INCEIF University Journals
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Protecting the Well-Being of Households: Delineating a Social Takāful Fund Initiative for Positive Social Impact
Full text linkPurpose — This study aims to examine the social takāful fund (STF) initiative, developed by Islamic Business School–Universiti Utara Malaysia (IBS–UUM) in collaboration with FWD Takaful Berhad in Malaysia, as a measure to address economic uncertainties and vulnerabilities by enhancing household well-being. It also analyses the potential impact of the STF on marginalised communities.
Design/Methodology/Approach — This study employs a case study method to generate an in-depth understanding of the STF. A semi-structured in-depth interview was conducted with the manager of the STF, and the responses were transcribed and examined based on content and thematic analysis.
Findings — The STF initiative is being applied for the benefit of the community in the state of Kedah in Malaysia before it can be extended to all other states in the country. It fosters inclusivity and resilience by pooling resources to provide a safety net for disadvantaged households. The model promotes collective responsibility and has the potential to enhance societal well-being and sustainable development. Utilising the fund for four main programmes (notably, community outreach, educational empowerment, the takāful lab, and takāful subsidy programmes), this initiative addresses economic uncertainties and vulnerabilities especially among the unserved and underserved communities through income improvement, empowering financial knowledge and takāful protection.
Originality/Value — This study offers an innovative approach to social finance by introducing an STF model. The initiative is unique in its alignment with Islamic finance and community support principles, providing a new perspective on collective social protection and broadening the scope by positioning takāful as a comprehensive community empowerment strategy.
Research Limitations/Implications — The implementation of this model requires further investigation into the regulatory framework for such an initiative and the sustainability of funding sources to ensure long-term impact.
Practical Implications — The initiative suggests that community, financial, and government institutions can collaborate effectively to implement and sustain social support programmes, contributing to the overall resilience of vulnerable households.
Social Implications — The STF initiative has the potential to create a culture of compassion and mutual support within communities, addressing social disparities and fostering a sense of collective responsibility for well-being
Sustainable Investing and Islamic Finance: Evidence from the Organisation of Islamic Cooperation (OIC) Countries
Full text linkSustainable investing and Islamic finance have been two of the fastest-growing areas of finance. In Islamic finance, equity markets play an important role. In the literature on Islamic equities, there are relatively few studies that have integrated sustainability factors into Islamic finance. In this paper, our objective is to contribute to the line of research on the integration of sustainable investing into Islamic finance. To that end, we first examine the comparative performance of investing in the sustainability indices from those Organization of Islamic Cooperation (OIC) countries that are partners of the Sustainable Stock Exchanges (SSE) initiative. We then conduct a case study of Borsa Istanbul in Turkey, which has the best-performing sustainability index from OIC countries. Overall, our findings reveal the heterogeneity in sustainable investment performance, and suggest the potential of obtaining superior risk-adjusted returns in certain economies from OIC countries. This study draws implication on how sustainable investing can help bridge the gap between Islamic and conventional financial markets
Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability
Full text linkABSTRACT
Purpose — This study aims to assess the first ṣukūk issuance in Libya from two main perspectives: the compliance of the ṣukūk with the Sharīʿah and its compliance with the Libyan legal system. Further, the study evaluates the adequacy of the provided financial disclosures to assess the feasibility of the ṣukūk issuance.
Design/Methodology/Approach — A qualitative case study methodology was used to assess the ṣukūk issuance in question. For the assessment of disclosure adequacy, a tailored model was devised featuring main and subsidiary points of interest.
Findings — The Sharīʿah assessment findings suggest potential non-compliance issues within the ṣukūk issuance. Additionally, there are significant gaps in the disclosure of key financial aspects related to both the ṣukūk originator and the project, potentially hindering stakeholders from gaining a comprehensive understanding of the issuance’s feasibility.
Originality/Value — One unique advantage of this paper is that it is the first to gain access to the actual documentation of ṣukūk issuances in Libya.
