INCEIF Knowledge Repository (INCEIF University)
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Can fraud in Islamic financial institutions be prevented using high standards of Shariah governance?
No full textThis study aims to scrutinize the modus operandi of global financial frauds in Islamic financial institutions and assesses whether those frauds can be prevented using high standards of Shariah governance. A qualitative research methodology is deployed to conduct this study by analyzing and scrutinizing academic journals, reports, regulatory guidelines and articles The findings in this study show that the modus operandi ranges from bribery, forged documents, unlawful profiteering, credit limit allowance ignorance, Ponzi scheme, culprit collaboration from inside and outside the banks. This paper also argues that the centralized and high-standard Shariah governance framework better prevents fraud by providing better Shariah supervision and risk management measures. The observations in this study are limited to financial fraud at Islamic financial institutions that happened in the 21st century with more than $100m in financial loss or penalty. This study may contribute significantly by providing insight for regulators to strengthen the Shariah governance framework in their respective countries. It also benefits Islamic financial institutions by enhancing their capacity to anticipate future financial fraud
New frontiers for cash-waqf models for socio economic development
No full textWaqf is a charitable financial instrument established by withholding immovable and movable properties to perpetually spend its revenue on fulfilling various socio-economic needs, depending on the founder's terms and conditions. Once the property is created as waqf, it can never be given as a gift, inherited or sold. It belongs to Allah (SWT), and the waqf property always remains intact. Only its generated revenue is channeled to the specified need. There are two motives behind the creation of waqf for the founder. The first is to attain righteousness as clearly stated in the following verse from the Qur'an: "By no means shall ye attain righteousness unless ye give (freely) of that which ye love; and whatever ye give, of a truth God knoweth it well" (Surah Al- i'- 'Imran 3: 92). The second is to get eternal rewards even after the founder's death, as stated in the hadith. Abu Hurairah (RA) reported Allah's Messenger (PBUH) as saying: "When a man dies his acts come to an end, except three things, recurring charity, or knowledge (by which people benefit), or pious offspring, who pray for him" (Sahih Muslim, Hadith 1383). These two inspiring motives in creating waqf imply a unique and everlasting financial instrument that not only fulfils the various socio-economic needs for different levels of Muslim societies, but also provides sustainable goods and services for future generations as well as generating continuous rewards for founders in the hereafter
Sukuk structure for deficit financing during COVID-19 crisis
No full textThis paper identified the sukuk structure suitable for deficit financing during the COVID-19 crisis. The study also explored the relevant Shari'ah contracts that could be utilized to issue sukuk that is suitable for various jurisdictions and corporations in handling deficit financing during the COVID-19 crisis. The authors have adopted a qualitative research approach in which primary and secondary sources available on the subject were reviewed, especially a number of cases related to sukuk structures prior to and during the COVID-19 crisis and analyzed their performances and drawn their conclusions. The outcome of this paper suggests that certain sukuk structures used during the COVID-19 crisis aimed primarily at financing deficit have been successful. Furthermore, these sukuk structures are relied very much on the obligator's/issuer's cash flow position. It has been revealed that if the sukuk is structured on equity-based contracts with lower repayment amount or no payment, it would not trigger default because the nature of this sukuk is the sharing of profit and loss, in accordance with a Shari'ah rule that there will be compensation for any loss only if deliberate and notable negligence is proven. However, if it is debt based or ijarah and wakalah contracts, then the payment to sukuk holders ought to be made as agreed and if not, it will trigger default. This payment is to be made from the cash flow of the issuer and if there is an issue in the cash flow of the issuer due to COVID-19, consent from the sukuk holders needs to be obtained to reschedule payment as found in the case of the Garuda Indonesia sukuk. However, as found in MASB's IMTN sukuk case, if the cash flow of the company is good, then the chances of default are very slim. However, so far, three new sukuk in the middle of COVID-19 were issued, one by a corporation and two issued by a sovereign, one of which addresses the liquidity issues during the pandemic, and all these proved that sukuk is definitely a viable alternative mode for deficit financing and a reliable option during the COVID-19 pandemic. This paper looked into the sukuk structure, especially the sukuk which are yet to mature and the new sukuk issued during the crisis caused by the COVID-19 pandemic
