INCEIF Knowledge Repository (INCEIF University)
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A fresh view on zakah as a socio-financial tool to promote ethics, eliminate riba and reduce poverty
No full textCurrent statistical data shows that almost all Muslim countries are facing economic and social problems such as the spread of poverty, mounting outstanding external debt due to compound interest and widespread unethical behaviour. Some contemporary scholars relate these problems to the oppression and the crippling policies of former colonial administrations, while others point to the governmental incompetence and corruption that triggered the last Arab spring. However, this paper contends that although the above mentioned issues may have served as catalysts that led to the worsening of socio-economic situation in many countries, the main reason for the overwhelming problems plaguing Muslim countries is their neglect of many Islamic financial and socio-financial duties, including zakah (alms) which is conceived to spread ethical behaviour, eliminate riba (interest), empower the poor and needy and so reduce and may even end poverty. This study aims to demonstrate how zakah, as a socio-financial tool, can help promote sound standards of ethics, generate funds to counter external borrowing endorsed by anti-poverty programmes, empower the poor, and eradicate poverty in Muslim societies. This paper uses a secondary source based meta-analysis of books, articles, journals, annual reports, and websites, besides referring to the Quran and the Sunnah of the Prophet (PBUH) whenever necessary. The findings show it is imperative that zakah to be recognised as an effective sociofinancial tool to counter the ills currently plaguing Muslim societies. Adequately managed and distributed zakah can help to promote good ethics, overreliance on external borrowing, empower the poor and end their poverty hence, resulting in a just and a caring society
Corporate social responsibility contribution to socio-economic development: evidence from Indonesian Islamic banks
No full textIslamic banks play a significant role in social and environmental responsibility. It is known that Islamic finance is not merely profit-oriented but also looking at the prosperity of the society, as an ethical financial system Islamic finance give a massive contribution towards social responsibility. This exploratory study examines the relations between corporate social responsibility (CSR) practices of Indonesian Islamic banks and socio-economic development. The evidence presented is based on the published annual reports of 13 Islamic commercial banks in 2017. The findings of this research suggests that CSR is a priority of Indonesian Islamic banks and has correlation to the socio-economic development. Furthermore, the findings suggest that the robust guiding principles on CSR need to be developed and it has potential of Islamic banks credibility and profitability
Determinants contributing to the primary market spread of securitization in Malaysia
No full textDuring the year 1997, the Asian financial crisis disclosed the inherent weaknesses of the financial market in Asia. Organisations had an over-dependence to the banks as the primary sources of fund is one of the reasons why companies faced difficulty during the financial crisis. One of the factors that contributed to the financial crisis was that organizations failed to diversify their financing structure. It is to be noted that when organisations want to source for funds, they can either issue stocks, bonds or finance from banks locally or globally. Source capital from equity and borrowing through debt is considered difficult, expensive and will distort the financial leverage of the company. The development of securitization allows the organization to smooth up their cash flow by converting the illiquid assets into a liquid asset through a special purpose vehicle (SPV). SPV is a legally separated entity from the company or the holder of the assets. SPV can take the forms of either a trust, corporation or partnership set up just for the purchasing of the originator's assets. There are many literature pieces of research that regard the factors that contribute to the pricing of corporate bonds but there are few empirical studies on the determinants on securitization in Malaysia
The institution of waqf: an innovative financial tool for socio-economic development
No full textThe book is written to meet the needs of students studying waqf and those who are keen to study modes of Islamic social finance. Part of this book maybe useful to those studying Islamic economics at the undergraduate and postgraduate levels. Apart from students, this book can be used by professionals to refresh and update their knowledge about the subject and implement Islamic social finance via waqf practically. This book is arranged in a way that helps readers understand pertinent areas of the topic in a comprehensive manner
Pandemic innovation for zakat: the potential of crypto zakat
No full textTechnology has no religion. As long as technology is utilized to benefit the humankind, from a Shariah perspective, there is no issue in using it. Zakat is the third pillar of Islam and to enhance the processes and procedures involved in it, technology has been used. The digitization process of zakat has taken place and today we are moving towards digitalization of it. The process of zakat is simple. The Muslim or any person professing the religion of Islam who is eligible to pay zakat could do so to Baitul-mal or directly to any of the categories of asnaf stated in the Quran: "Zakat is for the poor and the needy, and amil (those employed to administer the funds), for the muallaf (those who have embraced Islam), for in bondage and in debt, in the cause of Allah and for the wayfarer: (thus is it) ordained by Allah and Allah is full of knowledge and wisdom" (Surah At-Taubah: 60). If the zakat money is paid to the baitul mal, it is the responsibility of the baitul mal to distribute the zakat money to the categories of asnaf stated in Quran. The latter process involves collection and disbursement and over the years, a number of challenges have been faced in the process of zakat collection and disbursements resulting in employment of various types of technology to overcome or mitigate these challenges
