INCEIF University Journals
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Islamic Social Finance Initiatives: An Insight into Bank Islam Malaysia Berhad’s Innovative BangKIT Microfinance Product
Full text linkPurpose ― The aim of this study is to explore the initiative taken by Bank Islam Malaysia Berhad (BIMB) in upholding Islamic social finance (ISF) through the innovative BangKIT Microfinance product.
Design/Methodology/Approach ― This paper adopts the qualitative approach to review and synthesise the relevant literature on microfinance and Islamic microfinance and, moreover, analyses the BangKIT Microfinance product offered by BIMB.
Findings ― The paper identifies the ISF initiative undertaken by BIMB as one of the primary objectives of Islamic banks with the noble aim to contribute to the society. This study makes some recommendations for further improvement of the product to unlock the full potential of ISF. It also proposes such a unique ṣadaqah-based product to other Islamic financial institutions (IFIs) and Islamic microfinance institutions (IsMFIs) to promote the provision of credits to individuals and businesses that lack access to fundamental financial products and services.
Originality/Value ― This paper sheds light on the use of loans and ṣadaqah-based products as a microfinance initiative offered by an Islamic bank. Although there are several microfinance institutions (MFIs) in Malaysia, this product is amongst the pioneer contributions to the role of Islamic banks in ISF
Evaluating the Bookkeeping Practices of Muslim Traders in the Context of Islamic Inheritance
Full text linkPurpose ― This study evaluates the bookkeeping practices of Muslim traders that carry out their trading activities in Kano State, Nigeria, from an Islamic inheritance perspective.
Design/Methodology/Approach ― The major source of data was the administration of questionnaires. Semi-structured interviews were also conducted to support the results.
Findings ― The questionnaire results found traders maintaining incomplete and improper records of their assets and liabilities. They also kept very minimal records for waṣiyyah (Islamic will). The findings imply that their inheritable wealth would not be fairly distributed based on the provisions of Islamic inheritance law. This claim was supported by real-life cases obtained through interviews portraying the consequences of incomplete and improper bookkeeping records.
Originality/Value ― This paper is a pioneer study that empirically links bookkeeping practices to Islamic inheritance.
Research Limitations ― This study is limited to Kano State, which is one of the 36 states of Nigeria.
Practical Implications ― Traders are required to maintain proper and complete records of their assets, liabilities and waṣiyyah with a view to ensuring that their wealth is fairly distributed among their claimants when they die.
Social Implications ― Keeping proper and complete records by traders could maximise the share to be given to each of their heirs and would save them against exposure to poverty, particularly if the wealth is properly invested
Malaysian Consumer Income and Spending Behaviour During the COVID-19 Pandemic: An Insight from Maqāṣid Al-Sharīʿah
Full text linkPurpose — Spending patterns changed during the COVID-19 pandemic due to the health crisis turning into an economic challenge. This study examines the Malaysian public’s awareness level and changes in their spending behaviour during COVID-19. It also aims to identify the spending patterns on different items based on the consumers’ income and establish whether the awareness level of maqāṣid al-Sharīʿah (objectives of Islamic law) on spending affects the public’s perception of future spending behaviour.
Design/Methodology/Approach — Quantitative approaches were implemented through questionnaire outcomes, and further analysis was carried out through the SPSS software. The survey included 420 participants, and the results were analysed using inferential and descriptive statistics such as the Chi-Square test and regression.
Findings — Important findings of this paper show that the situation following the COVID-19 pandemic led to behavioural changes in many aspects, especially in Malaysians’ spending patterns. The findings show that most items related to awareness of maqāṣid al-Sharīʿah and spending are less than 3, which means that respondents are not aware or slightly aware of the concept. Only one item related to spending more on necessities during the pandemic achieves an average of more than 3. Secondly, changes in spending behaviour are seen on all items included in the study, which means the pandemic caused various changes in the spending patterns of Malaysians. Furthermore, certain categories of items (e.g., food and groceries, meal delivery services, entertainment items, face masks/hand sanitisers/disinfectants, and internet services) have shown significant differences among income groups in this study. Finally, from the regression results, it is found that the awareness level of maqāṣid al-Sharīʿah and its impact on spending is significant for the future perception of spending.