Research Limitations/Implications — The study’s scope was constrained by a scarcity of data and documents from Libyan parties.
Practical Implications — After analysing the ṣukūk issuance, a framework of Sharīʿah and financial disclosures was developed. The application of the proposed framework can be extended to effectively assess other comparable ṣukūk offerings within the Libyan legal system.
Social Implications — Libyan policymakers are recommended to strengthen the regulations governing forthcoming ṣukūk issuances. The proposed improvements should include mandating comprehensive disclosures regarding the financial viability of the ṣukūk issuance and ensuring ample disclosures to guarantee full adherence to Sharīʿah principles
Blockchain Use Case in Islamic Social Finance
Full text linkPurpose: This research explains and reviews two innovative solutions based on blockchain that were used for Islamic social finance projects by two separate companies namely Finterra and Blossom Finance. Policy implications are suggested for the future use of blockchain in innovative financial products for the Islamic financial industry.
Design/methodology/approach: This is qualitative research conducted through library research and semi-structured interviews with experts and founders of Finterra and Blossom Finance. Data obtained from published literature and the interviews were accordingly examined and interpreted through content analysis and the results are presented in this research.
Findings: There is rising interest in Islamic social finance for economic revival post COVID-19 pandemic. Innovation through technology seems to be the future of Islamic social finance. Innovation through blockchain technology would see a renaissance in Islamic social finance, hence the need for relevant stakeholders to understand the technology. However, there is a regulatory gap in terms of proper legal framework to support blockchain related innovations in Islamic social finance and a policy gap to manage Shariah and legal risks involved in Islamic social finance transactions.
Originality: This research is original because it explains unique case studies from the source of innovation itself, and analyses the hurdles that were present and offers recommendations for future use of innovative technology in the Islamic financial sector.
Keywords: Blockchain technology, Blossom Finance, Finterra, Islamic Social Finance, Regulatory and Policy Issue
Editorial: Embracing New Horizons
Full text linkIn September 2024, ‘ISRA International Journal of Islamic Finance’ (IJIF) has been rebranded, and its publication is being continued under a new title, ‘International Journal of Islamic Finance and Sustainable Development’ (IJIFSD), following an institutional collaboration between the Islamic Development Bank Institute (IsDBI) and INCEIF University.
The collaboration in the publication of IJIFSD marks the interest of both institutions in driving innovative research to create more meaningful real-world impact and support sustainable economic development in societies. The collaboration brings the combined resources and expertise of the two institutions in providing a premier platform for showcasing cutting-edge research by synthesising the principles of Islamic finance and sustainable development practices. While IJIFSD will continue to be published by ISRA Research Management Centre, INCEIF University, it will now have the added leverage of IsDBI to support its sponsorship and ensure its open and free accessibility to readers.
The new title incorporates the terms ‘sustainable development’ as a strategic move to align the journal with the evolving landscape of Islamic finance that promotes global sustainability goals and, thus, results in a journal that is broader in scope and coverage. Therefore, besides focusing on the areas of Islamic economics, banking and finance and its related fields—Islamic capital markets, Islamic social finance, takāful (Islamic insurance), Islamic financial law, and Sharīʿah applications in Islamic finance—attention will also be given to the discourse on sustainability and sustainable economic development. With the expanded scope, it is expected that the journal will garner increased appeal to a wider range of authors and readers. It will also be able to reach a wider range of markets that have not yet been served, as well as have greater impact through enhanced citations. The key features of the rebranded journal therefore include:
Focus: emerging trends such as green finance, impact investing, financial inclusion.
Platform: fostering a community of forward-thinking scholars, researchers, policymakers, and practitioners to share insights on issues of concern.
