Journal of Islamic Finance (JIF)
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An Analysis of Islamic Banking Performance: Maqashid Index Implementation in Indonesia and Jordania
Get PDFThe discourse on the presence of Islamic banking in the global era went broadly and extensively. It is because the society has begun realizing the existence of Islamic banking. Islamic banking does able to show its resilience and endurance facing the global financial crisis. A part from its positive growth, there exist a critical issue related to it performance measurement. For the time being, the performance measurement of Islamic banking industries merely uses the financial ratio measurement (shareholder oriented). Indeed, this financial ratio measurement is necessary but unfortunately not sufficient. Therefore, Islamic banking that is different from conventional banking both in theory and practice, needs a shifting paradigm in term of their performance measurement which not only limited to the financial ratios (stakeholders oriented). This paper would like to apply Maqashid Index approach for the measurement of Islamic banking industry performance. The object of this research is Islamic banking industries in Indonesia (Bank Syariah Mandiri and Bank Muamalat Indonesia) and Jordan (Jordan Islamic Bank and Islamic International Arab Bank Jordan)). Using Maqashid Index approach with SAW (Simple Additive The weighting) method, it can be concluded from the first measurement using Maqashid Index that Islamic banking industries in Indonesia which represented by BMI (0.17839) and BSM (0.16190) show better performance in comparison with Islamic banking industries in Jordan, namely IIABJ (0.10295) and JIB (0.08152)
The Role of Awareness in Islamic Bank Patronizing Behavior of Mauritanian: An Application of TRA
Get PDFThis paper is aimed at examining the role of awareness and the applicability of the theory of reasoned action (TRA) in predicting the intention of people to patronize Islamic Banks in Mauritania. A total of 227 respondents were involved and structural equation model was used to measure the relationship between the exogenous and endogenous variables in the model. The results have shown that TRA is a valid model in predicting the intention of Mauritanian to patronize Islamic banks in Mauritania. Attitude and subjective norm were found to have a positive influence upon the intention to patronize Islamic banks. It was also proven that awareness has a positive and significant influence upon the attitude and thus influences the intention of Mauritanian to patronize Islamic bank
An Application of GARCH Modeling on the Malaysian Sukuk Spreads
Get PDFThis study explores the influencing factors of the Islamic bond (sukuk) spreads, by employing the generalised autoregressive conditional heteroscedasticity (GARCH) method. Apart from the general GARCH (1,1) model, a higher order of lags for both ARCH and GARCH terms are also considered which is applied onto both the investment and non-investment grade sukuk. This study is among the first few to document the empirical evidence on sukuk spreads and its volatility which is expected to further enrich the empirical literature of the financial markets especially in the Islamic finance. This is in line with the pressing demand for more in-depth information on various dimensions of the sukuk market given the importance of the sukuk in the global capital market. This study contributes significantly to the benefit of the investors, portfolio managers as well as regulators to better understand the underlying factors influencing the pricing and risk management of sukuk instruments. In addition, the assessment on the impact of therecent global financial crisis allows for a thorough understanding on the behavior of sukuk spreads so as to pre-empt the impact of future financial shocks to the sukuk market
The Foundations of Islamic Finance and The Maqasid al-Shari'ah Requirements
Get PDFThe emergence of Islamic finance as a system of thought and practice is timely in the midst of world crisis and the uncertain proposals for solving it. It is hoped that Islamic finance offers a coherent perspective for understanding real economic problems as well as a genuine alternative to the very foundations of how economics and finance should be managed to actualize human prosperity. In addressing those expectations and challenges, sufficient attention to the foundations should be given to develop solid conceptual scheme of a new finance in Islamic perspective and to resolve the tensions in the current development. This paper attempts to discuss the foundations of Islamic finance and the requirements in developing Islamic finance from the basic principles of maqÄá¹£id al-Sharī’ah (the objectives of Sharī’ah). Islamic finance, in this perspective,must realize its full potential as a system, not merely a lawful means in doing financial business or a stopgap means of surviving the crisis. It must go beyond that to provide the guidelines for managing a good economy, stimulating growth and development, realizing socio-economic justice and promoting employment and stability as implied in the objective of Sharī’ah (maqÄá¹£id al-Sharī’ah )
Integration of Waqf and Islamic Microfinance for Poverty Reduction: A Survey in Kuala Selangor, Malaysia
Get PDFWaqf has generally been related to the religion and the socio-economic system of Muslim societies. It has played avital role throughout Islamic history. On the other hand, Islamic Microfinance (IsMF) is expanding rapidly in theMuslim countries. The IsMF is considered as a key instrument for providing funds to poor micro investors. Since bothwaqf and IsMF emphasize sustainability, and since waqf can assist to reduce the cost of capital in operation of IsMF,the research aims to develop an integrated waqf based microfinance model applicable in some Muslim countries. Thiswill ensure utilisation of the combined resources of Waqf and IMF institutions in alleviating poverty, an objective that both the two institutions share. The present study focuses in in Kuala Selangor, Malaysia, using 102 sahabat (clients) from Amanah Ikhtiar Malaysia (AIM). Structural equation modeling is adopted to examine the relationship among the five constructs i.e., Waqf Resources, IsMF, Takaful, Human Resources and Poverty Alleviation. While the reliability and validity were established, the structural relationship between the constructs reveals that the model has to be modified. Specifically, the result shows only takaful has significant impact in reducing poverty while others are found to be insignificant. This suggests that the model as well as the instrument should be further developed
Scrutinizing the Malaysian Regulatory Framework on Shari'ah Advisors for Islamic Financial Institutions
