INCEIF University Journals
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Some thoughts on resetting the roles and functions of Sharīʿah committees of Islamic banks in Malaysia:
No full textPurpose
The purpose of this study is to understand and evaluate the roles and functions of the Sharīʿah committee (SC) of Islamic banks (IBs) in Malaysia and to recommend a resetting of the scope of responsibilities to enable the SC to effectively respond to current market needs.
Design/methodology/approach
A Likert-type survey questionnaire was developed and distributed to all available SC members through e-mails and online surveys as well as self-administered questionnaires. At the end of the survey, 87 useable questionnaires were collected from 161 SC members, representing a 54% response rate.
Findings
This study finds that most SC members have the necessary Sharīʿah qualification, and they are mostly academics with doctoral degrees. However, there is a noticeable lack of diversity in the composition of experts in the committees. Respondents indicate that their main functions are to ensure Sharīʿah compliance of bank operations and product offerings. This is of course consistent with their stated functions as outlined in the Bank Negara Malaysia's Sharīʿah Governance Policy Document (BNM, 2019). The study finds that SCs are not involved in product development, nor responsible for financial performance. Respondents indicate three ways to enhance the role of SCs: improving banking knowledge of the members, more engagement with the board of directors (BoDs) and broadening the functions of SCs.
Practical implications
This study highlights two policy implications. First, there is a strategic need for IBs to consider having a diversity of expertise in the SCs while maintaining the Sharīʿah experts as core members. Second, this study recommends a reset of the scope of duties of the SC to include three new areas: risk management, product development and financial performance.
Originality/value
This study evaluates the current functions of the SC of IBs in Malaysia and provides suggestions for improvement in the composition of the committee and in the scope of duties of SCs based on contemporary needs.
DOI: https://doi.org/10.1108/IJIF-05-2021-009
Performance comparison between Islamic and conventional stocks: evidence from Pakistan's equity market
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This paper aims to examine the performance of Islamic and conventional stocks listed at the Pakistan Stock Exchange by using both parametric and non-parametric approaches. The motivation is to do risk-return analysis of Islamic stock prices and conventional stock prices.
Design/methodology/approach
It uses various measures of performance, e.g. Sharpe ratio, Treynor ratio, Jensen's alpha, beta, generalized auto-regressive conditional heteroskedasticity and stochastic dominance. Using the Karachi Meezan Index-30 (KMI-30) and the Karachi Stock Exchange Index-30 (KSE-30) as proxies for Islamic and conventional stock prices, respectively, it examines the performance of Islamic and conventional stocks. The daily data of KMI-30 and KSE-30, covering period from June 9, 2009 to June 20, 2020 are used.
Findings
The results show that the overall KMI-30 outperforms the KSE-30. The returns of the KMI-30 are greater than the KSE-30. However, the risk and volatility of the KMI-30 and KSE-30 are similar. Further, the KMI-30 has higher excess returns per unit of total risk than the KSE-30. But both indexes have similar excess returns per unit of systematic risk. Moreover, the KMI-30 returns have stochastically dominance over the KSE-30 returns. These results reveal that the Islamic index performs better than the conventional index.
Practical implications
The findings provide several practical implications in financial and investment decisions making by investors, managers and policymakers such as strategies for asset allocation and investment. Further, in risk management, it provides guidance for allocating portfolios and managing risk. The investment in Islamic stocks may mitigate potential risk within asset portfolios.
Originality/value
This research is unique in its approach to the analysis of the performance comparison of conventional and Islamic stock by using comprehensive parametric and non-parametric estimation techniques. Such research has not been undertaken in the Pakistan's equity market since.
DOI: https://doi.org/10.1108/IJIF-07-2020-015
Mind the gap: theories in Islamic accounting and finance, Islamic economics and business management studies
No full textPurpose
This study aims to analyse whether theories and views of classical Islamic scholars are widely adopted as references in Islamic accounting and finance (IAF), Islamic economics (IE) and Islamic business management (IBM) research studies as part of their contribution to solving current economic and financial problems.
Design/methodology/approach
The research adopts a qualitative meta-analysis methodology using NVivo 12 with selected data from 474 international journal articles published between 1981 and 2021. The study considers 172 IAF articles, 111 IE articles and 191 IBM articles.
Findings
The results of the study show that the use of theories and views of classical Islamic scholars is not widespread among the examined research papers. The findings show that 90% of researchers tend to acquire modern economics, management, psychological and sociological theories instead of classical theories. Both modern and classical theories have been discussed in the studied articles namely agency theory, stakeholders' theory, ḥisbah (accountability), maqāṣid al-Sharīʿah (objectives of Islamic law) and waʿd (unilateral promise). The gaps prevail not only in the taxonomy of terms but also in the choice of paradigm references. It is found that 66% of the 474 journal articles adopt a positivist paradigm, followed by interpretivism (19%), post-structuralism (9%) and critical orientation (6%).
