INCEIF Knowledge Repository (INCEIF University)
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Saddling effect of underlying contracts on sales performance: a multi-group analysis in the takaful industry
No full textThis study aims to examine the impact of information overload (referred to as the saddling effect in this study) of underlying contracts on the sales performance of the salesforce at takaful institutions with special reference to addressing the heterogeneous effect among distribution channels. A total of 311 samples were collected from the sales professionals of the takaful industry in Malaysia using a purposive sampling technique and the empirical analysis was conducted with the measures of model fit and bootstrapping technique using partial least square structural equation modeling and multi-group analysis. Empirical results indicate that the saddling effect of the underlying contracts is evident among salesforce and the magnitude of the impact was found to be heterogeneous between the groups of salesforces in different distribution channels. Findings recommend respective authorities of takaful institutions to intensify capacity building for their salesforce, particularly in the area of shariah knowledge and nature of underlying Islamic contracts used in the takaful products. A significant heterogeneous effect between distribution channels suggests that the actions and policy formulations should be diverse between the salesforce at different distribution channels and higher attention should be catered for the salesforce at the direct selling channel
Islamic finance stakeholders in the Maldives to strategize future of the industry
No full textThe importance of Muslim-friendly tourism to complement the unique tourism proposition of the Maldives was highlighted by the minister of tourism of the Maldives, Dr Abdulla Mausoom, during his speech as a chief guest at the Maldives Islamic Banking and Finance Industry conference held for the 9th consecutive year in the Maldives. Professor Azmi Omar, the president and CEO of the International Centre for Education in Islamic Finance or INCEIF in Malaysia and who was the guest of honor and the keynote speaker at the event attended by the Maldivian Islamic finance fraternity and experts worldwide, shared his experience on ways to deploy the potential of Islamic finance in achieving financial inclusion. As the chairperson of the conference, Dr Aishath Muneeza, the chairman of the Capital Market Shariah Advisory Council of the Capital Market Development Authority (CMDA) of the Maldives, highlighted the progress made by the Maldives in the midst of the COVID-19 pandemic in Islamic finance as the Maldives has been ranked 10th in the Islamic Finance Development Indicator published in the 2021 Islamic finance growth indicator report by Refinitiv
Intellectual capital disclosure and corporate governance: empirical evidence from a cross country that offering Islamic bank services
No full textIntellectual capital is imperative for Islamic banks given their unique characterisctiscs in that they offer innovative Shariah-based solutions to the modern financial problems. This study therefore examined the influence of corporate goverance on intellectual capital disclosure (ICD) practices of Islamic banks. Data from a sample of 33 Islamic banks for the period 2012 to 2018 were collected. A self-developed ICD checklist was used to measure the extent of IC information disclosed in the annual report. This paper also examines the relationship between ICD practices and several corporate governance components which includes board size, board meeting, board independence, board gender, board expertise, audit committee size, audit committee meeting, audit committee independence, audit committee gender and audit committee expertise. Our results revealed that having an effective corporate governance structure is essential, as it is able to influence the ICD practices of Islamic banks. However, instead of focusing on the role of the board, our paper highlights the importance role of audit committee functions. Specifically, the results suggest that larger or reasonable audit committee size tends to have varied skills and expertise among the audit committee members, resulting in more information by allowing for greater diversity of backgrounds and viewpoints. Gender diversity in audit members' profiles will also encourage the board to be more effective and creative in generating innovative ideas, hence more IC will be created. This study adds to the empirical studies on corporate governance from Islamic banks' perspectives covering several countries. It also introduce the Shariah capital, as one of components in the IC index to respond to the peculiarities of Islamic on intellectual capital
Sukuk default/near default and governance failure: the need for a strong and sound governance framework (the role of Securities Commissions and other regulatory authorities)
No full textThis study examined the relationship between corporate governance failures in sukuk issuer's company/ originator's company and sukuk defaults/ near defaults thus calling for the attention of Securities commission and other regulatory authorities on the need for sound and vibrant corporate governance framework. There were five (5) celebrated sukuk cases reported outside Malaysia region in 2009 while nine (9) cases of sukuk default were reported in Malaysia same year. The year 2009 was dubbed sukuk default year as there were fifteen (15) reported cases of sukuk defaults out of which nine (9) cases were reported in Malaysia alone (Mohammed Khnifer 2010). It was established that Corporate governance failures among other factors contributed significantly to those sukuk defaults as most of the cardinal points on which sound governance framework rests on were violated by Issuer/Originator companies, which ranges from Full Disclosures and Transparency in all business affairs, corporate governance culture and character to be exhibited by Board members, Independence of Auditors, protection of the interest of all stakeholders i.e not only shareholders as observed in some cases. While some of the companies posited shariah non-compliance of the sukuk transaction as justification to avoid payment on their due obligations however the US & UK Courts came to the rescue of the sukuk holders. While Sukuk holders with respect to Malaysia default cases were lucky by not going through prolong and rigorous court cases by utilizing options of restructuring and other various dispute resolution schemes provided by the Malaysia Regulatory authorities, those sukuk investors in the GCC countries were not that lucky. Hence, all regulators in the industry need to be reviewing their corporate governance code and framework regularly
What motivates retail investors to invest in government-issued digital sukuk during COVID-19?
