Journal of Islamic Finance (JIF)
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An Examination of Cultural-Economic Model and Public Relations in The Malaysian Islamic Banking System
Get PDFBy adopting the study by Gaither and Kandari on cultural-economic model of, the current study was designed to analyse the cultural-economic model of public relations practice of two prominent Islamic banks (full-fledged Islamic bank and Islamic window bank) in Malaysia. This study is mainly focusing on their communication tool particularly websites and relevant reports. The study is advancing the understanding of Islam and public relations in the context of Islamic banking institution in Malaysia, an understudied area in public relation literature and enlightens the relationship between religion and public relations. The analysis has identified six Islamic value orientations elements especially respect for religious authority, affinity with the past, fatalism, communal kinship, attachment to the eternal life and spirituality and idealism relative to public relation practice among the particular Islamic banks. The study concludes with observation that there is inseparable relationship between religion and culture in the context of Islamic banking industry in Malaysia
Impact of Financial Crisis on Non-Traditional Income: Islamic Banks vis a vis Conventional Banks
Get PDFThe present study aims to investigate the existing of shock due to the subprime financial crisis (2008) to the commercial banks performance in ASEAN-5 countries (Indonesia, Malaysia, Singapore, Thailand, and Philippine) particularly on the non-traditional activities aspect. Commercial banks in the present study are classified into Islamic and conventional banks. The data of 136 commercial banks in ASEAN-5 countries during the period of 2004-2012 from have been collected from the Bankscope database. The composition of sample based on type of bank is twenty samples are categorised as Islamic banks and the remaining 116 samples are under the category of conventional banks. We manage to run panel data regression using three estimation methods namely pooled-OLS, fixed effects and random effects methods. Based on the Breusch and Pagan Lagrangian Multiplier (LM) and Hausman tests, the random effects method is preferred. Islamic banks earn relatively lower non-traditional income compared to conventional banks. During the 2008 financial crisis commercial banks earn relatively lower non-interest income. Additionally, we find no evidence than Islamic and conventional banks non-traditional incomes are significantly different during the 2008 global financial crisis
Behaviour of the Islamic Stock Market in a Prolonged Downturn in the Global Market: Empirical Evidence from Malaysia
Get PDFBy focusing on Malaysian data, this study investigates the response of the Islamic stock market to changes in major macroeconomic variables such as industrial output, money supply, unemployment rate, exchange rate and foreign interest rate. It focuses on the period from January 2010 to December 2014 to capture the period of a prolonged downturn in the global financial market due to the U.S. financial crisis which started in 2007. The study adopts the co-integration approach of the Auto Regressive Distributed Lag (ARDL) model in order to capture the long-run relationship between the variables. The results show that the Islamic stock price reacts positively to the domestic factors, namely industrial activities, money supply, unemployment rate and real effective exchange rate disturbances. Interestingly, it reacts negatively to the foreign interest rate, suggesting investors’ “flight to quality†behaviour during a downturn in the global equity market
Competency of Shariah Auditors in Malaysia: Issues and Challenges
Get PDFOver the last decade since the inception of the first Islamic bank in Malaysia in 1983, Malaysia saw an increasing demand for Islamic banking services from consumers. Whilst the need for highly trained and skilled manpower in the Islamic banking industry is well established, the main challenge is really a mismatch of talent pool between what is required by the banks and what is offered by the market. Thus, this paper argues for a competency framework for shariah auditors in Malaysia. Prior research reveals that the competency requirements for shariah auditors were still not developed even though there is a need for it. A more recent empirical study reveals that most shariah auditors are either trained in shariah or auditing discipline. There is indeed an urgent need to draft the competency requirements which will include the knowledge, skills and other characteristics (KSOC) requirements to ensure adequate supply of competent shariah auditors to meet the expanding market demand. This paper proposes a new KSOC model as a basis for competency framework for shariah auditors that can uphold their effective functioning in our Islamic banking system
Ethical Investment in Stock Screening and Zakat on Stocks
Get PDFIslamic finance is the fastest growing segment of the global financial system and has been experiencing an impressive double-digit growth in recent history. Following the growth trend of Islamic finance, a rapidly rising affluent and well-educated Muslim middle class from the Islamic world and Western countries is aspiring to match finance with faith and fueling demand for Islamic investments. This paper examines how Muslim investors can invest in the contemporary stock market in a way completely compatible with the letter and spirit of divine Islamic law or shariah, and how Islamic investment is considered for zakat—a religious obligation to donate to the poor and needy a certain percentage of wealth. The conditions laid down by shariah make Muslim investors’ participation in the stock market a special case of ethical investment. This paper discusses a qualitative screening process to identify stocks of companies that are engaged in business or activities permissible (halal) in Islam, and a quantitative screening process utilizing financial ratio analysis to allow companies in permissible business to use a tolerable level of interest-bearing securities and associated interest income and expenses. Stocks of companies passing these tests are designated as shariah-compliant stocks or halal investments and these stocks form the investment opportunity set for Muslim investors. The paper then focuses on how to cleanse investment income from shariah-compliant stocks contaminated by income from impermissible (haram) sources and concludes with a discussion of two opinions of Islamic jurists and shariah scholars on treatment of investment in stocks for zakat calculation
Corporate Governance Disclosure Practices and Performance of Islamic Banks in GCC Countries