Get PDFIslamic banking, takaful and Islamic Capital Market are the main component of Islamic financial system in Malaysia. Shari’ah compliance is one of the attributes to distinguish Islamic Financial Institutions (IFIs) from its counterpart. Adherence to Shari’ah principles is fundamental to the operations of IFIs and such adherence is a continuing process as long as such institutions operate. The Shari’ah Advisors appointed by the IFIs are responsible in ensuring the Shari’ah compliance of IFIs in carrying out its Islamic financial business. The requirement for the appointment of Shari’ah Advisors in IFIs has been included in the statutes governing IFIs as well as guidelines and circulars issued by authoritative bodies related to Islamic banking, takaful and Islamic Capital Market. This indicates that, the appointment of Shari’ah Advisors in IFIs is a vital to the industry. A specific regulatory framework on Shari’ah Advisors is essential in regulating their duties and responsibilities as may be in ensuring that the operations of IFIs conform to Shari’ah principles. Furthermore, a strong regulatory framework on Shari’ah Advisors is one of the factors in ensuring the resilience development of Islamic finance industry. Henceforth, this study seeks to analyze the Malaysian regulatory framework on Shari’ah advisors as their significant roles and responsibilities in ensuring Shari’ah compliance of IFIs.Â
Customer Satisfaction and Switching Behavior in Saudi Islamic Banks: An Exploratory Study
Get PDFInvestigating Islamic banks customer satisfaction and switching behaviour is imperative for the Islamic banking industry because it could assist in explaining the level of relationship between Islamic banks and their customers. Accordingly, the present study is aimed at examining customer satisfaction and switching behaviour of Islamic banks’ customers for the case of Saudi Arabia. Data for this study is obtained through survey method that involves the distribution of questionnaire to about 216 Islamic banks’ customers in Saudi Arabia. Importance and performance analysis (IPA) method is employed to achieve the objective of this study. The finding of this study indicated that, internet banking, shariah compliance, confidentiality, bank’s type, accuracy of bank statement, new technology adoption, and frontline friendliness dimensions fall under the quadrant of “keep up the good work†with high level of performance and importance. In contrast, the attributes that are located in quadrant called “concentrate here†are ATM location, clarity in giving explanation, promptness in giving response, staff understanding on Islamic contracts, staffhandling complaints and parking area
The Impact of Global Financial Shocks to Islamic Indices: Speculative Influence or Fundamental Changes?
Get PDFThe ripples of the financial crisis are still being felt over different parts of the world causing much distress to the real economy. The capital market, in particular, took a massive hit during the crisis plummeting to all-time lows. In the footsteps of globalization, a financial shock to the US capital market can cause a spill over effect to other markets, Islamic capital market included. Hence, this paper attempts to address the question whether Islamic indices are affected through fundamental changes or short-term influences by sudden changes in volatility as compared to their conventional counterparts. To empirically analyze this, we apply continuous wavelet technique to identify co-movements between world financial indices and Islamic indices for World, Asia Pacific and Emerging Markets specifically. Covering a time period of 15 years (1997 – 2011), our results confer that Islamic indices in the Asia Pacific and Emerging Market region are partially immune to speculative shocks to global financial services making them a good alternative. Similarly, Islamic indices testified more stable due to their rigid screening criteria
Measuring Takaful Agents' Understanding Towards The Objectives and Concepts of Takaful
Get PDFAs the Takaful industry increasingly taking innovative steps to improvise their marketing efforts, the introduction of Wakala system (agency system) is further enhanced. Takaful agents not only oblige to sell Takaful products, but they are also responsible to educate public pertaining to the objective and importance of Takaful products. Without excellent and proper understanding, the Takaful agents would fail to fulfill their responsibility to market the Takaful products. This study thus, investigates the Takaful agents’ understanding towards the objective and concept of Takaful besides the factors that contribute to their understanding. In addition, it is done to confirm the measurement items constructed to examine the agents’ knowledge on Takaful objectives and concept. Self constructed survey questionnaire was distributed to agents of Prudential Bsn Takaful Bhd. A descriptive statistic analysis and factor analysis was utilised to measure the level of understanding among the agents and also the factors contributed to their understanding. Results indicated that the level of understanding among the Takaful agents still discontented. Furthermore, learning culture has become the most influential factor to enhance the agents’ understanding. Overall, the results of this study would reflect the Takaful industry to prepare an effective learning environment to their agents in order to strengthen their marketing efforts
Towards Adopting Zero Interest Financing (ZIF) and Profit and Loss Sharing (PLS) Principle in Islamic Microfinance: The Case of Amanah Ikhtiar Malaysia
Get PDFMicrofinance institutions evolved to alleviate poverty by providing micro-credit to the poor. Islamic microfinance evolved to provide alternative to the interest based conventional microfinance. However, the financing modes being used by the Islamic micro-finance institutions (IMFIs) are mostly debt based, which have resemblance to the interest based conventional modes. IMFs shun away from using the PLS scheme, which they consider risky. Theoretically, it is argued that PLS mobilizes factors of production, encourages risk sharing and ensures distributive equity in income and wealth. There is hardly any literature that has shown that PLS is workable in a pristine environment of zero interest. Furthermore, there is hardly any studies that have discussed on the feasibility of financing the poor using a combination of PLS and zero interest financing (ZIF). This study will experiment on the feasibility of providing small financing using a combination of PLS and ZIF to empower the working poor. The research incorporates literature survey, field study and business model applications in its methodology to achieve the desired objectives. The results of this pioneering project are expected to promote the local socio-economic welfare of the poor and provideopportunities in applied areas for future research