Research limitations/implications
This paper considers only ABS ranking journal articles. Future research may consider other journal articles from different ranking groups such as Scopus or Thomson & Reuters.
Practical implications
The paper sheds light on how Islamic educational institutions can develop strategies for the Integration of Knowledge (IOK) in their curriculum.
Social implications
This paper helps to shape the Muslims' way of thinking within an Islamic worldview which will lead to an Islamic way of expressing knowledge, skill and behaviour.
Originality/value
This paper contributes to the model of IOK that has been deliberated among Islamic universities, especially those that develop IAF, IE and IBM studies.
DOI: https://doi.org/10.1108/IJIF-11-2019-017
Legislative provisions for waṣiyyah wājibah in Malaysia and Indonesia: to what extent do they differ in practice?
No full textPurpose
This research aims to examine and compare differences in waṣiyyah wājibah (obligatory bequest) (WW) practices in Malaysia and Indonesia.
Design/methodology/approach
This is an exploratory qualitative research, employing a thematic analysis approach. Six Muslim Wills (State) Enactments [Enakmen Wasiat Orang Islam (Negeri)] in Malaysia, Islamic Law Compilation (Kompilasi Hukum Islam) in Indonesia, two fatwas (ruling in religious matters) and one court case from each country are analysed. Data is collected from official government websites and other reliable search engines.
Findings
First, the findings show that the WW practice in both countries is similar regarding the quantum of the beneficiaries' entitlement. However, the practice varies between both countries in terms of the types of beneficiaries and how the bequest is distributed. Second, this study shows the potential of WW as an estate planning instrument to complement the existing instruments in each country, especially when addressing family members who are not entitled to succeed by farāʾiḍ (Islamic inheritance law).
Practical implications
The provision of relevant laws and regulations regarding WW needs to be formulated to guarantee the well-being of dependants. The differences in practice between the two countries can be a guideline to expand the WW scope and context to other Muslim countries.
Originality/value
This study is the first attempt to compare WW between two Muslim-majority countries focusing on relevant laws, court cases and regulations.
DOI: https://doi.org/10.1108/IJIF-01-2021-001
A Diagnosis of Tranching in Light of Shari’ah Principles
No full textTranche is a French word which means: class, section, series, portion, slice, partition, or part of something. Tranching is done through subordination, which refers to “the process of prioritizing the order in which losses are allocated to the various layers of bonds” (Mason, 2008). Investment banks use tranching extensively in structured finance to appeal to different sections of investors
Factors necessary for effective corporate waqf management for Malaysian public healthcare
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This research paper aims to determine the factors needed to propose a platform where waqf (Islamic endowment) organizations can collaborate with government public hospitals to develop corporate waqf hospitals. Consequently, the elements of governance and sustainability are included in the management of corporate waqf hospitals thereby leading to the corporatization of public hospitals.
Design/methodology/approach
This study adopts the qualitative research methodology and undertakes content analysis of data collected from journal articles, magazines and official websites. Data analysis involves open coding with NVivo 12.
Findings
General findings from the literature review have shown that architectural and engineering fundamentals were essential factors in the success of past waqf hospitals of the era between 8th and 14th centuries. In that era, the decentralized waqf-based hospitals employed the mutawalli (the trustee/manager of the waqf assets) to govern the administration of the hospitals. Present corporate waqf hospitals can exploit the elements identified from past waqf-based hospitals and additionally adopt the private-public partnership model in the form of a muḍārabah (profit-sharing contract) agreement to design a sustainable waqf governance model for Malaysian public healthcare services.
Research limitations/implications
The proposed platform is designed for a corporate waqf model developed in collaboration between Malaysian waqf institutions and public healthcare services. It abides by both the Malaysian fatwa (Islamic rulings) on waqf and the laws of the Malaysian Government.
Practical implications
There is potential for developing the Malaysian corporate waqf-governance healthcare model which will enable the hospital to provide better quality healthcare to more patients through upgrading the quality of equipment used in hospitals and/or better facilities at equal or lower costs. Consequently, this will not only improve waqf management and distribution but also result in reduction of government expenditure.
Social implications
This research promotes the concept of a corporate waqf hospital which will provide innumerable beneficial healthcare services in terms of improved healthcare quality at affordable costs to the general public and at no cost to the poor and the underprivileged.
Originality/value
Although waqf has played an important role as a vehicle for Islamic financing in the society for centuries, a model of collaboration or partnership of waqf with public healthcare services has yet to be explored and developed. With proper corporate governance and well-managed sustainability in a corporate waqf model, this newly developed partnership between waqf institutions and public healthcare providers can be a first step in many more interesting collaborative arrangements that can be established between waqf institutions and public services in the future.
DOI: https://doi.org/10.1108/IJIF-11-2019-017
Enhancing zakat compliance through good governance: a conceptual framework
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This paper aims to construct a conceptual framework which explains the relationship between governance of zakat institutions and zakat payment compliance by using the organisational legitimacy theory.