Originality/Value — The novelty of this study comes from the concept of relating spending behaviour to maqāṣid al-Sharīʿah, especially during challenging moments such as the COVID-19 pandemic.
Practical Implications — This paper reflects the importance of enhancing the maqāṣid al-Sharīʿah concept in spending patterns, especially in Muslim-majority countries. The current research added to knowledge in regard to how consumer behaviour changed during the COVID-19 pandemic. The findings may be useful in developing marketing strategies, considering psychological elements to suit the feelings and demands of genuine customers
An Exploratory Study of Manfaʿah (Usufruct) in Ijārah Accounting from the Sharīʿah Perspective
Full text linkPurpose — The recording and reporting of usufruct in ijārah (lease) financing is a major issue in both conventional and Islamic accounting standards. The International Accounting Standard (IAS-17) was revised and replaced by the International Financial Reporting Standards (IFRS-16) to address this issue. In response, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) revised and issued a new ijārah Financial Accounting Standards (FAS-32). Considering this ongoing issue, the aim of this study is to explore māl (asset) and milkīyah (ownership) as the two significant Sharīʿah dimensions of manfaʿah (usufruct) in ijārah accounting.
Design/Methodology/Approach — This study adopts the qualitative research methodology and uses the content analysis technique whereby secondary data was collected from the related books of Islamic fiqh (jurisprudence) as well as from the accounting and Sharīʿah standards of ijārah.
Findings — The study found that manfaʿah is a māl and as per the milkīyah structure, the lessee can represent legal ownership of the leased assets under his possession, and accordingly, manfaʿah could be registered in the lessee’s name.
Originality/Value — To the best of the researchers’ knowledge, this study constitutes the first of its kind in the existing literature that focuses specifically on the Sharīʿah perspective of usufruct in ijārah accounting.
Practical Implications — The findings of this study contribute to help financial and Sharīʿah experts and Islamic financial institutions (IFIs) in their understanding of manfaʿah and the adoption and implementation of the new ijārah accounting standard. This study will also help researchers in their future research
The Fourth Market theory and interest rate benchmarking in the Islamic finance industry
Full text linkPurpose
This paper aims to understand the issue of interest rate benchmarking in Islamic financial institutions (IFIs) from a macro-economic perspective and assessing the relevance of creating a Sharīʿah-compliant profit rate benchmark to solve this issue. This paper also aims at suggesting an Islamic alternative that will handle both the negative economic impact on IFIs as well as on their financial performance.
Design/methodology/approach
The paper is based on literature review of conventional finance and Islamic finance theories to construct a theoretical model to assess the impact of interest rate benchmarking on the ability of IFIs to achieve the objectives of the Islamic economy.
Findings
The macro-economic perspective concludes that conceiving a profit rate benchmark for the Islamic finance industry is not relevant to raising the Sharīʿah credibility of the industry. Indeed, several adjustments need to be introduced in terms of the business model.
Research limitations/implications
The recommendations of this paper require the involvement of financial authorities and governments for their implementation. Indeed, the adjustments require a macro-economic review.
Practical implications
The paper considers a profit rate benchmark irrelevant and inefficient. Instead, it suggests the necessary adjustments in terms of business model and economic approach for IFIs to achieve their objectives.
Social implications
The paper considers zakat implementation and the adjustment of IFIs as the real path to implement a fair wealth distribution in the society.
Originality/value
The creation of a profit rate benchmark has always been the only solution for the pricing issue in IFIs. This paper challenges this idea and tries to give a deeper understanding of the situation.
DOI: https://doi.org/10.1108/IJIF-05-2020-009
Determinants of the intention to adopt Islamic banking in a non-Islamic developing country: The case of Uganda
No full textPurpose
This paper aims to investigate the contribution of attitude, subjective norm and religiosity on the intention to adopt Islamic banking in an emerging economy like Uganda, which is a secular state that is in the early stages of adopting Islamic banking.