Are Islamic banks suffering from a model misfit? Comparison with cooperative banks
No full textFor the first time, this study investigates whether, in mimicking conventional banks, Islamic banks have become less stable than their theoretical equivalent: cooperative banks in Europe. Theoretically, the prohibition of interest should have pushed Islamic banks towards mutuality and profit-sharing, which have been argued as stabilising. In practice, however, banks are pushed for growth under a debt-driven commercial banking model, which is not only antithetical to the Shariah but is also destabilising. This may explain why empirical findings are still divergent in Islamic banking stability studies. Our study employs the generalised method of moments (GMM) system to compare the stability of 37 Islamic banks against 1,536 cooperative banks in Europe during the 2008 crisis and post-non-crisis years. Interestingly, we found consistent and significant evidence that Islamic banks are less stable than cooperative banks in both macroeconomic conditions. This has significant policy implications, the most important of which is to steer reform efforts away from refurbishing Islamic commercial banks and towards building an entirely new Islamic cooperative bank, based on the model in Europe
Islamic social impact financing & the Syrian refugee crisis in Turkey
No full textOver the last few decades, refugee issues have been at the forefront of social issues globally, with Turkey leading the countries affected from migrant movements in recent years (UNHCR, 2020). Funding refugee camps and their fundamental needs such as education, healthcare, accommodation, employment and social needs are heavy burdens for host countries. The Turkish government spent more than $40 billion for Syrian refugees alone, since the conflict in Syria began, which is around 5% of the Turkish GDP (TRT News, 2019). For several reasons, including the obvious economic, financial and political impact, the refugee crisis in Turkey has become a significant challenge exacerbated by the recent reneging of the European decision to absorb a portion of refugees within their own borders. The further refusal of financial support from a previously agreed European commitment has caused significant pressure on the Turkish economy that has already been unsettled through political (infamous attempted coup) and economic shocks. The Turkish government is therefore in dire need of a financial solution that ensures the sanctity of its sovereignty, complies with its approach of prioritizing Islamic finance development and reduces internal economic impact derived from the demands of supporting millions of refugees fleeing from war
Istijrar: an alternative solution to murabahah-based import financing facilities under letter of credit-I in Malaysia
No full textIslamic banks provide similar trade finance facilities to those of conventional banks. They intermediate between buyers (i.e., importers) and sellers (i.e., exporters), act as a custodian of documents, and provide means to reduce payment risks via different payment terms (e.g., open account, documentary collection and letter of credit (LC)). They also provide financing - as need be - to help with working capital tied to the trade transactions. This research focuses only on financing by Islamic banks to importers that involve LCs. Different underlying Shari'ah contracts are used for import financing facilities under LC, the most common being the murabahah contract. At the time of sale, the existence of the subject matter and its ownership by the seller are the key requirements for the validity of a murabahah contract. In the absence of either of these requirements, the contract is considered null and void
Fintech: technology application in the financial product ecosystem
No full textRecent success in the technology sector has witnessed the transformation of start-up companies with relatively small or no seed capital into billion-dollar companies within a very short-space of time. From the advent of taxi-hailing apps (aka Uber, Lyft and Grabcar) to accommodation (eg. Airbnb), smartphone applications and web-based platform provide the evidence of this growing phenomena. The application of technology in the financial sector has 'disrupted' the traditional 'brick-and-mortar' style distribution channels and if not embraced, would cause the current financial sector to lose a substantial portion of their businesses (estimated between 20% to 40%) to firms using 'fintech'
The role of multinational banks and international transmission of financial shocks in dual banking system: do Islamic multinational banks make a difference?
No full textIn the last two decades, financial integration and financial liberalization has resulted into proliferation of multinational banks across the globe. This augmenting growth in multinational banking is proclaimed to enhance financial stability in host countries as they bring about competitiveness and efficiency, introduce best governance practices, superior risk management techniques, product innovation,and above all have parental support at their disposal in times of financial distress. However, at the same time these multinational banks with significant market share can destabilize host economies as they may not only intensify their domestic crises but may also become a source of transmitting financial shocks from home countries to their host economies. Rapid liberalization and facilitative business environment in many Islamic countries has also encouraged large multinational banks to make these countries their destination of choice. However, despite their mushrooming growth, less attention is being devoted to study the impact of these foreign-owned subsidiaries in dual-banking economies where conventional and Islamic banks operate in parallel. Taking a sample of 245 banks and unique matched dataset of 85 foreign-owned subsidiaries operating in dual-banking systems for a period from 2001-2016, our study investigates if Islamic foreign-owned banks behave differently than their conventional counterparts over different facets of financial crisis in both the short-and as well as in the long-run ..