Get PDFThis paper investigates the impact of the level of corporate governance disclosure on bank performance by constructing a corporate governance disclosure index (CGDI) for 27 Islamic banks operating in five Arab Gulf countries. Using content analysis on the banks’ annual reports for 3 years (2011-2013), the composite index construction uses information on six important corporate governance mechanisms, namely board structure, risk management, transparency and disclosure, audit committee, Sharia supervisory board and investment account holders. The results demonstrate that Islamic banks adhere to 54% of the attributes addressed in the CGDI. The most frequently reported and disclosed elements are Sharia supervisory board followed by board structure and risk management. The findings related to countries revealed that only two countries, the United Arab Emirates and Bahrain, possess a higher level of CGDI. Our regression results provide evidence that Islamic banks with higher levels of corporate governance disclosure report high operating performance measured by return on assets and return on equity. Finally, as of the effect of internal and external factors, we identified four variables that were associated with bank performance, namely size, equity, risk and concentration
Globalisation of Islamic Financial Services and World City Networks
Get PDFIslamic Financial Services (IFSs) sector is rapidly developing in the Middle East cities as well as growing in the South East Asian cities like Kuala Lumpur and Jakarta. Growth rate of this sector is notably significantly in the mainstream International Financial Centres (IFCs) such as London and New York. Currently these cities are said to be the ‘command and control’ centres of the global economy because they harbour producer's services firms which manage increasingly complex production networks. This paper draws an analysis of rapidly expanding IFSs sector through a study of how cities are being connected through the intra-firm networks which provide Shari‘ah-compliant financial services. It is argued that a focus on the globalisation of Islamic financial services (IFS) sector may provide an alternative to hegemonic imaginations of world city-formation through its focuses on globalising economic process. The relevance of such analysis is discussed against the conceptual backdrop of the world city network literature. Based on information on the location strategies of 27 leading Islamic financial services (IFS) firms in 47 cities across the world, this study employed the methodology on ‘globalisation and world city network’ (GaWC). The results show that globalisation within the Muslim world follows a unique urban trajectory, thereby creating a network of powerful cities. The results also show that Middle East is at the apex of the IFSs sector and Manama is identified the hub of the IFS sector which other major cities such as Amman, Dubai, Doha, Jakarta, Jeddah, Karachi, Kuala Lumpur, Kuwait, Riyadh and Istanbul etc. are also primary nodes in the city network. Outside the Muslim world, London is increasingly profiling itself as a global Islamic financial service (IFS) hub
An Analytical Framework to Examine Shari'ah-Compliant Mortgage Financing by Financial Cooperatives in Malaysia
Get PDFThis paper utilises an analytical framework to explore and critically examine issues and challenges of offering Shari’ah-compliant mortgage financing by financial cooperatives in Malaysia. Concepts from five distinct theories (Theory of Credit Cooperative, Transaction Costs Theory, Agency Theory, Stakeholder Theory, and Theory of Credit Rationing) are modified and integrated to form a hybrid, layered framework. This is then used as a ‘lens’ to highlight the issues pertaining to business models and strategies, good governance, regulation and supervision, risk management, human resource management, which may influence the success of mortgage financing. This analytical framework is useful for relevant stakeholders on how to manage the issues, challenges, and harnessing the prospects of Shari’ah-compliant mortgage financing products
Cash Waqf: Historical Evolution, Nature and Role as an Alternative to Riba-Based Financing for the Grass Root
Get PDFIt is a settled matter among the Muslim jurists that riba in its any form is prohibited. It is so due to the exploitation and injustice associated with riba-based loans. To overcome the resulting hardship of non-availability of easy loans, sustainable alternatives are provided under the Shariah to enhance mutual dealings and promote commercial transactions. This paper sets to explore the Islamic heritage of cash waqf as alternative to riba based financing, the nature and its potentials in assisting the grass root in the society. This is because entrepreneurship which could be one of the key solutions to the growing poverty in the world, availability of cash is a prerequisite to making its wide practice a possibility. It is undisputable that the poor are unbankable and so they are denied access to commercial loans. This research contends that cash waqf could serve as a solution to this problem, by investigating the historical evolution and identifying the challenges that could stand against its development through lessons from the past. The paper finds that cash waqf is capable of promoting entrepreneurship in the world with interest free loans from the cash waqf institutions, making the poor self reliant and dignified
Behavior Investigation of Islamic Bank Deposit Return Utilizing Artificial Neural Networks Model
Get PDFAccording to Islamic law, the Islamic banks deliver return to depositors based on profit and loss sharing principle. Consequently, the return will be uncertain following real business and economic condition. However, this research investigates the phenomenon that Indonesian Islamic banking industry seems to mimic interest rate in generating return to depositors. This investigation utilizes artificial neural networks (ANN) model to examine the importance rate of each macroeconomic variables used. The rate indicates the level of domination or contribution of each variable in determining the volatility of Islamic time deposit return. The research uses ten years of monthly macroeconomic data as independent variables. Additionally, the average rate of return from one-month time deposit of all Indonesian Islamic banks (RR) is used as dependent variable. As a result, the N(9-4-1), a chosen neural networks architecture, found that BIRT and INTR as proxy of interest rate, dominantly affect RR volatility with almost 98% of importance rate. It shows the very high dominance of interest rate in determining RR volatility, as indication of mimicking behavior, rather than remaining variables as proxy of real economic condition