INCEIF University Journals
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Editorial
Get PDFIn the Name of Allah, Most Gracious, Most Merciful. The development of the Islamic finance market over the years has not been without its challenges, whether on the political, legal, Sharīʿah or commercial fronts. Notwithstanding these challenges, the Islamic finance market has continued to push forward, with a step up in activity from different players around the globe. In the process, the industry has become more innovative in its approach and in expanding its coverage to include new types of financing and new markets.
One way for the industry to create more social impact and contribute towards sustainable development goals is to associate itself with green and socially responsible initiatives. One of the latest developments in this respect is the issuance of the world’s first sovereign green sukūk by Indonesia in February 2018. This issuance was for an amount of US$1.25bn made under the Republic’s Green Bond and Green Sukuk Framework. While Indonesia has a thriving Islamic banking industry, its sukūk sector has been slower to take off, especially on the corporate side. In a move to spur corporate players and concurrently support environmentally friendly initiatives, the Indonesian Government announced this green issuance. Its proceeds will be used to finance projects such as renewable energy, green tourism and waste managemen
Centralisation of corporate governance framework for Islamic financial institutions: Is it a worthy cause?
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The purpose of this paper is to supply basic insights into the principle of shūrā (consultation) in Islamic banking, the idea of a centralised approach to the corporate governance of Islamic financial institutions (IFIs), the roles of a centralised Sharīʿah board as the highest authority on Sharīʿah issues and its distinguishing features from a de-centralised system and the advantages and disadvantages of the two governance systems.
Design/methodology/approach
In analyzing these, the paper adopts the critical legal studies approach and refers to the provisions of the Qurʾan and Sunnah, ijmāʿ (consensus) of Sharīʿah scholars and recent Islamic banking reports.
Findings
Despite the fact that the double-digit growth of the current US6.5tn mark by 2020 – there remains concern over the lack of standardization or rather the diversified approaches to the corporate governance of IFIs across key Islamic banking regions.
Practical implications
There has been much debate surrounding the issue of whether the Islamic banking industry requires a centralised Sharīʿah board at the state level to complement the Sharīʿah boards at the IFIs’ individual level in providing better supervision of the Sharīʿah-compliance of IFIs. The fact that the industry is already equipped with two prominent standard-setting agencies in the form of the AAOIFI, the IFSB does little to suggest that best governance practices – which centre around the themes of consistency, harmony and uniformity – are on the horizon, at least not whilst their issued standards and guidelines remain voluntary for IFIs.
Originality/value
All in all, it is aspired that this paper may assist the reader in evaluating the pros and cons of the whole concept of Sharīʿah board centralisation.
DOI: https://doi.org/10.1108/IJIF-08-2017-002
Islamic finance: financial inclusion or migration?
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This paper aims to define a methodology to assess the impact of introducing Islamic finance on financial inclusion.
Design/methodology/approach
The paper is based on a literature review to understand the link between Islamic finance and financial inclusion. The second part of the paper presents a conceptual framework to assess the impact of introducing Islamic finance on financial inclusion in a defined context based on the profiling of people interested in Islamic finance.
Findings
The paper brings an insight on the impact of introducing Islamic finance. Indeed, it could cause a financial migration to Islamic banks that can take many forms and depends on many factors that call for deep analysis.
Research limitations/implications
The paper would help financial authorities and financial institutions to measure the impact of introducing Islamic finance on their businesses and the stability of the whole system.
Practical implications
Islamic finance can not only enhance financial inclusion but also create financial migration. The two implications can vary from one context to another.
Social implications
Islamic finance can contribute in the effort of including “self-excluded” people with religious concerns as well as people without access to financial services.
Originality/value
This paper promotes the idea that Islamic finance is not exclusively a way to enhance financial inclusion.
DOI: https://doi.org/10.1108/IJIF-07-2018-007
Bayʿ wa salaf in Islamic banking current practices
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The purpose of this paper is to analyze the issue of bayʿ wa salaf (the combination of sale and loan contracts in a single arrangement) from the Sharīʿah perspective. Based on the Sharīʿah findings on the issue, the paper examines the existing Islamic banking products and services that use these two specific contracts to determine whether the current practice is in line with Sharīʿah.
Design/methodology/approach
The paper uses the qualitative method by reviewing and analyzing relevant literature and operational structures to comprehend the issues pertaining to bayʿ (sale) and salaf (loan). It then provides Sharīʿah parameters for bayʿ wa salaf before applying them in assessing some existing Islamic banking products and practices. Subsequently, the compliance status of the banking operations that use these contracts in a specific product structure can be ascertained.
