Journal of Islamic Monetary Economics and Finance (JIMF)
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Can Yale Endowment Model Be Applied for Islamic Pension Fund?
Get PDFThis paper examines Yale Endowment model and proposes a modified investment model to achieve an investment objective of mainstream investors and to comply with Sharia principle. The proposed model utilizes Islamic CAPM to formulate the optimal asset allocation for Islamic pension fund’s portfolio. It will offer a strong investment strong which could be adopted by government to manage the Islamic pension fund and raise the awareness of society to see the great potential of Islamic pension fund in the future. Promoting an efficient and productive investment of pension-fund assets not only helps reaching Sustainable Development Goals (SDGs) by providing important sources of long-term finance for development, supporting financial inclusion and ensuring that poverty among the elderly is alleviated by a strong growth and resilience of income in retirement through pension systems that have broad coverage
Constructing Islamic Banking Resilience Index in Indonesia
Get PDFIslamic banking plays critical roles in providing many essential economic functions and services to the entire financial system and the overall economy. Thus, a strong and the resilience of Islamic banking is the foundation and pre-condition for achieving sustainable economic growth, given that banks are at the centre of the credit intermediation process between savers and investors. One of the main causes of past financial crisis was that the banking sector had built up excessive both on-and-off balance sheet levereage. To address such financial crisis, the resilience of Islamic banking needs to be developed. Therefore, this paper searches the level of resilience of Islamic banking by building the Islamic Banking Resilience Index (IBRI). The level of resilience is analyzed through the construction of the composite index. The composite is compiled on the basis of several single variables index. Its construction follows an ideal sequence of five steps: theoretical framework, data selection, normalization, weighting and aggregation, and visualization of the result. Twelve variables are used to construct the composite index by using monthly data since January 2010 until December 2016. The composite index is able to figure out the resilience level of Islamic banking in Indonesia over periods of observation. At the resilience level, Islamic banking is able to deal with shocks and stresses, while keep providing financial services. The level of resilience is capable of preserving the elements of banking sector not failing from both crash and stagnation phase. Therefore, construction of IBRI is important as surveillance tools and underlying reason for further policy response and implementation. The composite index, represented by IBRI, is able to show the level of resilience of Islamic banking in Indonesia. The paper finally suggests that the resilience of Islamic banking requires a solid capital and liquidity management in order to provide a stronger ability in absorbing shocks and promoting financial services
The Role of Integrated Islamic Commercial and Social Finance for Curbing Credit Cycles and Achieving Macroprudential Objective
No full textIt is widely believed that Islamic finance is inherently stable since the principle of risk-sharing and linking the financial to real counterpart in particular through its social finance are applied, hence the financial stability may successfully be attained. If mimicking the conventional finance, Islamic model will probably be facing instability, following the financial cycle. There has been a growing literature discussing credit cycle in mainstream perspective since 2008 global financial crash. However, it is quite rare to find study, in macro context, on credit cycles and the effectiveness of integrated Islamic commercial and social finance in achieving macroprudential objective: curtailing excessive credit. This study is designed to empirically examine the characteristics of cycles stemming from conventional and Islamic credit whether both have similar trend and also to investigate how the integrated Islamic commercial and social finance may be effective to hamper such cycles. By employing Hodrick-Presscot Filter, Markov Switching and Vector Error Correction Model, this study demonstrates that, in terms of cycle, Islamic model cycle has certain similarities with conventional counterpart since it functions under similar financial environment despite the fact that Islamic has less amplitude compared with conventional credit. Both credit and financing cycles tend to grow rapidly (excessive) several months before global financial crisis happened in 2008. This means that, in a dual banking system, credit and financing boom may precede financial crisis. Moreover, it is apparent also that the integrated Islamic finance is proven to be effective in curbing credit growth due to the effectiveness of both macroprudential instrument applied in banking sector and social finance in safeguarding financial stability.
 
Do You Capture Financial Crisis?
