Journal of Islamic Finance (JIF)
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Dynamic Linkages Among SAMI Nations (Saudi Arabia, Turkey, Malaysia, Indonesia) Equity Markets
Get PDFThis research paper investigates the dynamic linkages among four selected equity markets from Organization of the Islamic Conference (OIC) members. The four countries comprised the proposed Muslim BRICS called SAMI: Saudi Arabia, Ankara (Turkey), Malaysia and Indonesia. The study explores the short and long run linkages between these stock markets for the period spanning from January 2000 to September 2014 split into two sub-periods before and after the global financial crisis. Through applying Johansen co-integration analysis we found that the Indonesian, Malaysian, Saudi Arabian and Turkish stock markets are co-integrated during both periods. Emphasis was on the after crisis period where two co-integrating equations have been recorded. Granger causality test employed based on VECM further revealed that only a unidirectional relationship exist in the pre-crisis period between Saudi Arabia and Indonesia. However, bidirectional causality relationships were detected between almost all the four stock markets during the post-crisis period
Determinants Of Islamic Banks' Margins In Asian Countries
Get PDFThis paper examines the determinants of margins in Islamic banks for the period 2005â€2013. Specifically, we apply pooled, static and dynamic panel regressions on 76 Islamic banks in Asian countries. The results suggest the main factors that influence the margins of Islamic banks are numerous including bank size, default risk, overhead cost, capitalization, market concentration, GDP growth and inflation. It is evident that enhancing macroeconomic policies, risk management capabilities and operational efficiency could help in lowering the margins
Inadequacy of Consumer Protection from Unfair Contract Terms in Musharakah Mutanaqisah Home Financing In Malaysia
Get PDFMusharakah Mutanaqisah is one of the Islamic home financing products which has gained popular demand from the public in Malaysia. However, the terms and conditions of legal documentation of Musharakah Mutanaqisah Home Financing which were usually prepared by solicitors for Islamic financing institutions (“IFIsâ€) may have affected the welfare of consumers especially when most of the terms and conditions of legal documentations favoured the IFIs. In these circumstances, the consumers have no choice but to abide by the terms stipulated by the IFIs.This paper examines the adequacy of present legislation in Malaysia namely Islamic Financial Services Act 2013, Financial Services Act 2013, Shariah Standard and Guidelines: Prohibited Business Conduct policy, Consumer Protection Act 1999, Consumer Protection (Amendment) Act 2010 and the Contracts Act 1950 relating to unfair terms of contract in Musharakah Mutanaqisah Home Financing. The methodology adopted in this paper is statutory analysis whereby the relevant legislation are analysed. The analysis reveals that the legislation are not sufficient to regulate unfair terms of contract in Musharakah Mutanaqisah Home Financing in Malaysia. To ensure the protection of the consumers in Musharakah Mutanaqisah Home Financing, this paper recommends the present legislation, particularly Consumer Protection Act 1999 and Contracts Act 1950 be reformed.
Musharakah Mutanaqisah Home Financing, reform, legislation, standard form of contract
Is Gold Dinar the Appropriate Money in Islam?
Get PDFThe idea of revisiting currency and gold dinar from an Islamic standpoint as done in this paper is an interesting discourse in the current monetary system. The literature survey included historical aspect, supremacy of gold currency and the weakness of fiat money by employing maslahah-mursalah approach. The law of gold, as money, from Maqasid al-Shari’ah and Siyasah Syar’iyya approaches were discussed. The paper deliberated on some possible alternative forms of gold as money and then evaluated some obstacles and barriers in the hope of finding the best model of gold as money to be implemented in the current economic system. Deductive method is utilized to explore the implementation of gold currency based on historical study and library research. The findings revealed that, money is not limited to gold and silver. However, by using derivation from based on process from sources of law-making, the ‘hukm’ of gold/silver as money is permissible. While, the hukm for the country to mint gold dinar is subject to change into wajib, if the objective is to protect nation and people from harm. Maqasid al-Shari’ah and maslahah-mafsadah studies have also strengthened the view. Moreover, the review indicated that gold as money serves maslahah while fiat money serves more mafsadah. However, it is difficult to implement gold dinar monetary system in the current system due to some impediments. Backed by information/communication technology and adequate political will, gold may, however be employed as measurement of value; and as such could be implemented in certain communities including cooperatives
A Waqf Concept Applied in Higher Education: An Exploratory Study on the Practice of the IIUM Endowment Fund
Get PDFThe IIUM Endowment Fund (IEF) plays a vital role in assisting IIUM students financially. The IEF has served the needy in IIUM more than a decade through the application of waqf, as well as other methods, such as zakat, investment and collection campaigns. In particular, IIUM students face financial difficulty regarding the payment of tuition fees and living expenses, whilst studying at the university. The IEF is very much focused on increasing its collections each year. Based on the waqf concept applied by IEF, this paper will explore how this concept contributes in facilitating the IEF in its fund collections
Effect of Crude Oil Spot and Futures Price Volatility on South East Asia Islamic Equity Market