Design/methodology/approach
This paper adopts content analysis and a review of multidisciplinary literature that primarily relate to zakat institutions, public governance and compliance behaviour.
Findings
The paper has developed a model, adapted from Abioye et al. (2013), concerning the influence of governance mechanisms on zakat payers’ compliance using trust as a moderator. The model comprises four governance mechanisms which influence zakat payment compliance. The four mechanisms include the board and leadership attributes, transparency and disclosure practices, stakeholder management practices and procedural justice. Trust has a moderating effect on the relationship between governance and zakat compliance.
Research limitations/implications
This model is applicable to regulated zakat systems, where the state has established zakat institutions and regulations for the collection and distribution of zakat, such as Saudi Arabia, Pakistan, Sudan and Malaysia.
Originality/value
This paper proposes a model, based on Abioye et al. (2013), to explain the influence of governance on zakat payment compliance. The novelty of the study is the addition of one new critical variable, procedural justice, to the Abioye et al.’s (2013) framework. Secondly, the model is proposed for regulated zakat jurisdictions.
DOI: https://doi.org/10.1108/IJIF-10-2018-011
Factors influencing Bumiputera contractors' acceptance of the contractor's all risk takāful product
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This research aims to investigate the factors that can influence Bumiputera contractors’ acceptance of the Contractor’s All Risks (CAR) takāful (Islamic insurance) product using the theory of reasoned action (TRA).
Design/methodology/approach
Using the method of quantitative surveys, 414 questionnaires were collected from targeted Bumiputera contractors in Malaysia (grade G1 to grade G7), except in Sabah and Sarawak, that are registered with the Construction Industry Development Board (CIDB) and are also members of Persatuan Kontraktor Melayu Malaysia (PKMM). The data was analysed using the partial least squares structural equation modeling (PLS-SEM) technique.
Findings
The findings from the PLS-SEM analysis show that attitude, subjective norm, religiosity and awareness have a positive relationship with Bumiputera contractors’ acceptance of the CAR takāful product. Religiosity appeared to be the most significant factor influencing Bumiputera contractors’ acceptance of the CAR takāful product.
Research limitations/implications
The respondents in this study only comprised Bumiputera contractors in Peninsular Malaysia, excluding those from Sabah and Sarawak. Therefore, it is not possible to generalise the findings to a broader population.
Practical implications
Takāful operators and their sales and marketing departments need to act proactively in promoting the benefits of investing in CAR takāful that follows Sharīʾah (Islamic law) rules and principles. They should create mechanisms to market CAR takāful better, thus accelerating its acceptance rate among contractors.
Originality/value
The paper uses the proposed extended TRA model, which includes the variables of religiosity and awareness in the TRA model. These variables were successfully integrated in the model, and the findings show that they have significantly contributed to the acceptance of the CAR takāful product among Bumiputera contractors.
DOI: https://doi.org/10.1108/IJIF-09-2020-018
Editorial
Get PDFIn the Name of Allah, Most Gracious, Most Merciful. The love for accumulation and power is part of human instinct. However, Islam teaches that it is not through wealth accumulation and hoarding that human beings will attain falāḥ (success) in this life and the hereafter or draw closer to Allah; rather, wealth circulation and distribution are fundamental principles to promote growth and development and bring about equity and justice in the society. In fact, the “giving” behaviour essentialises the faith of a Muslim. He is called upon to be generous to the poor and the deserving through various means, including zakat (Islamic tax), ṣadaqah (voluntary charity), waqf (Islamic endowment) and qarḍ ḥasan (benevolent loan).
Under the present conditions of the ongoing COVID-19 pandemic that has been affecting societies and the global economy since 2020, the importance of solidarity and the sharing economy has grown even more. The philanthropic sector of Islamic finance, called the Islamic social finance sector, has thus been further propelled to the forefront to help sustain life and human well-being. Islamic social finance has only recently been integrated within the mainstream of Islamic finance to revitalise age-old philanthropic instruments such as waqf to strengthen their effectiveness and applications in contemporary societies. Supported by rapid digital transformation, the Islamic social finance sector along with breakthrough initiatives and Islamic finance innovations have been looked into to contribute to more efficient resource allocation. Ṣadaqah and qarḍ ḥasan, for instance, could be used to provide immediate relief solutions such as food and cash to daily wage earners and migrant workers. The zakat platform, especially if digitalised, could serve as an important vehicle to raise funds for financing aṣnāf (zakat recipients), including microfinance beneficiaries, affected by the pandemic. Potential medium- to long-term solutions could be provided through the various innovative applications of waqf (e.g. waqf-ṣukūk, waqf-venture capital, corporate waqf and others) to mobilise both capital and other resources (e.g. human resources and expertise) for investment in essential activities such as research, technological innovation and transfer, agricultural production capacity building and income-generation projects to support economic recovery and growth