INCEIF Knowledge Repository (INCEIF University)
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Alternative crypto solutions for impact investing: advancing social impact tokens
No full textGlobal agendas are aggressively gearing towards climate change strategies and funding the United Nations (UN) Sustainable Development Goals (SDGs). The total investment gap for successfully achieving the 169 targets in developing countries is estimated at USD2.5 trillion per year (UNCTAD 2020). Unfortunately, limited data and challenges in data consensus have significantly inhibited monitoring bodies' ability to accurately determine how much and where it is needed. Furthermore, developing countries have been slow in developing sustainable fund structures and even slower in attracting impact investment for the SDGs (UNCTAD 2019). Impact investing is defined as "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return" (Global Impact Investing Network 2019). Once embraced as a mainstream funding vehicle, impact or sustainable investing is expected to enable the public and private sectors in reaching their SDGs targets
Ethical issues in profit rate charges in Islamic debt financing with special reference to Islamic personal financing product in Malaysia
No full textIn past thirty years, Islamic banking has established itself in the global market as an alternative method of financing to interest-based financing. Most of Islamic financing products are formulated on debt financing contract such as murabaha and tawaruq contracts where elements of interest, ambiguities, gambling and impure commodities are duly avoided. While these contracts have complied with the fundamental principle of the Shariah, less attention is accorded to the pricing aspect of the contract especially in the setting of finance charges, namely profit rates on the facilities. While regulatory murabaha Shariah parameter defined the selling price of murabaha as a sum of the cost of purchase and profit margin, less study is attempted on the latter. Claims of exorbitant profits charged by Islamic banks have been voiced by various parties including consumer associations are not without basis. The first objective of this study is to examine and confirm the claims made by the consumer groups. This study has confirmed that the complaints have been true where Islamic banks were found to use the monthly profit rate compounding system as well as the flat rate method which have contributed to the questionable increase in profits earned by the banks. In the former, the effective profit rates (EPF) are found always higher than the quoted profit rates (QPR) while in the latter the use of flat rate method (FRM) over the reducing balance method (RBM) where both of these practices have increase banking profits at the detriment of customers. This study considers this case as an ethical issue as no clear guideline on this matter is accorded by the regulator in the murabaha Shariah parameter
The COVID-19 pandemic: the impact on emerging and development economies
No full textHumans are social creatures that live based on interaction with one another, including economic activities and pandemics that brings unpredictable negative social and economic impact. The COVID-19 pandemic has now reshaped globalization and transformed the industrial society into an Information and digital society. This third-wave (Toffler, 1984) is mark by the widespread use of internet-based information technology, digital service industries with artificial intelligence as the driving of economic and social development. Meanwhile, COVID-19 has also shown a big gap between large companies with substantial market capitalizations such as Microsoft, Apple, [Alphabet] and Facebook in the developed economies that survive the pandemic. Similarly, in emerging and developing countries, their small-medium enterprises that forms the back-bone of their economy are also surviving this pandemic better than other businesses
Competition, diversification and performance in dual banking: a panel VAR analysis
No full textThis article investigates the dynamic relationship among competition, diversification and bank performance using data for 18 countries with a dual banking system over the period 2000 to 2016. Analyses using panel vector autoregression (P.V.A.R.) model, impulse response function (I.R.F.) and variance decomposition (V.D.C.) methods confirm that market power increases the profitability and the stability of banks the dual banking system while revenue diversification reduces them. Market power increases revenue diversification of banks. Segregating the sample of banks into emerging and developing countries, we find that positive impact of market power on profitability is stronger for emerging countries. Even though we find that revenue diversification has a more damaging effect on the profitability of banks in the developing countries, it only dampens the stability of banks in emerging countries. In addition, we find that asset diversification dampens the stability of banks. However, it has a more positive impact on the profitability of banks in emerging economies
Switching costs and bank competition: evidence from dual banking economies
No full textThere is a strong theoretical foundation that demonstrates costs of switching as one of the main barriers in creating a healthy level of competition. Switching costs might even be more prevalent for Islamic banks due to Shariah dimension since Shariah driven customers are limited to only switch to banks that offer Shariah-compliant products. However, the banking market is not completely segmented as Islamic banking clients can switch to conventional banks, and vice versa. This paper examines the degree of switching costs in Islamic and conventional banks, and investigates its influence on bank competition in dual banking economies. We find that conventional banks inherit higher switching costs than Islamic banks. The finding is consistent for all countries in the sample except for Malaysia and Bahrain. We also find that switching costs during the global financial crisis are higher than the rest of the years. We further document a significant negative relationship between switching costs and bank competition, while this relationship is more pronounced for Islamic banks
Role of zakah as an Islamic social finance tool in realising SDGs