No full textTo analyse Sukuk Prihatin (SP), the first-ever retail digital sukuk issued by the Government of Malaysia in the midst of the COVID-19 pandemic, as part of the national economic recovery plan. The issuance of SP was oversubscribed, even upsized, resulting in the government announcing its intention to issue similar types of sukuk in the future. In light of this, the purpose of this study is to understand the motivation for retail investors to invest in SP. The purposive sampling method was applied via a self-administered survey, while the cross-sectional data were empirically tested using the SmartPLS 3.2.9 structural equation modelling. An integrated model of the theory of planned behaviour and social cognitive theories was used in determining investors' intention to invest in SP. The findings of this research revealed that attitude (ATT) towards SP investment (SPI), social norms (SN), perceived control (PBC) regarding SPI, sukuk features (SF), tax incentives (TI) and the spirit of unity and brotherhood (SUB) were significant determinants of investors' willingness to invest in SP. This research also provided evidence for significant national pride-moderated interactions of ATT, SN, PBC, SF, TI and digitisation on investment intention. The outcome of this study could assist governments and policymakers to structure sukuk and other debt-based capital market products to attract retail investors who would be willing to invest in the development of the nation in the midst of a crisis
Insolvency regime for Islamic banks in Malaysia: an analysis from the Shari'ah perspective
No full textIt is presumed that banks including Islamic banks (IB) are too big to fail. Despite the evidence to the contrary, this presumption is still predominant. The evidence shows that the consequences of banks insolvency is part and parcel of the business risk involving banks, albeit it can be prevented or mitigated with sound insolvency regime. The objectives of this research are to: explore the concept of insolvency under Shari'ah; examine the insolvency regime applicable to IB in Malaysia; study the instances in which Islamic financial institutions (IFI) have been insolvent and insolvency framework applied in actual cases of failed IFI; and find out the compatibility of current insolvency framework for IB in Malaysia with Shari'ah by identifying the gaps. Needless to say that the operation of IB must comply with Shari'ah requirement from 'cradle to grave'. In other words, its establishment and dissolution should not just be mere technicality but has to be backed by Shari'ah force. In pursuant to these objectives, a qualitative study that prescribed a doctrinal and empirical method has been employed. The findings of this research identifies several gaps that are: absence of reference to iflas concept, absence of recovery and resolution planning (RRP), absence of international Shari'ah standards on IB insolvency and reliance on conventional international standard on bank insolvency, absence of mechanism for effective communication and training among the stakeholders, absence of Shari'ah ruling by SAC related to insolvency of IB's and recommended the followings: acknowledge the term iflas in laws related to IB in Malaysia and embedded into insolvency regime for IB in Malaysia; opinion from SAC must be sought on procedure related to insolvency of IB; include RRP in insolvency regime for IB in Malaysia; advocate for the formulation of international - standards on IB insolvency and remove full-reliance on conventional international standard on bank insolvency; establish a communication channel and lastly provide adequate training to related stakeholders involving in IB insolvency. It is anticipated that the outcomes of this research would contribute to Malaysia to attain a comprehensive insolvency regime for IB that is compatible with Shari'ah. The regulator, supervisory authority, resolution authority, policy makers and law makers can use this research as a basis to further enhance and/or amend the related policy and laws that might hinder the orderly recovery and resolution process of insolvent IB in Malaysia
The impact of bank competition on financial intermediation cost in dual banking system
No full textThis thesis examines the relationship between bank competition and financial intermediation cost in the dual banking system. In literature, such relationship has been substantially studied for the conventional banking system. Yet, exploring it in dual system is still missing. This examination is important for two main reasons. First, the changing market structure within the dual banking jurisdictions and its sequences on various banking aspects. Second, the high intermediation cost of Islamic banks compared to their conventional peers, which is well documented in literature, and the possible role of changes in market structure on such cost. By leveraging on a sample of 387 commercial banks (85 of them are Islamic) from 12 dual banking jurisdictions across 20 years (1999-2018), this empirical study tries to fill an important research gap in the dual banking system literature by studying the impact of bank competition on financial intermediation cost, represented by bank margin, within dual banking system from three main perspectives
