INCEIF University Journals
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Micro, small and medium enterprises’ competitiveness and micro-takāful adoption
No full textPurpose
This paper aims to attempt to first examine the competitiveness of micro, small and medium-sized enterprises (MSMEs) in the logistics industry; second, to identify the MSMEs’ perception towards takāful (Islamic insurance); third, to recognise the challenges in the adoption of takāful; and fourth, to suggest strategies to enhance the micro-takāful penetration rate.
Design/methodology/approach
The SWOT (strengths, weaknesses, opportunities and threats) analysis was used to measure the MSMEs’ competitiveness. Interview sessions were conducted with 13 owners of MSMEs in the logistics industry from the period November 2018 until January 2019 in Selangor, Malaysia.
Findings
The SWOT analysis identified several strengths (e.g. advanced infrastructure, rising number of new entrants and contribution to the local economy), weaknesses (e.g. lack of digital culture and training and a dearth of expertise), opportunities (e.g. supportive government initiatives and evolution of the mobile internet) and threats (e.g. changing customer expectations and limited financing facilities). The MSMEs’ perception towards micro-takāful and challenges in the adoption of takāful were also identified.
Research limitations/implications
This paper provides an understanding of the MSMEs’ perception towards micro- takāful products, sheds light on the challenges faced by MSME owners in protecting their businesses from risk exposures and offers strategies to enhance the micro- takāful penetration rate. This study, however, is limited to Malaysia’s experience.
Practical implications
The identification of MSMEs’ SWOT will be useful for these businesses as it provides solid information that can be used to improve business performance while also seeking takāful protection. This paper, other than serving as a guideline for stakeholders in the logistics industry to have a better understanding of their business environment, may also provide useful insights to practitioners and policymakers.
Originality/value
This paper integrates the SWOT analysis into a study on business risk exposure and takāful protection from the MSMEs’ perspective. Hence, the findings could broaden available knowledge on MSMEs, especially for businesses in the logistics industry. The knowledge may also facilitate matters for takāful operators interested in tapping into the market.
DOI: https://doi.org/10.1108/IJIF-03-2019-003
Capital market and economic growth in Malaysia: the role of ṣukūk and other sub-components
Full text linkPurpose
The purpose of this paper is to explore the effects of the capital market on economic growth by considering the role of ṣukūk (Islamic investment certificates) and other capital market sub-components in Malaysia between 1998 and 2018.
Design/methodology/approach
The empirical investigation is based on the autoregressive distributed lag (ARDL) cointegration bounds test.
Findings
The results reveal the prevalence of a long-run equilibrium relationship between capital market variables and economic growth. As expected, bond market components (ṣukūk and conventional bonds) have a positive, albeit insignificant influence on economic growth. In contrast, in the long-term, stock market development – regardless of the indicator used on economic growth – is shown to have a significant and positive effect. The study suggests that stock market sub-components affect Malaysia’s economic growth the most.
Research limitations/implications
The primary limitation of this study is that only corporate ṣukūk were considered, while government ṣukūk were excluded from the estimation due to a lack of requisite information, resources and data.
Practical implications
A strategic framework should be established, especially in pricing efficiencies. Furthermore, there is a need to create more awareness on the benefits of ṣukūk investment among conventional bond investors, including retail investors. Thus, there will be more players in the ṣukūk market, and this will help to improve market liquidity.
Originality/value
Apart from conventional capital market sub-components, this study takes into account ṣukūk as a sub-component in the capital market on economic growth using the ARDL framework. Also, this study particularly concentrates on the world’s largest ṣukūk issuer, Malaysia, rather than focusing on other ṣukūk-issuing countries.
DOI: https://doi.org/10.1108/IJIF-04-2019-006
Evaluating ṣukūk investment intentions in Pakistan from a social cognitive perspective
No full textPurpose
This study aims to evaluate cognitive, personal and environmental factors affecting investors’ behavioral intentions (BI) to invest in ṣukūk (Islamic investment certificates) in Pakistan.
Design/methodology/approach
Data from 462 participants were collected through survey-questionnaires by using the convenient sampling technique. Hypothesized proposed relationships among the constructs were examined by applying the structural equation modeling (SEM) technique through smart partial least squares.
Findings
Compatibility, internal influence, external influence and intrinsic motivation were found to be significant predictors of investors’ BI to invest in ṣukūk. In addition, it was found that the religious aspect not only affects investors’ BI positively but also works as a moderator in the relationships between BI and both internal and external influence.
