Journal of Islamic Monetary Economics and Finance (JIMF)
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Developing an Islamic Financial Inclusion Index for Islamic Banks in Indonesia: A Cross-Province Analysis
Get PDFThis study measures an Islamic financial inclusion index in Indonesia based on three
dimensions, namely the accessibility, availability and usage of Islamic banking services.
Additionally, it measures the relationship between the Islamic financial inclusion index
and the human development index (HDI). The study found that the level of Islamic
financial inclusion in Indonesia is relatively low at the national level. DKI Jakarta is the
most financially inclusive province in Indonesia, followed by East Java and Nanggroe
Aceh Darussalam. In contrast, East Nusa Tenggara has the lowest average Islamic
financial inclusion index. The findings also revealed a positive correlation between the
Islamic financial inclusion index and HDI. Those provinces with the highest Islamic
financial inclusion index were also likely to have a higher HDI. The findings of the
present study suggest that both policymakers and the Islamic financial industry should
play a greater role in improving financial access to low-income segments, especially in
the eastern part of Indonesia such as East Nusa Tenggara and Papua provinces.
 
Financial Stability of Islamic and Conventional Banks in Bangladesh: Revisiting Stability Measures and Analyzing Stability Behavior
No full textThis study intends to assess the relative financial stability of Islamic banks in Bangladesh using three different Z-Scores as financial stability measures, based on a sample of 29 listed commercial banks (23 conventional and 6 Islamic) in Bangladesh over the period 2005-2016. Apart from the existing measure of financial stability, Z-Score, the paper contributes to the literature by developing an alternative Z-Score based on bank’s loan portfolio infection ratio. We first use pair-wise comparison and find that Islamic banks are financially more stable in two stability measures i.e. Z-Score (based on Capital Adequacy Ratio) and Z-Score (based on Infection Ratio). We then perform static (random effects) and dynamic (GMM) panel data analysis. By controlling for bank-specific, industry-specific and macroeconomic variables in the regressions, we find that Islamic banks are financially more stable in 2 panel regressions of Z-Score (based on Infection Ratio). We also find that the presence of Islamic banks increases the stability of all banks in the system including their conventional peers
Measuring the Performance of Islamic Banking in Indonesia: An Application of Maslahah-Efficiency Quadrant (MEQ)
Get PDFDespite of market condition under perfect or unperfect competition, Islamic banking has to reach their level of efficiency in order to succeed and make a profit; those who do not will fail and be forced to exit the market. However apart of having a sound performance, Islamic banking also has to comply with the sharia principles. This paper aims to have efficiency and maslahah measurement in one assessment framework that is maslahah-efficiency quadrant (MEQ). The study from 2011-2014 revealed that Bank Muamalat Indonesia (BMI) and Sharia Panin Bank are excellent since both are within the first quadrant. Whereas Bank Sharia Mandiri (BSM), Sharia Maybank, and Sharia Bukopin Bank are considered good at the second quadrant; Bank Rakyak Indonesia Sharia (BRI) and BCA Sharia are fair at the third; and Bank Mega Sharia, Victoria Sharia, Bank Negara Indonesia Sharia (BNI), and Bank Jabar Banten Sharia (BJB) are poor at the fourth sequentially. It is urge for Islamic bank that are in low level of MSI to have a critical policy to keep in line with the five factor of maqashid sharia apart of having efficiency in order to reach maslahah
The Role of Islamic Social Finance in Empowering Youth and Women in Sokoto State of Nigeria
Get PDFIslamic Social finance is an emerging area of study and practice, different from commercial finance. It concerns about financing members of the community or country for socio-economic development. However, it faces the challenge of sustainability either due to legal or regulatory framework or due to lack of awareness among members of the society. The history of Islamic social finance in Nigeria connects back to the revivalism of Islam through Shehu Uthman Bin Fodio in 1804. Recently, with the establishment of Zakat and Endowment Committee in Sokoto in 2007, there was an increasing awareness and practice in the contemporary Islamic Social Finance, especially when the Government converts the Committee into Commission in 2016 which makes it independence to initiate and execute its policies. The objective of this paper is to examine two of its recently executed projects vis-à-vis Youth and Women Empowerment programs. The study uses qualitative technique for data collection and analysis. Two focus group sessions were conducted with the Youth and Women entrepreneurs who benefitted from the empowerment programs by the SZEC. The study finds that the Youth have been able to harness their potentials by expanding their businesses and upgrading the quality of their products and services such as shoe repair due the skills acquired in the training. Moreover, the women have improved their welfare and that of their children to an unprecedented level. They were able to maintain their chosen business as livelihood of income. However, they reveal that, marketing of their finished products is the major challenge they face
Zakat: Concept and Implications to Social and Economic (Economic Tafsīr of Al-Tawbah:103)
Get PDFOne of the most used methods by Ulamā’ to find the laws and wisdoms from Quran is a tafsīr method. This paper try to find and analyze the concept from sūrah al-Tawbah: 103 - ayah with the more general content related to the concept and function of zakat – by using the tafsīr method and how the implication of zakat for the social and economic equality is. The method used in this paper is a qualitative method by using content analysis that combines tafsīr bi al-ra’yi with tafsīr bi al-ma’thūr. By using economic interpretation, the result shows that zakat should be an obligatory system and its management must be done centrally by the government. In this case Baznas can be a representation of the government to perform the task. The study also found that there are two implications of the zakat mentioned in sūrah al-Tawbah: 103. First, التطهير (purification) through which zakat is able to provide social implications of tranquility, security, and harmony. Secondly, التزكية (holy, blooming, blessing and praise) through which zakat has economic implications both in micro aspects (increase in quantity in the economic curve) and macro (increased investment and depletion of poverty and unemployment)
An Empirical Investigation of Consumption Behaviour in Selected OIC Countries
Get PDFThis study examines the consumption behaviour in Organization of Islamic Cooperation (OIC) countries. It presents empirical evidence on rational expectations permanent income hypothesis (RE-PIH) and tests whether the phenomena of myopia, liquidity constraints or loss aversion impede forward-looking consumption behaviour. It also attempts to measure the intertemporal elasticity of substitution. The empirical evidence defies the existence of consumption smoothing phenomena as postulated in RE-PIH. The results support loss aversion. The response of consumption to unexpected income changes is statistically significant in only one-third of the countries. In contrast, the response of consumption to expected income changes is statistically as well as economically significant in as many countries. The intertemporal elasticity of substitution is also statistically insignificant in most of the countries and the elasticity is generally not positive. For the Islamic finance industry, the results help in explaining the low penetration of equity-based risk sharing instruments. From the policy perspective, the excess sensitivity of consumption to income suggests that redistribution efforts to enhance incomes of poor could help in enhancing their consumption levels.
