Journal of Islamic Finance (JIF)
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Gap Analysis Between BNM Regulation and Musharakah Mutanaqisah Application in Islamic Banking
No full textBank Negara Malaysia resolved the utilization of Musharakah Mutanaqisah on the Shari’ah Advisory Committee 56th meeting in 2010. In practice, most of the banks have adopted Musharakah Mutanaqisah for the purpose of home financing. This study examines the gap between the BNM regulation and as practiced by Maybank Islamic and HSBC Amanah. The method of analysis adopts a qualitative study based on the library research. The study discovered one major gap and three minor gaps. The major gap is related to charging an early settlement fee by HSBC Amanah. In addition, three minor gaps are related to wa’ad statement in both banks, the pledge statement with respect to Maybank, and default approach compliance in both banks. However, this study does not examine the gap that related to the contract validity. Nevertheless, the discovery of a single gap found may affect contract validity of the product. This study recommends for better monitoring and supervision conducted by all stakeholders. BNM Shari’ah Advisory Council and respective Islamic bank committees should verify the practice that may cause the contract to become void. In addition, Islamic financial institutions should strictly follow all the regulations issued by the Bank Negara Malaysia in all their practices and publication in order to make the contracts acceptable according to Shari’ah and to cater public confidence. Adhering to guidelines along with the Shari’ah standard of the product further increases accountability and trustworthy of Shari’ah compliance in a particular product
A Case for a Shari'ah Compliant Alternate Credit System to Facilitate Working Capital Management for Micro, Small and Medium Enterprises in Malaysia
Get PDFStudies and statistics have shown that micro, small and medium enterprises (MSMEs) enhance competition through economy-wide entrepreneurship, encouraging innovation and improving efficiency as their industries grow. In an increasingly globalized marketplace, it is important for Malaysian MSMEs to remain competitive in order to survive. Due to their size, they face many problems with regards to business operations. One of the main problems is access to financing for working capital management. This paper seeks to identify the main problems faced by Malaysian MSMEs in raising finance to meet their working capital requirements in their business operations, and also delve into the concept of trade credit and its employment in MSME business practices. Finally, the elements of an alternative strategy of working capital management will be proposed and discussed for the betterment of the MSMEs in Malaysia
Will It Survive? Challenges Faced by Islamic Banking and Finance in Today's World
Get PDFDespite the significant accomplishments made by Islamic banks over the past decades, there are still some notable issues from a marketing of financial services point of view that require attention in order to strengthen their market position relative to their conventional banking counterparts. Based on a review of extant literature this paper submits that with due recognition of the Islamic banks’ peculiar practical and regulatory milieu, financial products development in its entire ramifications is a sine qua non for continuous but sustainable growth of the Islamic banks. This should be complemented by developing a robust legal structure that enhances operational efficiency without infringing on growth potentials
Proposed Waqf Framework for Food Security and Price Stabilization Policy of Rice in Indonesia
Get PDFThis paper provides a framework for agriculture waqf in support of a food security strategy and price stabilization policy for rice in Indonesia. Instability and inefficiency of rice production has inceased, involving a high cost of production and low access of financing, which leads to instability of stock. Long supply chains, mismatch of supply and demand of rice due to the timing gap between harvesting periods, also encourages speculative practices. Waqf, through agricultural ventures that focus on producing rice, can play multiple roles and provide solutions for the entire supply chain of rice involving a framework designed to address the problems of rice in Indonesia. The proposed framework is intended to benefit all related stakeholders by maximizing the potential of waqf assets that already exist in Indonesia, with the justification based on the data, that provides an insight in to the real conditions of rice in Indonesia. The findings reveal that waqf can fit perfectly in the current framework for food security and price stabilization policy, with an additional reserve that independently enables the custodian of waqf assets from agriculture (rice) ventures. This promotes farmers as waqf partners, to create a stable rice production environment and to shorten long supply chain by creating associated commercial subdivisions. Hence the benefit is distributed to both farmers and customers through various subsidies and necessary aid in order to attain food security and stabilize the price of rice thereby improving the welfare of Indonesians
Examining the Resilience of Islamic and Conventional Banks to Changes in Macroeconomic Conditions
Get PDFThis paper aims to examine if there is any relationship between Islamic and conventional bank resilience to changes in economic conditions. To fulfill our objectives, first we provide a descriptive approach, in which we compare the credit risk evolution of 53 Islamic and 215 conventional banks operating in 10 countries from 2005 to 2015. Then we adopted a regression analysis, to examine to what extent being Islamic does matter in determining (i) the level of a bank’s credit risk, and (ii) sensitivity to changes in macroeconomic conditions. Results reveal that being Islamic seems to not matter, neither in determining a bank’s credit risk level, nor a bank credit risk sensitivity. Both types of bank seem to respond similarly to changes in the macroeconomic context
The Role of Waqf in Educational Development - Evidence from Malaysia
Get PDFThis study explores the role of waqf in educational development for a developing country facing economic downturn and financial scandal. It focuses on an Islamic charitable institution and gathers information from the annual report for fourteen years, commencing in 2000. Results derived through multiple regression analysis indicate that waqf-based financing has a significant positive impact on educational development in Malaysia. The present study is limited to the case of an Islamic charitable institution and thus lacks the ability to provide generalizable findings. In the event of economic instability and constant rise in educational costs, waqf has the potential to facilitate the educational needs of meritorious students by reducing their financial burden. As this is the first attempt to empirically test the proposition of past studies that waqf can serve as a secondary source of finance for educational development, this study contributes to minimizing the gaps in the previous literature.  