Implication of GST increase on Islamic finance offered by private companies
No full textPursuant to the sixth amendment to the Goods and Services Tax (GST) Act, the rate of tourism sector GST and general sector GST will increase to 16% and 8% respectively from the 1st January 2023. As such, the Maldives Inland Revenue Authority (MIRA) has released a circular on the 24th November 2022 informing that GST must be charged at the new rates if the 'time of supply' of a transaction occurs on or after the 1st January 2023. MIRA also advised to take the necessary action to bring any system changes beforehand that may be required to charge GST at the new rates, and to have a ready arrangement to display the prices of goods and services inclusive of the new rates
What drives the halal food and beverage trade? A gravity model investigation
No full textThe study aimed to determine the antecedents or drivers of the Halal food and beverage trade. The Halal F&B statistics were manually derived by applying the Shariah principle of "presumption of permissibility" and the WTO assumption when assigning HS codes on the specific trade concerns database to determine the approximate value of Halal F&B trade between countries, which is an important contribution of this study. We utilized the gravity model of international trade and the Poisson-Pseudo-Maximum Likelihood (PPML) approach, which is the gravity model's commonly suggested estimator. The examined samples include bilateral trade data from 59 nations (20 OIC members) between 2007 and 2016. The tested determinants are the variables of the economy, distance, level of income, exchange rate, regional trade agreement, common border, common language, colonial relationship, and landlocked commerce. Results indicate that the economic size of trade partners, regional trade agreements, shared borders, and common language significantly positively impact the value of Halal F&B exports. In contrast, distance, exporting nation income, exchange rate, and landlocked trade significantly negatively impact. Meanwhile, it appeared that neither the income level of the importing country nor its colonial relationship had a substantial impact on commerce
The determinants and impact of short-term capital flows on stock market (conventional and Islamic) and economic growth: evidence from the OIC countries
No full textThis thesis investigates the determinants and impact of short-term capital flow in the 33 OIC countries from 2000 to 2018 and bridges the understanding between both literature strands. The short-term capital flows are divided into gross inflows, outflows, and extreme episodes, analyzed under the push-pull framework. The empirical approaches for exploring the determinants of short-term capital flows consist of panel static and dynamic LSDV and probit models. Additional analysis controlling for Lucas's paradox conditions provides more insights and robustness. The study then analyzes their impact on economic growth (GDP), conventional, and Islamic stock markets. The study employs time-series models (ARDL and NADRL) to test the impact of short-term capital flows on economic growth and stock markets. The models establish the long-term dynamic relationship and synergize with prior findings on the heterogeneous responses of each country. The findings suggest that short-term capital flows into the OIC countries are tied to the global commodity and domestic consumption effects, indicating the dominance effect from push factors and the global economic cycle. Regional contagion act as a transmission mechanism of episodic flows across the OIC. There is also clear evidence of each country's heterogeneous determinants and impact of short-term capital flows, emphasizing the important roles of pull factors and the level of capital account openness. The impact of STC flows on stock markets confirms that they are susceptible to global economies and uncertainty, especially in conventional stock markets. The findings for Islamic stock markets support the "decoupling hypothesis" since they are less affected by global shocks from higher risks and uncertainty. The overall findings imply the importance of capital liberalization, institutional quality, and the optimal sequence of capital liberalization