Goal: providing practical solutions for sustainable economic development and showcasing Islamic finance’s role in creating shared prosperity
The Impact of Corporate Governance on Bank Risk-taking: Evidence of Islamic Banks in Gulf Cooperation Council (GCC) Countries
Full text linkPurpose — This study investigates the impact of Islamic corporate governance variables on risk-taking within a sample of 31 Islamic banks (IBs) operating in six countries in the Arab Gulf region during the period 2013–2022.
Design/Methodology/Approach — The study utilises content analysis and employs two econometric models: the random-effect generalised least squares (GLS) technique and the generalised method of moments (GMM) approach.
Findings — The findings reveal that two characteristics of Sharīʿah supervisory boards (SSBs), namely cross membership and knowledge in accounting and finance, have a negative impact on bank risk. However, it is observed that SSB size demonstrates a positive correlation with bank risk-taking, indicating that SSBs face challenges in effectively performing their supervisory role. Furthermore, it is noted that during the pandemic period, banks demonstrated significantly higher levels of credit risk and global risk.
Originality/Value — This research provides a valuable addition to the existing literature by conducting the inaugural analysis of the relationship between SSBs and bank risk-taking in the Arab Gulf region, adding to the understanding of Islamic corporate governance dynamics.
Research Implications — The study suggests reinforcing the structure of SSBs in IBs in the Gulf Cooperation Council (GCC) countries by appointing members with educational backgrounds in business, accounting, and finance. Furthermore, it supports the idea that the presence of shared scholars in IBs facilitates rational decision-making by SSBs and contributes to reduced risk-taking. Haut du formulair
Exploring the Determinants of Financial Well-Being: An Empirical Study in Muslim-Majority Countries
Full text linkPurpose — This study explores the financial well-being (FWB) of Muslim countries. It particularly examines the effect of financial capability, religiosity, and education level on FWB.
Design/Methodology/Approach — The data utilised was obtained from the World Values Survey. The data analysis used was the ordered logit/probit regression analysis with a sample of 20,701 respondents from 16 countries. To measure FWB, this study uses both objective and subjective FWB.
Findings — The results show the average FWB in the medium category, reflecting a moderate level where individuals neither face substantial financial difficulties nor achieve full financial satisfaction. The feeling of happiness is an important factor for a person to achieve high FWB even though they have a relatively low income or are relatively satisfied with their financial situation. Religiosity and education level have a positive effect on FWB while financial capability in success (hard work) has a negative effect, but saving has a positive effect on FWB.
Originality/Value — This paper is the first to highlight the determinants of FWB in Muslim-majority countries with insights from World Values Survey data. The study contributes to the literature on FWB, specifically in the context of Muslim-majority countries.
Research Limitations/Implications — A limitation of this study relates to the data availability and its use of some independent variables based on World Values Survey data. From a theoretical perspective, the research contributes to a better understanding of the factors influencing FWB.
Practical Implications — One of the policy implications of this research is for governments to strengthen financial education that is integrated with religious values to encourage wiser financial management while adhering to religious principles. Practically, this study encourages individuals to improve financial literacy while considering religious values; financial institutions can also provide relevant financial services that accommodate religious needs. Individuals are advised to not only pursue high income but also to prioritise satisfaction and happiness through a healthy work-life balance
Redefining Boundaries: The Case for Enterprise-Structured Waqf Over Corporate Waqf
Full text linkPurpose — This paper highlights the overextension in the definition of the term corporate waqf in the current literature, proposing a return to its original meaning. It also advocates for the use of a new term, enterprise-structured waqf, to capture the broader and more inclusive contexts of waqf. This paper further elaborates on and categorises the facets of the newly advocated term, clearly delineating its scope.
Design/Methodology/Approach — This paper utilises a qualitative content analysis (QCA) methodology to recognise specified characteristics within the corporate waqf literature. It prudently dissects the prevailing narratives, revealing areas of conceptual ambiguity and inconsistency. It further proposes new narratives.
