INCEIF University Journals
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The Investment Initiative in Takāful: Issues and Challenges
No full textThe concepts of mutual assistance and charity often come to mind when takāful (Islamic insurance) is mentioned. This is understandable given that takāful, in the generic sense, has played an essential role in risk sharing in Muslim history. However, another feature has been added to the modern practice of takāful
Ponzi Operandi: Affinity Fraud Risk for Sharīʿah-compliant Investment Funds
No full textPonzi schemes using the principles of affinity fraud are a real and current risk for Islamic investors. This paper examines the use of affinity fraud in targeting the Islamic community and analyses Sharīʿah norms that seek to protect people from fraud and cheating. Using case studies from three countries, the paper identifies the common traits pervasive in Ponzi schemes including legal ruses aimed at circumventing the Sharīʿah interdiction on interest and other proscriptive acts by unscrupulous and fraudulent operators. The examination shows that the nascent Islamic finance market should be vigilant of copycat schemes that have the potential to undermine the industry. Like other affinity frauds, there is the need to develop early warning systems aimed at preventing, or at least minimising, the prevalence of such schemes in the Islamic financial industry
Maqāṣid Al-Sharīʿah and the Foundational Requirements in Developing Islamic Banking and Finance
No full textIslamic finance attempts to rearrange the modern financial practices to be in line with Sharīʿah principles and requirements. The industry has grown considerably over the last three decades and has a global reach. We contend that this trend is being driven not only by operational compliance with the requirements of Islamic law but also because of the objectives and values it promotes. Islamic banking and finance (IBF) was intended to bring an Islamic vision of the economy to the financial sphere in an effort to realize human wellbeing (maṣlaḥah) and a just and fair order of society. Financial practices are to be arranged to meet those objectives
A Critical Appraisal of Sharīʿah Issues Related to Ṣukūk Al-Ijārah
No full textThe success of the Islamic financial industry over the last two decades has brought new challenges related to liquidity management. An alternative to conventional debt securities was needed as an avenue for investment of excess liquidity, one which complies with Sharīʿah principles and yet meets the diverse risk-return profiles of those issuing such instruments as well as of investors. At the same time, Muslim countries and large corporations wishing to raise Sharīʿah-compliant financing for national and international development projects required a substitute financing instrument that avoids the prohibited ribā (interest)
Waqf and Its Role in Socio-Economic Development
No full textWaqf is an important institution in the Islamic socio-economic system. It has played a key role throughout Islamic history. According to Cizakca (2002: 264), history has shown that waqf institutions have managed to provide social welfare services that many current states struggle to offer
The Islamic View on Money and its Implication for Financial Instruments
No full textThe backdrop of Islamic finance in the existing conventional framework has great influence on Islamic financial operations and instruments. Despite the advantage of becoming the most preferred products, a greater disadvantage is foreseen, alarming the whole system. Assimilation of ‘Islam’ into the financial system needs absolute integration in conceptual foundations and applications. The gap in Islamisation of the financial system has not only been observed in the misuse of terminology, but extends throughout the overall system. The central issues in this misconception are the functions and applications of money
Cost of Funds – Is It a Part of Actual Loss (Ta'wid)?
No full textThe understanding of the cost of funds from both the conventional and the Islamic perspective differs significantly. From the conventional perspective, the cost of funds is identified as the interest cost of borrowing money expressed as a percentage. It is simply understood as the interest rate paid on an outstanding loan. The parties involved in giving out loans to the banks include savings and current account depositors, lenders through the currency market, deposits and investment certificates holders, etc
Principles Of Wa’d and Muwa’adah: Their Application In Islamic Financial Contracts
No full textThe application of unilateral promise (wa'd) in certain Islamic financial products, although recent, has witnessed spectacular development. It has been widely applied in products such as murabahah for a purchase orderer (murabahah lil amir bi al-shira’), leasing ending with ownership (ijarah muntahiyah bi al-tamlik), Islamic hire-purchase (ijarah thumma al-bay'), diminishing partnership (musharakah mutanaqisah), sukuk structures and treasury products such as FX-i forward Islamic profit rate swaps. Some of the abovementioned structures employ only one-way wa'd while others use two-way wa'd
The Parameter of Permissible Risks in Takaful
No full textOver the past twenty-five years, the takaful industry has flourished as an alternative form of insurance and a viable form of financial intermediation which adds to the comprehensive financial landscape of the Islamic financial system in Malaysia. The growth in assets and contributions provides partial evidence of the significant progress achieved since its establishment in 1984. According to KFH Research, between 2005 and 2009, Malaysia’s total takaful assets expanded at a compound annual growth rate (CAGR) of 20.6% to reach USD 3.9 billion, making Malaysia the largest takaful market in Southeast Asia. The Malaysian takaful market was established over the years through a carefully planned and gradual approach. Malaysia has been developing a more comprehensive takaful framework to ensure a more resilient Islamic financial system