Design/methodology/approach
This study uses a cross-sectional and correlational research design. Usable questionnaires were received from 258 managers of their own micro businesses. A hierarchical regression analysis was used to test the hypotheses.
Findings
Results indicate that attitude and religiosity are significant determinants of the intention to adopt Islamic banking, unlike subjective norm whose predictive power is subsumed in attitude. In the absence of attitude, subjective norm is a significant determinant of intention to adopt Islamic banking. Overall, attitude, subjective norm and religiosity explain 44 per cent of the variance in the intention to adopt Islamic banking in Uganda.
Research limitations/implications
This study is cross-sectional, excluding the monitoring of changes in behavior over time. Further, the study used evidence from owner-managed micro businesses in Uganda. It is possible that these results are only applicable to Uganda’s micro businesses.
Originality/value
Islamic banking is an emerging phenomenon on the African continent, especially in Sub-Saharan Africa, where most countries are secular states. As such, there are largely no empirical studies exploring the combined contributions of attitude, subjective norm and religiosity on the intention to adopt Islamic banking in an emerging economy after the national adoption of an enabling legal framework. To the best of the researchers’ knowledge, this is the first study that carries out this task.
DOI: https://doi.org/10.1108/IJIF-04-2018-004
Court referral and Nigeria's Financial Regulation Advisory Council of Experts (FRACE)
No full textPurpose
This paper aims to highlight resolution of Islamic finance dispute by common law-oriented courts in Nigeria with respect to Sharīʿah non-compliance and legal risks thereof, as well as the lesson to learn from Malaysia in that regard. This is with view to ensuring Sharīʿah compliance and legal safety of Islamic finance practice as prerequisites for sustainability of the Nigerian Islamic finance industry.
Design/methodology/approach
A qualitative method was used; interviews were conducted with different categories of experts and primary data collected in relation to Sharīʿah non-compliance and legal risks in adjudicating Islamic finance dispute by civil courts and the role of expert advice as basis for court referral to Financial Regulation Advisory Council of Experts. A doctrinal approach was adopted to analyse relevant legislative provisions and content analysis of secondary data relevant to applicable provisions in matters of finance before civil courts.
Findings
The paper discovers an indispensable role of conventional financial regulations in sustaining Islamic finance industry. Appropriate laws for Islamic finance under the conventional framework foster legal safety and Sharīʿah compliance of Islamic finance activities in related cases handled by courts. Nigeria civil courts can aid sustainability of Islamic finance when so equipped and enabled by laws that address apparent Sharīʿah non-compliance and legal risks in judicial dispute resolution. Inadequate legal provisions for dispute resolution breeds Sharīʿah non-compliance and legal risks in Islamic finance, undermine its prospects and stand inimical to its sustainability.
Research limitations/implications
This research is limited by its focus on Sharīʿah non-compliance and legal risks alone, which emanate mainly from judicial resolution of Islamic finance dispute by Nigerian civil courts.
Practical implications
This research seeks to motivate a determined and deliberate regulatory action and change in approach towards addressing apparent risks associated with Islamic finance while resolving disputes therein by civil courts. It has implications on common law jurisdictions generally that adopt similar approach as Nigeria's while introducing Islamic finance into their conventional finance framework.
Originality/value
Dispute resolution and other regulatory functions of civil courts are important to Islamic finance though apparently overlooked while introducing Islamic finance in Nigeria as in other emerging jurisdictions. This research ascertains the role of the civil courts as indispensable for Islamic Financial Institution (IFIs) operations and demonstrates that such courts are needed for the development and sustainability of Islamic finance industry. The research demonstrates the end-to-end requirement of Sharīʿah compliance of Islamic financial transactions as absolute and needs be ensured and guarded at dispute resolution level by properly equipped courts.
DOI: https://doi.org/10.1108/IJIF-11-2018-012
Who Gets Believed? Trust and Investor Reaction to Earnings Announcements in Sharīʿah-Compliant vs. Sharīʿah Non-Compliant Firms
Full text linkPurpose ‒ Considering the proclamations of trustworthiness within the Islamic financial system and the positive relationship between stock market reaction and earnings announcement of the trustworthy firm, this paper aims to empirically test the presence of trust in Sharīʿah-compliant listed firms in Pakistan.