Parliament of Maldives to give final approval for Maldives becoming a member of ITFC
No full textOn the 6th June 2022, the president of the Maldives, Ibrahim Mohamed Solih, sent a letter to the parliament requesting it to endorse the Maldives as a member of the International Islamic Trade Finance Corporation (ITFC). On the 24th May 2022, the cabinet approved the Maldives to become a member of the ITFC; however the final permission has to be given by the parliament. Even now, the ITFC has been providing financing facilities for state-owned enterprises. For instance, on the 1st June 2022, it is reported that the ITFC renewed a Murabahah trade financing agreement for US$175 million to support the import of essential commodities with the State Trading Organization of the Maldives. It was reported that the financing facility will support the procurement of essential commodities, including petroleum products, staple food and medicine and medical equipment; the original Murabahah trade facility was signed between the ITFC and the Republic of Maldives in October 2019
Halal food and beverage trade: do restriction on religion, halal certification, and OIC membership have any Impact?
No full textThis study determined the worth of the Halal food and beverage trade. We imposed the Poisson Pseudo-Maximum Likelihood after applying the gravity model (PPML). The economic size of trading partners, regional trade agreements, a shared border, and a shared language are determinants with a strong beneficial effect on commerce. On the other hand, the negative trade factors are the distance between trading parties, the exporting country's income, the exchange rate comparison, and landlocked trade. In the meantime, the income level of the importing nation and the colonial relationship appeared to have little impact on trade, as does OIC trade cooperation. Halal certification has a considerable beneficial influence. However, limitations on religious considerations (GRR and SHR) have a significant negative impact on trade
Depicting ethical dilemma in Islamic financial institutions; addressing the gender heterogeneity
No full textThough the lex loci applicable to Islamic financial institutions (IFIs) are derived from Shariah that embeds ethical and moral values, IFIs still face ethical dilemma. Since the leadership and managerial roles are played by both genders, it is imperative to understand the implication of their contribution in this. As such, the objective of this paper is to examine the influence of gender using the aspects of al-Ghazali's ethical philosophy in explaining the formation of ethical and unethical behavior within the purview of the Islamic finance industry of Malaysia, where both genders play a pivotal role in the industry. A total of 418 samples were collected from IFIs 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. The empirical findings indicate the dedicated use of intellect in making decisions related to ethical issues where desires and emotions tend to overwhelm reason and human choices. While divine knowledge is found ineffective guidance of the intellect, the element of satanic force is found to significantly impacting decision-making. As the lack of religious consciousness is evident among respondents, higher exposure to operational risk is expected. These findings were found identical among both genders under study. Findings suggest respective authorities of Islamic financial institutions to intensify the capacity-building programs on the foundation of faith which includes Islamic thought and worldview, to enhance the corporate ethical decision-making irrespective of gender
Tawar al-hawkamat wa-itar al 'amal al-qanuni wal muasasatilil waqf bi Maliziya
No full textAwqaf properties in Malaysia have evolved over the years from being in the nature of consumptive immoveable properties used for religious purposes like madrasahs and mosques into productive and mixed-use type real estate properties like hotels, office buildings and commercial type properties. The regulatory and legal frameworks have played a vital role in the evolution of waqf sector and its management through the State of Islamic Religious Councils (SIRCs), the Department of Waqf and Hajj (JAWHAR) and Yayasan Waqaf Malaysia (YWM). In fact, waqf in Malaysia operates under three separate laws, namely: Islamic Law, Federal Territory Act or State Enactments relating to administration of the Islamic Law, State Waqf Enactments. In addition, the 2007 national fatwa