceived value variables. Eleven hypotheses were
developed and tested using a sample of 255 Muslim tourists. Exploratory and
confirmatory factor analysis was used to test the validity of the measures, while the
structural equation modeling in hypotheses testing. The strength of the relationship
between the constructs indicates that features of the suggested MCPV model are crucial
to achieving Muslim customer retention in the tourism industry. Findings also suggest
that the availability of the suggested Islamic attributes value, along with conventional
value dimensions, could satisfy Muslim tourists when they buy a tourism packag
Classical and Contemporary Fiqh Approaches to Re-Estimating the Zakat Potential in Indonesia
Get PDFThis study aims to re-estimate the potential of zakat in Indonesia based on the
classical and contemporary fiqh approaches, as well as including optimistic and
realistic scenarios with different assumptions. Under the classical fiqh approach, the
potential amount of zakat was calculated based on the zakatable assets that have
been agreed upon by all scholars, including only zakat on savings. Meanwhile, using
the contemporary fiqh approach, the zakat potential was calculated based on a new
classification of zakatable assets agreed by contemporary scholars after considering the
issue of economic development, including professional (household) zakat, corporate
zakat and zakat on savings. The results show that, based on the classical fiqh approach,
the potential zakat amount is IDR 69.57 trillion, or equivalent to 0.56% of GDP under
the optimistic scenario, and it is IDR 13.26 trillion, or equivalent to 0.11% of GDP,
under the realistic scenario. Meanwhile, based on the contemporary fiqh approach, the
potential zakat amount is IDR 216.54 trillion, or equivalent to 1.75% of GDP, under the
optimistic scenario, and it is IDR 74.87 trillion, or equivalent to 0.60% of GDP, under
the realistic scenario. The estimated zakat potentials are still significantly higher than
actual zakat collection recorded. However, the results of classical approach under the
realistic scenario (0.11% of GDP) is the closest to the real 2018 zakat collection of 0.05%
of GDP, which could be the indication that most Indonesian Muslims follow classical
fiqh approach in calculating their zakat maal obligation