No full textThis article summarizes the multitude of empirical studies in the area of Islamic banking and finance with purpose to analyze impact of Islamic banking and finance studies to practice by mapping research direction and the depth of the study. The studies are categorized based on research paradigm, countries being researched, methods employed, and results that lead to policy direction in the particular period. The research found that the research direction of the papers under study mostly employ positivist paradigm with countries being researched are generally Malaysia, Pakistan, Indonesia and UAE. It documents that the papers did not link directly to the future policy directions ie. to predict and prepare for financial crisis, rather they merely responded to the undergoing policies or themes of the journals. This review provides insights for understanding the importance of guiding future policy direction in the area of Islamic banking and finance by publishing more research policy papers authored by both academics and professionals
An Integration of Waqf and Ventura Capital: A Proposed Model for Indonesia
Get PDFThis study aims to find the appropriate model for the modus operandi of a financial institution called Waqf-Ventura Capital Syariah (WVCS). WVCS is integration between social finance (waqf) and commercial finance (Ventura capital). This WVCS has been adopted in Indonesia but the right form of operation is still yet to be found. In addition, this study also looks for appropriate contracts able to be practiced within the WVCS itself. WVCS is conceptualized based on the content analysis of cash waqf operations, profit and loss sharing modes and venture capital strategies. It has been found that there are at least 3 alternative models of operation for this WVCS. Firstly, the waqf fund is pooled into the capital; secondly, the waqf fund is pooled into a third-party fund; and thirdly, the waqf fund is pooled into both the capital and third party-fund. These unique operandi of WVCS could be adopted, as long as there are mudharabah dan musharakah contracts for development of the Indonesian Economy
Linking Islamic Commercial and Social Finance with Special Reference to Cash-Waqf as New Strategy of Interest-Free Micro-Credit for Family Empowerment of the Poor Towards Establishing World Social Bank: A Case Study Approach
Get PDFThe floating of Cash-waqf Certificate as a financial instrument by Social Islami Bank Ltd (SIBL) in Bangladesh in 1997 (formerly known as Social Investment Bank Ltd) is an innovation in the history of Islamic Finance. The issuance of Cash-waqf Certificate has settled the age-old controversy among scholars concerning the concept of perpetuity and inalienability associated with waqf property since its implementation during the Ottoman Empire in the early 15th century. This study has put forward three proposals to establish a World Social Bank that includes (i) Giving Institutional Leadership by Bank Indonesia (ii) Forming International Taskforce (iii) Connecting Initiatives of Muslim- Minorities in Non-Muslim Countries for initial establishment of Commonwealth of Human Communities. Since the aforementioned Cash Waqf is managed by the Bank, it has its transparency and accountability, it is a perpetual deposit and its profit can be invested in a wide spectrum of social investment. Bank shall manage Cash-Waqf on behalf of the Waqif. It can help monetizing Islamic Voluntary Sector, accumulation of Social Capital and National wealth, implementing strategic social investment program that reinforces family values, family heritage empower people at grass roots and stimulates economic, social and moral foundation of a caring society. Cash-Waqf Certificate provides new opportunities to transfer liquid asset and make connection with one another on a global scale leading to establishment of World Social Bank a new strategy of interest-free micro-credit for empowering the poor to irrespective of caste,creed and religion
Zakat for Poverty Alleviation and Income Inequality Reduction: West Java, Indonesia
Get PDFThis research aims to analyze the role of zakat distribution programs for poverty allevation and income inequality reduction among groups in urban and rural areas. It takes the case study of 1,309 zakat beneficiaries managed by the National Zakat Board of Indonesia (BAZNAS) as the coordinating zakat institution in Indonesia, in five different cities and regencies in West Java Province namely, Bogor, Depok and Sukabumi. The analytical tools used in this study are the modification of the Center of Islamic Business and Economic Studies (CIBEST) model, CHAID analysis, Deciles method and Gini coefficient. This study suggests that the present zakat distribution programs can significantly alleviate poverty and reduce income inequality among the observed zakat beneficiaries. It is also found that spiritual supervision and routine assistance form BAZNAS officers, informal education, family size, age and job of the respondents are the variables that are statistically significant in influencing the increase of the households’ monthly income and spirituality. 