The Balance Sheet Network Analysis for Measuring Systemic Risk of Islamic Commercial Banks in Indonesia
Get PDFSystemic risk in a simple definition is potential loss suffered by the financial system which is commonly caused by the individual institution in the system. The default of Bear Sterns and Lehman Brothers in 2008 which were two of the five largest investment banks in the U.S at the time has changed the perspective that Too-Big To Fail was not solely an issue in the vulnerable financial system. Nevertheless, recent studies indicate that Too-Connected To Fail (TCTF) problem is actually the main issue of the vulnerable financial system. This study provides early warning system regarding the systemic event by measuring the systemic risk in Indonesian Islamic commercial banks (ICBs). This study employs a balance sheet network analysis to measure the systemic risk in Indonesia ICBs which relies only on the interconnection among banks in the system. The purposive sampling method is applied in this study involving 10 banks in 2012 and 11 banks in 2013 and 2014. This study investigates the capital loss suffered by an individual institution in case of bank default in the system, the Too-Connected to Fail (TCTF) risk which measures how risky the individual bank towards others and system, and the TCTF vulnerability which measures how vulnerable an individual bank in case of a bank default in the system. It is forecast that this study can be one of the references for the macro prudential and micro prudential supervisions in Indonesia.
 
An Analysis on Islamic Social Finance for Protection and Preservation of MaqÄá¹£id al-Sharī‘ah
Get PDFIslamic social finance is akin to the conventional social finance but the former is subjected to the established principles of Sharī‘ah. In generating positive impacts to the society, the Islamic social finance and its instruments must be utilised in protecting and preserving the MaqÄá¹£id al-Sharī‘ah. A critical analysis on the Islamic social finance in relation to the MaqÄá¹£id al-Sharī‘ah is provided through this research. By using the doctrinal and qualitative methods, the practices of the Islamic social finance as applied in OIC member states are reviewed and provided as examples. Problems of implementation of Islamic social finance in the OIC countries are listed; while tentative solutions are suggested with a hope of triggering better solutions. At the end of discussion, a list of recommendations for future researches is proposed for considerations
The Role of Islamic Banks Managing Waqf Institutions to Promote the Indonesian Agriculture Sector
Get PDFThe agriculture sector has absorbed numerous labourers to work in this area as a farmer. However, it still has many issues such as a low level of educational background and financial constraints experienced by the farmers. This study delineates the role of Islamic banks in managing waqf institution to promote the Indonesian agriculture sector. By adopting an extensive review on this particular issue, this study finds that firstly, an Islamic bank is needed to manage waqf funds professionally in Indonesia. Secondly, Islamic banks can act as a social intermediary to enhance human resource quality by empowering the farmers’ education in the field of agriculture. Thirdly, the Islamic bank can be a financial intermediary, which will provide subsidies to the farmers to buy fertilizer, seed, and other inputs. Furthemore, the Islamic bank can also be a third party guarantor to the farmers when they are borrowing money or give direct financing to the farmers by adopting an Islamic financial scheme. This study provides suggestions to overcome several issues in the agriculture sector by managing waqf funds and it accordingly adds to the literature thereby deepening the knowledge in related fields
Determinants of Efficiency of Islamic Banks: Indonesian Evidence
No full textThis study attempts to investigate the efficiency of Islamic banks in Indonesia and its determinants over the period of 2004-2014. Eleven full Islamic banks were selected for the sample. This study employs the Data Envelopment Analysis (DEA) in first stage of the analysis based on two inputs (fixed assets and deposits) and one output (financing income). Panel data regression is then employed in the second stage of analysis. This study finds that the efficiency scores of Islamic banks in Indonesia range from 61.4% to 96.4% between 2004-2014 with an overall efficiency of 75.6%. Regression analysis suggests that the efficiency of Islamic banks in Indonesia is negatively influenced by factors suchs as GDP growth, exchange rate and trade freedom while positively related with profitability, financing intensity, capitalization and non-financing expenses