Practical implications
The results are quite helpful for ṣukūk issuers and regulators to consider cognitive, personal and environmental factors that might enhance the adoption of ṣukūk, especially among Muslim investors.
Originality/value
This study is among the few research studies that shed light on investors’ BI to invest in ṣukūk. Using social cognitive theory, the study investigates the cognitive, personal and environmental factors influencing ṣukūk adoption, which were previously unexplored. In addition, this is the first study that unveils the influential factors of ṣukūk adoption in Pakistan, a Muslim-majority country.
DOI: https://doi.org/10.1108/IJIF-12-2019-019
The effectiveness of technical strategies in Malaysian Sharīʿah vs conventional stocks
No full textPurpose
This study aims to investigate Malaysian stock market efficiency from the view of Sharīʿah-compliant and conventional stocks based on the effectiveness of technical trading strategies.
Design/methodology/approach
This study uses unconventional trading strategies that mix buy recommendations of Bursa Malaysia analysts with sell signals generated from 10 selected technical trading strategies (simple moving average, moving average envelopes, Bollinger Bands, momentum, commodity channel index, relative strength index, stochastic, Williams percentage range, moving average convergence divergence oscillator and shooting star) that are detected using ChartNexus. The period from 1 January 2013 until 31 December 2015 produces a total sample consisting of 1,265 buy recommendations of 125 Sharīʿah-compliant stocks and 400 buy recommendations of conventional stocks. The study period is extended until 31 March 2016 to provide an ample time for detecting the sell signal especially for buy recommendations that are released towards the end of 2015.
Findings
The resulting Jensen’s alpha show 8 out of 10 strategies are effective in generating abnormal returns in Sharīʿah-compliant samples while only 3 out of 10 strategies are effective in conventional samples. Prominent effectiveness of technical trading strategies in Sharīʿah-compliant stocks implies clear inefficiency in that stock market segment as opposed to those of the conventional stocks.
Originality/value
The results based on unconventional trading strategies provide new insights of Malaysian stock market efficiency especially in Sharīʿah-compliant and conventional stocks. The paper provides more robust findings on market efficiency as firms’ equity level data were focussed together with analysts’ buy recommendations from Bursa Malaysia.
DOI: https://doi.org/10.1108/IJIF-08-2018-009
Classical waqf, juristic analogy and framework of awqāf doctrines
No full textPurpose
This paper aims to analyse the Sharīʿah premises of waqf (Islamic endowment), followed by dilating on the nature of argumentation among the classical jurists on its rules and principles. The paper critically analyses the edifice of the applied juristic analogy of different early jurists in deriving various waqf doctrines. The objective of analysing the jurisprudential framework of waqf in its classical mould is to conceptualise the methods, mechanism and nature of juristic analogies in deriving the waqf principles. This analysis is critical to understand the scope of jurisprudential flexibility in modern awqāf.
Design/methodology/approach
The paper is an outcome of a library-based research. It uses the classical jurisprudential treatises of waqf with an aim to analyse the Sharīʿah basis of the institution, the premises of its key principles and the applied juristic analogy to derive the same. The paper covers the classical waqf books and treatises from the four Sunni schools of jurisprudence and uses a textual analysis method.
Findings
The paper finds that in its initial phase, the conceptual framework of waqf was not unanimously agreed by all jurists, rather its Sharīʿah permissibility remained critically disputed among them for a while. Though, the opinion of those jurists who approved the Sharīʿah-validity of waqf was to prevail in the later stage, disagreement persisted with reference to its necessary features and defining criteria. It is found that in the classical waqf literature, two most disputed aspects of waqf jurisprudence constituted the requirements for completion of a waqf and its ownership status.
Research limitations/implications
This study neither covers the historical contribution of waqf among the Muslim societies nor touches on the empirical aspects of modern waqf. Rather, the focus of the study is limited to analysing the classical jurisprudential discourse of waqf and distillation process of its rulings.
Practical implications
The objective of analysing the classical juristic discourse of waqf is to underline the premises of classical juristic analogy in determining the framework of fiqh al-awqāf (jurisprudence of waqf) in its classical permutations and to learn how to adopt a similar approach for deduction of new waqf rulings.
Originality/value
This paper adds original value to the body of waqf literature for analysing the classical waqf rulings distillation process along with examining the methods and mechanism of juristic analogy.