Findings — It is shown that the extended definition of the term corporate waqf has left it ambiguous, with two meanings. The first is waqf that is established by corporate entities. The second is waqf whose assets are dedicated to entities with strategic business frameworks, regardless of the founder’s corporate or non-corporate status. The second meaning, while innovative, is misleading. It is therefore proposed that the term corporate waqf be returned to its original meaning and the term enterprise-structured waqf be used instead to capture the broader and more inclusive contexts of waqf.
Originality/Value — This paper is the first to highlight the overextension in the definition of the term corporate waqf, propose a return to its original meaning, and advocate for the use of an alternative term, namely enterprise-structured waqf.
Practical Implications — Returning to corporate waqf’s original meaning while distinguishing it from the broader concept of enterprise-structured waqf will potentially help expand waqf engagement and resource mobilisation
Analysing the Effects of Third-Party Funds and Financial Ratios on Muḍārabah Financing
Full text linkPurpose — This paper aims to investigate the relationship between financial indicators of Islamic banks in Indonesia and muḍārabah (profit sharing) financing. The financial indicators considered are third-party funds (TPF), capital adequacy ratio (CAR), non-performing financing (NPF), and net profit margin (NPM).
Design/Methodology/Approach — This study adopts a quantitative approach, analysing the Islamic banks’ financial statements from 2014 to 2023. The research design utilises a non-random sampling technique instead of purposive sampling, which focuses on specific criteria. This means that the sample is deliberately selected by considering certain criteria, notably complete financial statements relevant to the study’s purpose. The data analysis technique used is data panel regression.
Findings — The study reveals that muḍārabah financing is influenced by factors such as funds from external sources (TPF), a bank’s capital strength represented by CAR, and the level of NPF and NPM. Interestingly, the study found no impact from the existence of NPF itself. NPF is not found to be an influencing factor on muḍārabah financing because Islamic banks have increased their distribution of muḍārabah financing over the years to offset the impact of high NPF and to cover losses arising therefrom.
Originality/Value — The research question focuses on how muḍārabah financing is affected by specific bank financial indicators. This combination of topics has not been extensively studied before, making it a unique and original research area, especially in the context of Indonesia.
Research Limitations/Implications — The scope of this study is restricted to investigating how bank financial indicators affect muḍārabah financing. Although the research offers insightful information on the topic, it does not examine the impact of the financial indicators on other Islamic modes of financing or the larger financial environment. Second, it might be challenging to establish a direct causal relationship between muḍārabah financing and bank financial indicators as other variables may affect the connection, and correlation does not always indicate causality.
Practical Implications — Examining the relationship between muḍārabah financing and specific bank financial indicators provides valuable insights for policymakers, regulators, and financial institutions. These insights can inform decision-making and contribute to the stability and efficiency of the Islamic banking system
The Evolution of Islamic Corporate Governance from the Early Ages to the Sustainable Development Goals’ (SDGs) Era
Full text linkPurpose — This study aims to capture the waves of Islamic corporate governance (ICG) from its original concept to its latest evolutionary manifestations.
Design/Methodology/Approach — This study conducted a literature review with an in-depth content analysis of 173 relevant articles from a selective database using Covidence.
Findings — The findings reveal five distinct waves of ICG, spanning from the era of Prophet Muhammad (SAW) to the Sustainable Development Goals’ (SDGs) era, each characterised by unique features. The study also finds the top three key actors in modern ICG to be the Chief Executive Officer (CEO), the Board of Directors (BOD), and the Sharīʿah supervisory board (SSB).
Originality/Value — This paper is the first to trace the roots of the ICG concept from the early ages to the current period of sustainable economy while also discussing the involvement of key actors.
Research Limitations/Implications — This study offers a dual ICG mechanism framework for both Sharīʿah-compliant and Sharīʿah non-compliant companies in Muslim-majority countries.
Practical Implications — The research findings can assist scholars and researchers in gaining insights into the effective implementation of ICG in contemporary business practices, especially in significant Muslim markets