No full textSlides that accompanied the keynote speech delivered at the International Webinar on Role of Zakah as an Islamic Social Finance Tool in Realising SDGs, 20 February 2021
Unearned wakalah fee in the takaful industry in Malaysia: a critical analysis
No full textThe issue of unearned wakalah fees (UWF) arises due to the statutory requirements in the Islamic Financial Services Act (IFSA 2013) that mandate takaful operators to refund any undue contribution with the corresponding wakaah fee in the event of surrender or termination of a takaful certificate. The relevant statutory provisions and Bank Negara Malaysia (BNM) guidelines on the valuation basis for liabilities of family and general takaful are open to more than one interpretation, and the exact definition and components of money not due are not clear. The implementation of the statutory provisions and regulatory guidelines on the refund of UWF has raised the following issues for the Malaysian takaful industry: 1. How to determine UWF and its components from money not due that must be refunded as stated in the statutory provisions and BNM guidelines? 2. What are the Shari'ah justifications, if any, to support the requirements for refund in the event of surrender? 3. How to resolve any Shari'ah and technical issues pertaining to the implementation of the refund of UWF due to lack of clarity regarding its definition and components? Accordingly, this paper delineates the concept and components of the wakalah contract, its salient features, contractual relationship, subject matter, including the wakalah fee, and juristic deliberations regarding it. It also examines the background and means of identifying UWF by explaining its subject and components, differences between earned and unearned wakalah fee, and the treatment of UWF. Further, it studies Shari'ah and technical issues related to recognition, calculation and refund of UWF and other surrender values
The role of zakat in poverty alleviation in Afghanistan: opportunities and challenges
No full textAfghanistan is a country with 99.99% of Muslim population and more than half of Afghans living below the poverty line. Nevertheless, there is a good number of rich people who are living in the same community as the poor Afghans live in, with such a great opportunity for zakat to be used as poverty reduction mechanism, poverty is a never-ending phenomenon in the country. This paper aims to find out how Afghans can use zakat to control poverty in the country and what are the challenges and opportunities in zakat collection and distribution processes. This study is based on qualitative and quantitative approaches. For quantitative analysis, primary data collected from Afghans is analysed to find out the major challenge facing zakat in Afghanistan today, also to examine the current zakat practice in the country and how Afghan can revive zakat institution, while for qualitative method articles, reports and case studies publish on similar topic in Malaysia, Indonesia and Bangladesh
Efficacy of Islamic financing for renewable energy infrastructure: the case for Nigeria
No full textThis dissertation examined the efficacy of Islamic financing instruments in bridging the energy infrastructure investment gap in Nigeria, a fiscally-burdened, developing country. A growing energy infrastructure investment gap is an imminent concern in Nigeria, like in many developing countries, and has been precipitated by financial and economic challenges. This research sheds light on two critical problems associated with the conventional infrastructure financing instruments in PPP: a. high risk of financial distress due to high debt gearing; and b. a substantial fiscal risk that endangers fiscal sustainability. Using a case study approach, the dissertation presents the case of Nigeria's Mambilla Hydro Electric Power (HEP) Project that has failed to kick off for over forty years since its initial approval due to several financing hurdles. This study examined in the Mambilla HEP project in its pre-set conventional financing framework and developed research hypotheses to design and structure an alternative Islamic financial instrument. Further, the study employs two distinct financial modelling techniques to test each of the hypotheses. First, it uses Monte Carlo simulation with optimisation algorithms to solve an objective function that maximizes the project's financial viability subject to specific economic constraints. Second, the dissertation uses scenario-based sensitivity analysis to assess Nigeria's (as the host country) fiscal sustainability position of the host country before and after implementing the infrastructure project using both the pre-set conventional financing instrument and the proposed Islamic financing solution
The pandemic and the economic conundrum: how Islamic finance can help
No full textThis paper examines the economic and financial impact of the Covid-19 pandemic and the responses that governments undertook. Though large and unprecedented in size, policy response has mostly been the same. Huge monetary stimulus, rate cuts, direct market intervention like bond purchases and debt moratoriums. Many of these were techniques used in the previous global financial of 2007-2009. Economies were already fragile and in a vulnerable state when the pandemic struck in late 2019. Continued use of the same policies did prevent a potential meltdown but has increased system vulnerability. The global debt burden is now much larger but governments may have fully expended all their monetary ammunition. Fiscal stimulus though much needed and more appropriate is seriously constrained by budget deficits and lack of fiscal space. Adding more debt to fund fiscal expansion is not really an option. Yet, the pandemic has made vulnerable, several parts of the economy that need to be salvaged. The SME sector which forms the spine of most developing economies is verging on collapse due to cash flow disruptions arising from lockdowns. The domestic banking sector which had funded these SMEs is exposed to a potential meltdown unless restructuring is done. The loan moratoriums widely adapted do not solve but merely postpone the problem. Governments, given their precarious fiscal position are in no position to provide the huge financial infusion needed to shore up the SMEs and banks. Islamic finance, which has risk-sharing alternatives can provide a way out of this conundrum. The paper proposes a shariah compliant risk sharing alternative to resolve this proble