DOI: https://doi.org/10.1108/IJIF-07-2019-010
An analysis of residue net estate distribution to bayt al-māl in Singapore
No full textPurpose
This paper aims to examine the current practice in Singapore regarding an inheritance issue: disposal of the residual net estate to the bayt al-māl, which is identified as the Islamic Religious Council of Singapore (Majlis Ugama Islam Singapura, MUIS). The issue arises when the deceased leaves farḍ (fixed-share) heir(s) and/or dhawū al-arḥām (outer family members) but there is no ʿaṣabah (agnatic residuary heir by blood). Farḍ legal heirs are those beneficiaries for whom the Qurʾān prescribes inheritance of a pre-determined share. Disposal of the residual net estate to the bayt al-māl results in a reduction in the share due to the farḍ legal heir or worse, a total loss to the dhawū al-arḥām legal heirs.
Design/methodology/approach
A qualitative approach based on library and case study research has been adopted to elaborate practices that fall under the purview of the Administration of Muslim Law Acts (AMLA), Chapter 3.
Findings
The current practice seems biased against, especially, women and spouses. It creates high dissatisfaction in the community, especially those affected by such practices. This paper elaborates on the practice of residual net estate distribution in Singapore and the contemporary practices of the four Sunni madh-habs – the Ḥanafī, Mālikī, Shāfiʿī and Ḥanbalī jurisprudential schools – in other countries.
Research limitations/implications
In Singapore, Muslim law is defined and implemented by the civil court, not the Syariah Court or MUIS. The recommendation to change from the current classical practice by the Syariah Court and MUIS to the contemporary practice that is relevant to today’s context lies with the civil court and Government of Singapore. The choice for the Syariah Court and MUIS to adopt the contemporary practice as per Ḥanafī School by rule of the court or the government is beyond this research. Zayd ibn Thābit, Caliph Abū Bakr and a small number of companions held the view that the residue net estate asset must go to the bayt al-māl, the current classical practice. The contemporary practice adopted by Sayyidina ʿUthmān ibn ʿAffān, Jābir ibn Zayd and majority of the companions’ view, is not in favour of the residue net estate asset to go to the bayt al-māl; rather they view that it must be returned to the legal heirs.
Practical implications
Awareness in the community in the current controversial practice in Singapore when the residue net estate through the farāʾiḍ law was giving to bayt al-māl instead of returning to farḍ or dhawū al-arḥām in the absence of the ʿaṣabah legal heir as stated in the Inheritance Certificate issued by Syariah Court.
Social implications
To understand the contemporary Muslim law and the practical and just application in today’s Singapore context as supported by the AMLA, Chapter 3.
Originality/value
This is the first study that challenges the current practice by the Syariah Court and MUIS in Singapore, thereby endeavouring to restore justice to the community.
DOI: https://doi.org/10.1108/IJIF-04-2019-005
Methodology of integrated knowledge in Islamic economics and finance: collective ijtihād
No full textPurpose
The purpose of this paper is to discuss the methodology of integrated knowledge in Islamic economics and finance and seek to offer collective ijtihād as one way to find solutions to the existing problems in the field.
Design/methodology/approach
The study is based on the idea of multidisciplinarity or interdisciplinarity, which uses not only traditional sources of Islam and economics, such as uṣūl al-fiqh, fiqh mu’amalat, econometrics, statistics, microeconomics and macroeconomics but also looks into behavioural and natural sciences for inspiration and solutions. This paper is constructed using the methodology of “the two readings”, as promoted by the International Institute of Islamic Thought, and which combines the revealed and the existential sciences.
Findings
This paper proposes the collaborative multidisciplinary methodology as the main approach to studying the modern problems and challenges, as well as for finding solutions in the fields of Islamic economics and finance.
Practical implications
Studying and researching issues, particularly in the field of Islamic economics and finance, from an interdisciplinary perspective, effectively broadens practical applications and possibilities in Islamic finance.
Originality/value
This paper contributes to social sciences, especially the field of Islamic finance, and calls upon researchers to engage in multidisciplinary studies.
DOI: https://doi.org/10.1108/IJIF-02-2019-003
Conventional REITs, Islamic REITs and macroeconomic variables in Malaysia: a review
No full textPurpose
The purpose of this paper is to empirically examine the return and dividend characteristics of two different types of Malaysian real estate investment trust (REIT) series, namely, conventional and Islamic, against macroeconomic variables over the period 2011-2017.
Design/methodology/approach
The required data are derived from Datastream database. Multiple regression analysis is used to determine the impact of macroeconomic variables on financial performance of 13 Malaysian REIT series.