Design/Methodology/Approach ‒ The research question has been addressed by investigating firms listed on the Pakistan Stock Exchange (PSX) from 1 July 2019 to 30 June 2020. Event study method has been used by taking Abnormal Return Variance (ARV) and Abnormal Trading Volume (ATV) as proxies to measure the investors’ reaction following earnings announcements.
Findings ‒ The results suggest that stock price variations around earnings announcements are negatively related to trustworthy firms compared to less-trusted firms (i.e., Sharīʿah non-compliant firms). For ATV, it was found that traders react to annual earnings announcements for both types of firms in a similar way.
Originality/Value ‒ This research is an attempt to evaluate the Islamic financial system from its trustworthiness perspective. Sufficient literature has already documented that being trustworthy is obligatory for Sharīʿah-compliant firms. This study contributes to the literature by examining whether the market/investors trust such firms or not.
Research Limitations/Implications ‒ This research is based on a single-country analysis with a research span of one year. Cross-country analysis with a broader time horizon may give further clarity.
Practical Implications ‒ This paper has made a valuable contribution to the literature by providing the guideline on how investors’ reactions to Sharīʿah-compliant firms differ from their reactions to Sharīʿah non-compliant firms. It also indicates how religious elements may subdue other social factors such as trust. This paper has also explored the market reaction by assessing both the liquidity and volatility of the stock market in Pakistan
Developing an Islamic Business Model: A Case for Agricultural Value Chain Finance in Agrobank, Malaysia
Full text linkPurpose — This study aims to analyse the development of an Islamic business model in the form of an agricultural value chain finance (AVCF) in Agrobank, Malaysia, from 2016 to 2020.
Design/Methodology/Approach — This qualitative research adopted the case study approach, and data were collected by using the interview and document analysis methods. The interviews involved a member of the Shariah committee as well as the Chairperson of the Shariah department in Agrobank. The document analysis involved Agrobank’s annual report and its official website (www.agrobank.com.my).
Findings — Findings indicate that Agrobank’s business model not only considers how to make profit but also how to practice and propagate Islamic values. Hence, Agrobank has modified the AVCF from trade finance to Sharīʿah finance contracts. This ensures that Agrobank’s business does not contradict Sharīʿah principles. However, mushārakah (participatory mode of finance) and muzāraʿah (temporary sharecropping) contracts, which are appropriately reputed, were not applied by Agrobank for the last five years. Findings show that qarḍ (loan), bayʿ al-ʿīnah (sale and buyback), bayʿ bi thaman ājil (deferred-payment sale), murābaḥah (sale with profit disclosure), tawarruq (two sale-and-purchase contracts, involving at least three parties, with the intention being to attain liquidity), and ijārah (lease) are contracts that positively affect businesses in Agrobank. These contracts provide flexibility for some people who are involved in the value chain.
Originality/Value — This is an attempt to study the application of AVCF from an Islamic perspective in Agrobank.
Research Limitations/Implications — Discussions in this paper are limited to AVCF as an Islamic business model in Agrobank.
Practical Implications — This study encourages Islamic financial institutions (IFIs) to adopt the Islamic AVCF system through lessons learnt from Agrobank
Editorial
No full textIn the name of Allah, the most gracious, the most merciful The scope of research in Islamic finance is wide and far-reaching. The industry itself covers various sub-components – including banking, capital markets, takaful, microfinance, social finance – each with its own operational complexities and challenges that require research and innovation to enhance their practices and development. As a discipline, Islamic finance intertwines with numerous other areas such as economics, econometrics, governance, accounting and auditing. This gives rise to an extensive bank of research topics. Moreover, given that compliance with Sharıʿah and laws and regulations represents a set of core requirements upon which the industry rests, legal studies and the application of Sharıʿah in Islamic finance are yet other areas where research is published. Last, but not the least, the Islamic finance industry operates side-by-side with its conventional counterpart in most countries; thus comparative and critical studies on its growth and performance are another important area of research.
DOI: https://doi.org/10.1108/IJIF-09-2022-26