Procyclicality and Bank Lending Behavior in Indonesia: The Case of Dual Banking System
Get PDFIt is widely suggested in the literature that procyclicality of bank lending behavior may lead to financial instability. This study examines bank-lending channel over the business cycle for Indonesian dual banking system by ascertaining to what extent Islamic banks have a role in the credit smoothing. In this context, we utilize Indonesian dual banking system unbalanced panel data for the period 2001-2015. By employing two-step dynamic GMM estimators, the study shows that the bank lending behaviour are procyclical. However, when we categorize the lending behaviour into conventional and Islamic banks, the cyclicality of bank lending affects only for conventional banks. As for the Islamic banks, the business cycle does not affect their financing decision. Specifically, large Islamic banks are more counter-cyclical in their financing behavior than small and medium size Islamic banks. Robustness tests using different measures of loans and model specifications confirm the results that Islamic bank is more stable and less procyclical in the case of Indonesia banking system
Study on the Efficiency of Cash Waqf Management in Malaysia
Get PDFThe role of Waqf is synonym with the purpose of developing the economics as well as social well-being by means of a charity-based system. Revitalization of cash Waqf gives advantage to Muslims countries to further enhance this charity system. However, the efficiency of cash Waqf management is still questionable due to several internal management issues. This research is conducted to explore current practices of Waqf institutions in managing cash Waqf concerning human resource, documentation and reporting aspect; to investigate challenges faced by Waqf institutions in managing cash Waqf in terms of human resource, documentation and reporting aspects; and to suggest a few ways that can enhance the efficiency of cash Waqf management focusing in the three aspects. To achieve these objectives, qualitative methodology has been adopted where the data of this research was collected through semi-structured interview and review of past literatures as well as relevant documents. The finding of the research shows that majority of Waqf institutions have made efforts in promoting cash Waqf based on its regulation, financial sources, collaboration, duration of cash Waqf implementation and its strategic planning. However, the current practices of human resource, documentation and reporting are not suitable with the current pace of evolution to fully realize the benefit of cash Waqf. This research revealed the loopholes in the management of cash Waqf and suggested several ways for improvement as a reference for Waqf institutions in order to improve their cash Waqf implementation. It is a significant endeavor for Waqf institutions in Malaysia to develop knowledge on cash Waqf management as well as provoking speedy development progress of cash Waqf implementation in Malaysia
Debt Taking and Charity Giving among Low-Income Households: Strengthening Resilience in Islamic Perspective
Get PDFHouseholds’ financial problem was perceived to be solved by taking other source of fund such as debt. In Islam, taking debt should be considered as the last resource when other sources were not available. Islam gives solution for those who have financial problem. Giving just small amount of money would give barakah to the giver. Charity-giving is not privilege for the rich people, but also for those in dire conditions. This paper attempts to explore whether low-income households’ perception on consecutive debt-taking influences their perception on regular charity-giving especially to achieve stipulated outcomes, i.e. households’ financial resilience. Structural Equation Modelling (SEM) is employed to analyse 1780 data from respondents across six areas in Indonesia. Low-income households perceived consecutive debt-taking to have negative relationship with regular charity-giving and positive relationship with outcomes (households’ financial condition and lifestyle satisfaction). Meanwhile, regular charity-giving has negative relationship with the outcomes when consecutive debt-taking intervene the relationship. Financial education and selection of financing institution have been proven to have relationships with variables which influence both regular charity-giving and consecutive debt-taking behaviours. As recommendation, charity education or sharing values should be included in the current financial education program. Formal financial institutions and social finance institution should also encourage supervision and continuously give financial education to social funds receivers