permitting cash waqf in Malaysia brought about diversification of awqaf properties through the introduction of several cash waqf schemes by local banks, federal agencies as well as State Islamic Religious Councils (SIRC). Further developments were seen with the development of the concept of "corporate waqf" and waqf shares as well as innovative awqaf products in the takaful sector and the Islamic capital market. Another significant development occurred in 2015 with the introduction of the Labuan International Waqf Foundation (LIWF) by the Labuan International Business and Financial Centre (LIBFC). Through qualitative research and content analysis, this paper traces these developments in Malaysia through the lenses of governance, reformation and transformation. The research also adopts the analytical method to evaluate the viability of waqf in the Malaysian context. Some of the issues that will be touched on are whether the regulatory framework for waqf in Malaysia has moved in tandem with these developments, innovative use of waqf for financial inclusion, as well as the online platforms to collect waqf funds
Islamic banking in retrospect
No full textMuch of the modern Islamic banking business was set up in the 1970s, but discussions had been around much earlier, predominantly among Islamic economists. For this reason, it is not surprising to see the concern for economic justice and equity from profit-loss sharing (PLS) arrangements such as mudaraba and musharakah against the evils of riba (usury/interest) which is blamed for the economic injustices that people face. Riba is said to favour the rich class over the working class as the former holds greater command of income and assets. Small businesses and startups stand no chance to compete with big companies for bank loans. In a way, PLS can be the way out to introduce justice into the banking business. Early Muslim economists such as Mahmoud Abu Saud, Nejatullah Sidiqqi, Umar Chapra, Zubir Hasan and Abbas Mirakhor followed by the younger cadres at the Islamic development bank (IDB) have contributed tremendously to the field with much stress being placed on the Islamic economic objectives, which is obvious. The drive for economic development and stability in Muslim countries has produced significant debate on Islamic fiscal and monetary policies based on the zakat system and other redistributive instruments like waqf and sadaqah
PPPs or iPPPPs: which model provides greater infrastructural social impact in Sub-Saharan Africa?
No full textSub-Saharan Africa (SSA) is made up of West, East, Central and Southern Africa and comprises approximately 48 independent countries. The region contributed just 2.35 per cent to the global GDP in 2020 but accounted for over 14 per cent of the global population during the same period (World Bank, 2021). Data indicates that the global population will increase by 2 billion within the next three decades, half of which will be from the SSA (United Nations, 2019). Unfortunately, SSA economies are classified as fragile, making them vulnerable to economic shocks or health disruptions like pandemics (OECD, 2018). To prevent financial collapse, SSA countries require efficient financial structures that will ensure resilience in crisis whilst achieving sustainable growth
Wadiah and ujrah issue in al-rahnu product: a turning point to tawarruq structure
No full textThe issue of wadi'ah and ujrah has long been discussed by scholars in the past by dividing them into two different types of contracts, namely mu'awadat and tabarru'at. They agreed that these two contracts have different characteristics, where mu'awadat is to generate profit while tabarru'at is a purely charitable contract. Thus, this article aimed to review why this combination is a non-shari'ah compliant and therefore, a replacement with another shari'ah structure becomes an essential. This study uses qualitative approach where interviews and content analysis are conducted and several books of fiqh from the four schools of thought are examined. The frequency of words by using some identified terms such as wadi'ah, rahn, ujrah, mu'awadat and tabarru'at are determined and coded to form the tendency of fiqh views whether it support the objective or against it. The study shows that modern scholars have a tendency of shared similar views and they found these two covenants (wadi'ah and ujrah) have been mixed in the same product namely ar-rahnu and this has raised the issue of shariah. They argued the safekeeping of collateral is applied based on the principle of wadi'ah where they impose a fee for the service that is rendered. This kind of fee is charged under the principle of ujrah. However, this connection gives rise to the indirect implications of bay' wa salaf and qard jarra manfa'ah, that are prohibited in shari'ah. Therefore, the tawarruq is so much better option to replace the wadiah-ujrah principles