Findings
Results show that the macroeconomic variables are able to predict future returns and dividends of Malaysian REITs. The analysis also suggests that Islamic REITs are seen to be less sensitive to macroeconomic variables and display better portfolio diversification benefits as compared to their conventional counterpart. The ongoing implications for large-cap and small-cap REITs are also highlighted.
Research limitations/implications
The main limitation of the study is the small percentage of Islamic REITs sample due to limited period of observation available. However, the two Islamic REITs included are representative of Islamic REITs in Malaysia as both of them are listed in the Bursa Malaysia with asset size and market capitalization values more than RM1bn.
Practical implications
The results of this study may serve as a useful input for financial market players on making strategic business decisions especially with regards to differences between conventional and Islamic REITs characteristics.
Originality/value
The main contribution of this paper is to explore the relationship between REITs and macroeconomic factors on a unique capital market (Malaysia) that allows comparison between conventional and its Islamic counterpart.
DOI: https://doi.org/10.1108/IJIF-08-2018-008
Editorial
No full textIn the Name of Allah, Most Gracious, Most Merciful. One of the recurring discussions about Islamic finance deliberates on the way forward for the industry. The objective is to spread the Islamic finance proposition as a preferred mode of banking and finance beyond traditional markets so that it grows as a universal alternative system of financial intermediation over time. To achieve this objective, efforts are geared at two levels:
embedding sustainability in the core Islamic finance business model by leveraging on its ethical principles so that it represents a unique, value-driven, stable and resilient system of finance; and
mobilising Islamic finance to spur inclusive growth and socio-economic and environmental sustainability of societies.
On the first front, different concepts of sustainability have been advanced as models of growth and development, including the following two streams: environmental, socially responsible and Islamic investing; and value-based intermediation. Now the talk is about democratisation of sustainability through Islamic finance within communities. On the second aspect, a shift in discussions is already happening on the opportunities for the Islamic finance industry in the emerging concept of “blue economy”, after having promoted the “green economy” initiatives
Venture waqf in a circular economy
No full textPurpose
This paper aims to enhance the impact of incorporated waqf institutions by blending their resources to promote responsible small businesses that are inclusive of human development, service to society and preservation of ecological environment and other species. This is expected to shift the paradigm of businesses from the current waste-oriented linear economy to ideally a zero-waste circular economy.
Design/methodology/approach
This is an analytical study building on the experience of European Venture Philanthropy Organizations (VPOs) that work with the primary objective of making impactful businesses successful, with capital protection and return on investment being of secondary concern. This paper suggests an incorporated institutional design that blends resources for promoting responsible businesses using a new hybrid financial mechanism, namely, equity-at-default (EaD) to replace collateral and foreclosure requirements with responsibility and compassion.
Findings
The research calls for changing the business paradigm from linear to circular, an incorporated institutional framework for venture waqf, purpose of the waqf to make impactful small businesses successful and designing a financial contract to loan in favor of responsible businesses that convert to equity stake for the waqf in case of default (EaD) replacing collateral and foreclosure requirements.
Research limitations/implications
This is a theoretical study motivated by the success of VPOs but assigns a new role to waqf institutions. Furthermore, the incorporated nature of waqf is a new idea and EaD is a new mechanism. Being new, these ideas have the risk of not being implemented. However, the broader message that waqf shall promote businesses that are inclusive of ecological concerns is generally applicable.
Practical implications
The paper has a significant practical implication to transform the responsibility and consciousness of businesses. Waqf is fundamentally a compassionate institution, and it must enhance the responsibility of businesses to become more inclusive of the environment and other species. It should also become more compassionate toward businesses that are in distress and default. In this sense, the paper tries to internalize compassion in financial contracting that can potentially change the architecture of lending.
Social implications
Altering businesses’ mindset from a waste-driven extractive linear economy to inclusive circular economy has a tremendous transformative role. This will have implications for enhancing business consciousness and responsibility. As poverty is a phenomenon of state of mind, changing the society’s state of thought in Muslim communities is expected to have basic positive implications. Entrepreneurs with a new mindset can have far-reaching positive impacts on the society.
Originality/value
The paper offers potentially innovative perspectives in four key areas and blends the different resources in an incorporated waqf that makes responsible entrepreneurs assume a partnership role in times of distress through EaD. Furthermore, the integration of compassion in financial contracting could have better implications for return on investment as well. The ideal state of an economy is where waste is turned into wealth and well-being is something that all policymakers must keep on the top of their agendas.
DOI: https://doi.org/10.1108/IJIF-12-2018-013