Findings
The paper finds that the bayʿ wa salaf arrangement in the existing Islamic banking products and services, as elaborated in the paper, does not fall under the prohibited category. This deduction is made in accordance with the parameters derived from jurists’ discussion on the issue of bayʿ wa salaf. It also takes into consideration other factors influencing the existence of such arrangements.
Research limitations/implications
This conceptual research highlights the jurists’ discussion on the issue of bayʿ wa salaf and the compliance status of the current products and services that use the contracts in a single arrangement (specifically in the case of Malaysia) without discussing other possible structures that can be applied as an alternative to the bayʿ wa salaf arrangement.
Practical implications
Thorough understanding of the issue can strengthen the industry’s confidence in executing operations that conform to Sharīʿah principles.
Originality/value
The paper provides comprehensive deliberation on the ruling of bayʿ wa salaf from various schools of thought and exhaustive elaboration on existing Islamic banking products that apply bayʿ wa salaf in their structures. This contributes in reinforcing the stakeholders’ confidence in the operations of Islamic banking and finance.
DOI: https://doi.org/10.1108/IJIF-01-2018-000
Cooperative-waqf model: a proposal to develop idle waqf lands in Malaysia
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Waqf (Islamic endowment) in the form of cash is important to address the problem of developing idle waqf lands. Although there are various existing models of cash waqf, there is still a need for innovative cash waqf models. This paper aims to offer an alternative mode of financing for developing idle waqf lands using the concepts of cooperatives and waqf.
Design/methodology/approach
The present study first evaluates relevant literature on financing issues faced by waqf institutions in developing idle waqf lands as well as existing models of cash waqf. Based on the prevailing gap in cash waqf models, the study proposes a hybrid model of cooperative-waqf to finance idle waqf lands in Malaysia.
Findings
The proposed model is unique owing to the new dimension of membership being embedded into the waqf project. It considers donors as members of the waqf project, which is funded through the cash waqf collected, and thus, donors are given the privilege to receive benefits from the commercialised projects that are developed on the waqf lands. The existing models of cash waqf use traditional methods in which donors merely contribute cash waqf without any awareness of how the contributions are utilised. Usually, this problem occurs due to the lack of reciprocal communication between cash waqf donors and waqf institutions.
Research limitations/implications
The present study examines the case of waqf land development in the context of Malaysia only. Secondly, the paper does not contain any empirical analysis, and the development of the paper is based on existing literature that discusses various models of cash waqf practised in Muslim-majority and -minority countries. Future research can conduct surveys of donors and other stakeholders on the practicality of the model.
Practical implications
It is expected that the proposed cooperative-waqf model will be able to create a synchronised relationship between cash waqf donors and waqf institutions and hence boost participation in developing waqf lands.
Originality/value
The present study adds to the existing literature in the area of waqf and cash waqf models, especially the application of this instrument in the context of Malaysia. It also offers a new hybrid model to the State Islamic Religious Councils (SIRCs) – Malaysia’s sole trustee of waqf assets management – such that the implementation of the proposed model could boost the collection of cash waqf in developing commercial projects on idle waqf lands.
DOI: https://doi.org/10.1108/IJIF-07-2017-001
Towards establishing an Islamic retail bank in a Muslim-minority country: Prospects and challenges in Mauritius
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The purpose of this research study is to explore and analyze the factors that will favour or constrain the introduction of an Islamic Retail bank in a Muslim-minority country such as Mauritius. This research attempts to fill the gap in the empirical literature on the setting up of an Islamic Retail bank in a Muslim-minority country. It recognizes upfront that Islamic banking offers an alternative banking system that is attractive to both Muslims and non-Muslims.
Design/methodology/approach
The research adopts a mixed approach to address the prospects and challenges of establishing an Islamic Retail bank in Mauritius.
Findings
The research finds that there are various prospects for an Islamic retail bank in Mauritius for Muslims and non-Muslims, including enabling legal, fiscal and regulatory framework, the financing of small- and medium-sized enterprises and the issuance of ṣukūk (Islamic investment certificates). The research also finds that the development of an Islamic retail bank in Mauritius face various challenges. Some of these challenges are lack of Sharīʿah-compliant liquidity instruments and inter-bank deposits, lack of knowledge and understanding of Sharīʿah-compliant products and the enforcement of Islamic contracts in court.
Originality/value
This in-depth study appears to be comprehensive and will help in developing a solid foundation for establishing an Islamic retail bank in Mauritius.
DOI: https://doi.org/10.1108/IJIF-11-2017-004
Academic sociology: The alarming rise in predatory publishing and its consequences for Islamic economics and finance
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The purpose of this paper is to explore the causes and impact of predatory online publishing on Islamic economics and finance.