Get PDFThis paper examines the effect of crude oil price volatility on Southeast Asia Islamic equity market index. The paper focuses on the long run and short run effect of both the spot and futures price of crude oil on the Islamic equity market index in south East Asia. Daily data from September 2007 to June 2015 obtained from Bloomberg database is used in the paper. The analysis based on time series techniques within the co-integrating framework. The vector error correction model is used in this study complimented with Impulse Response Factor IRF to examine out of sample causality. The major finding of this study is that crude oil spot and futures prices have positive impact on the Islamic equity index in Malaysia, Singapore and Thailand. Though based on the short run relationship, there is remarkable difference in the speed of adjustment back to equilibrium among the Southeast Asia Islamic equity indices. Given the ongoing price volatility of crude oil prices and the market expectation that it may not abate anytime soon, this paper promotes the viability of the Southeast Asia Islamic equity market as investment safe haven to mitigate the impact of such volatility in crude oil prices
Factors Affecting Credit Risk in Indonesian Islamic Banks
Get PDFThis study uses dynamic panel data methods to examine the factors affecting credit risk in Indonesian Islamic banks. The panel data is collected from 11 full-fledged Islamic banks and 22 Islamic business units (windows) in conventional banks from 2004-2012, taking into account both macroeconomic variables and bank-specific variables. The Generalized Method of Moments (GMM), as proposed by Arellano and Bond (1991), is utilized to estimate the model. The results show that the GDP growth rate and the unemployment rate with a one-year lag have a strong effect on the level of the non-performing financing. Moreover, bank-specific variables such as bank’s diversification and financing structure have a positive effect on the problem financing although its direction is not as expected. It is hoped that the findings could draw attention to factors affecting credit risk in Islamic banks so that credit risk can be properly managed
Profit and Loss Sharing Financing, Mark-up Products or Conventional Debt? Application of Analytic Hierarchy Process
Get PDFFinancing SMEs is one of the most critical problems faced by entrepreneurs. PLS (Profit and Loss Sharing) and mark-up instruments are two sets of Islamic modes of financing developed as a substitute for conventional debt, which is typically adopted by SMEs. However, with larger finance offerings, it becomes more complicated for SMEs to determine the best financial instrument. Indeed, the financing decision involves a trade-off between tangible and intangible factors. Therefore, using an experts’ decision-making in evaluating financial products is a beneficial way to assist SMEs choosing the most appropriate one. The purpose of this paper is to apply the Analytic Hierarchy Process (AHP) in selecting an instrument to finance SMEs. Financial suitability, cost, risk, management intervention and profitability are the criteria upon which the financial decision is based in the current study. The results show that PLS equity finance complies with the SMEs profile more than mark-up products and traditional debt. The study has concluded with suggestions for future research
Shari'ah Committee Composition in Malaysian Islamic Financial Institutions: Post Implementation of SGF 2010 and IFSA 2013
Get PDFShari’ah Governance is what makes Islamic Financial Institution (IFI) different from the Conventional Financial Institution. The primary aim of Shariah Governance is to ensure that the operation, practice, instrument, product and management of the IFIs are compliant with the Shari’ah principles at all times. The Shari’ah Governance framework has been outlined in several standard and guideline issued by various bodies and organizations. At the global level, it has been issued by IFSB and AAOIFI, while in Malaysia specifically, it has been provided by Bank Negara Malaysia (BNM) through the Shari’ah Governance Framework 2010 (SGF 2010) and the newly implemented Islamic Financial Service Act 2013 (IFSA 2013). Acknowledging the significant role played by Shari’ah Committee in an IFI’s Shari’ah Governance framework, all of the standards, guidelines and regulations mentioned above provide many provisions with regard to the Shari’ah Committee in order to enhance their role and strengthen their position in the Islamic Finance industry. In this paper, focus will be given on two specific requirements, which are the requirement of qualification background of a Shari’ah Committee and the minimum number of Shari’ah Committee that must be appointed by an IFI. This paper will also discuss the gap between the requirements as provided by AAOIFI, IFSB, SGF 2010 and IFSA 2013, and what is the practice of the IFIs in applying these requirements
A Framework for Determination of Actual Costs in Islamic Financing Products
Get PDFIslamic banking commonly considered as an alternative to the conventional banking system, conducts its business based on certain financial contracts in order to attain profit, while doing away with the element of interest (riba). Among the services offered by Islamic financial institutions (IFI) are financing products and fee-based services to generate profits free from interests and other non-permissible incomes. The fee-based services conducted by Islamic banks may raise some Shari’ah issues such as the practice of charging a fee on services related to loan (qard) facility. Similarly, in financing activities, the IFI also imposes some amount of compensation or related charges in the case of late payment or default events for such financing. This paper aims to discuss the mechanism to determine the calculation of such actual charges and fees from Shari’ah perspective. Nevertheless, this paper does not intend to discuss the issue of “pricing†for Islamic financial products to determine its sales price and profit margin. This paper proposes Shari’ah compliance parameters on the computation of the actual costs for some related financing products offered by Islamic financial institutions