 
Comparative Analysis of Bank Stability in Indonesia: A Non-Parametric Approach on Different Banking Models
No full textThe present study, grounded in theory of financial intermediation, provides new empirical evidence on comparison of bank stability measures of Islamic banks, conventional banks and other bank models in Indonesia. Specifically, 72 conventional banks, 4 Islamic banks, 3 conventional banks with Islamic subsidiaries and 2 subsidiary Islamic banks in Indonesia are considered, focusing on the sample period of 1999-2015. The study adopts z-score as a measure of bank stability, while a non-parametric multiple comparison analysis was used to test the significance of the differences in the bank stability of the different bank models, namely Islamic banks, conventional banks, Subsidiary Islamic banks and conventional banks with Islamic subsidiaries. The sample period is further divided into three sub-periods, namely, before the global financial crisis (1999-2006), during the global financial crisis (2007-2009) and after the global financial crisis (2010-2015) so as to gain more detail findings on the impact of the global financial crisis on the banks’ stability. The impact of local crisis periods (1999-2001) on bank stability of different bank models is also investigated. Findings of this study contribute towards extending the theory of financial intermediation through empirical works of stability of different banking models namely Islamic banks, conventional banks, Subsidiary banks and conventional banks with Islamic subsidiaries
Solution to Overcome the Bankruptcy Potential of Islamic Rural Bank in Indonesia
Get PDFThis paper investigates the direct and indirect effect of macro and microeconomics variables toward financial distress by using efficiency variable as mediator. This research used time series and monthly-published report data of Islamic Banking Statistics and Macroeconomics data. The Springate Model is used to measure financial distress through s-score, while the Data Envelopment Analysis (DEA) approach is used to measure Islamic rural bank’s efficiency. The finding implies that the efficiency of Islamic rural bank in Indonesia is mainly caused by microeconomics variables where CAR and NPF directly have significant and negative effect on efficiency, while ROA and FDR directly have significant and positive effect on efficiency. The financial distress of Islamic rural bank in Indonesia is mainly caused by micro and macroeconomics variables where CAR and SIZE directly have significant and positive effect on financial distress score, while NPF and Exchange rate directly have significant and negative effect on efficiency. Efficiency is strongly having a role in mediating the effect of microeconomics variables toward financial distress score of Islamic rural ban
Measuring the National Zakat Index (NZI) on Zakat Performance in Bogor Regency
Get PDFPoverty is the most crucial problem in many countries including Indonesia. As a predominantly Muslim countries, there are several Islamic instruments to combat poverty, such as zakat. It is an act of worship that combines economic, social, moral and religious components to improve the welfare of Muslims, as well as reducing poverty. Bogor Regency, a region in Indonesia, targeted 10 billion rupiah as its zakat collection for 2016. However, the actual zakat collection was only 5 billion rupiahs, which signals the ineffectiveness of zakat management from either collection, distribution, or utilization. The purpose of this research is to analyse zakat performance in BAZNAS (Badan Amil Zakat Nasional; National Board of Zakat) in Bogor Regency. Data were collected through interviews and questionnaires completed by 100 mustahik household in Bogor Regency. The National Zakat Index was used with a calculation method called the Multi-Stage Weighted Index. The findings indicate that the implementation of zakat performance in BAZNAS Bogor Regency is fairly good
Theoretical Impact of Enhanced Musharakah Mutanaqisah Home Financing on Real Estate Prices
Get PDFThis paper theoretically analyzes two alternative modes of home financing. The first mode is the conventional housing loan and the other is Enhanced Musharakah Mutanaqisah (EMM) home financing. Our results reveal the EMM based setting is superior to the conventional housing loans in at least two aspects. These are the prevention of house price inflation in all phases of economic business cycle and the smoothening of real estate cycles. This means that, under the EMM, the risk of real estate bubble formation is subdued, which should prove to be welfare improving