Design/methodology/approach
The method adopted involves a library literature scan to identify the origin and expansion of predatory publishing, as references listed in the paper show. The personal experience and observation of the author over the decades of teaching at various universities endorses the evidence.
Findings
The focus on “publish or perish” has led to division of Islamic scholars into conservative and modern economists, and it led to the overuse of mathematical and parametric modeling to the disadvantage of the discipline essentially imbued with unquantifiable ethical norms and values.
Practical implications
The study seeks to induce fruitful and purposive change in the research designs and direction of Islamic economics and finance.
Originality/value
This research initiates discussion on predatory publishing, an issue so far untouched in Islamic economics. It explores its impact on the discipline and suggests ways to curb the malady.
DOI: https://doi.org/10.1108/IJIF-11-2017-004
A qualitative inquiry into cash waqf model as a source of financing for micro enterprises
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This paper aims to explore the opinions and recommendations of various experts on the integrated cash waqf micro enterprise investment (ICWME-I) model, particularly in terms of its suitability, applicability and prospects in the market.
Design/methodology/approach
The research involves primary data which are collected from semi-structured interviews conducted with experts from various backgrounds. Thematic analysis was used to examine the data.
Findings
The experts support the suitability of the ICWME-I model in providing financial services to micro enterprises. They highlight the importance of establishing, managing and operating ICWME-I model under the aegis of the State Islamic Religious Council in Malaysia or the corporate sector. They further emphasize that the characteristics of micro enterprises, the element of sustainable funding, the importance of proper management and administration, legal matters and public awareness are key factors that influence the sustainability of the ICWME-I model.
Originality/value
This paper adds to the literature on waqf and micro enterprises especially from the Malaysian context. The paper validates the ICWME-I model in terms of its suitability, applicability and prospects in the market by interviewing experts from various backgrounds.
DOI: https://doi.org/10.1108/IJIF-07-2017-001
Framework for financial hardship indebtedness management in abandoned housing projects in Malaysia
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This paper aims to examine the existing practices and pertinent issues affecting Islamic banks and their customers in abandoned housing projects (AHPs) to ensure compliance with Sharīʿah and statutory requirements.
Design/methodology/approach
This study employs the qualitative research method using the inductive approach to analyze both primary and secondary data and sources. Data collection involved a series of semi-structured interviews with five volunteering Islamic banks and a representative of Abandoned Property Owners Association Malaysia (Victims). Statutory acts, regulatory policies, guidelines, directives and standards were also analyzed.
Findings
The result indicates developer’s default, underlying contracts, regulatory arbitrage and bureaucracy, attitudinal disposition of customers and sell-then-build approach as major factors of AHP’s conundrum.
Practical implications
This study has suggested both short- and long-term solutions based on the principles of justice, public interests and removal of hardship to resolve and effectively manage financial hardship indebtedness arising from housing abandonment. Further, part of the proposed solutions would also reshape housing development policies and home financing transactions.
Originality/value
The quest for this research demonstrated Islamic banking industry’s initiatives to find lasting solutions to perennial issues of AHPs.
DOI: https://doi.org/10.1108/IJIF-03-2018-002
The effect of Islamic sacred months on stock prices in Iran and Iraq Stock Exchanges
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The present study aims to examine the effects of the Islamic sacred months, namely, Muḥarram, Rajab, Dhu al-Qaʿdah and Dhu al-Ḥijjah, on stock prices on the Iran and Iraq Stock Exchanges.
Design/methodology/approach
Using the infrastructure models of the capital market, the daily stock prices were calculated for the sacred and non-sacred months. As the data of this study are non-stationary, the AMIRA time-series model was used for better understanding of the model or future projections. The dependent variables of this study are the daily stock indexes for Iranian and Iraqi Stock Exchanges, and independent ones are the sacred and non-sacred months of a lunar year. Data were gathered daily from the financial statements of Iranian and Iraqi Stock Exchanges websites. To test the hypotheses under study, a five-year period from 2012 to 2016 was considered for both Iraqi and Iranian Stock Exchanges, which corresponds with the lunar calendar from 1433-1437AH.
Findings
The obtained results indicated that there is no significant difference in stock prices between the sacred months of Muḥarram, Rajab, Dhu al-Qaʿdah and Dhu al-Ḥijjah and other non-sacred months. However, the stock price in the Iranian Stock Exchange has a significant difference in Rajab and Dhu al-Qaʿdah with other non-sacred months.
Originality/value
The results of this study will reveal more than ever the role of Islamic sacred months for society and users of financial statements to make better financial decisions especially in Islamic emerging markets.
DOI: https://doi.org/10.1108/IJIF-10-2017-003