Journal of Islamic Finance (JIF)
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Determinants of Islamic Financial Inclusion in Indonesia: A Demand-Side Analysis
Full text linkThe low number of Islamic financial inclusion has been a major problem to the Indonesian government because of the country has the largest Muslim population globally. This study aims to examine the Islamic financial inclusion determinants by collecting information from Muslim respondents. The determinants used include Islamic financial literacy, trust, financial self-efficacy, and social influence. The survey involved 215 respondents from West Java, Lampung, South Kalimantan, Gorontalo, and West Nusa Tenggara. All the participants involved in the study were included in Islamic financial institutions. Furthermore, the Exploratory Factor Analysis (EFA) and the Confirmatory Factor Analysis (CFA) methods were applied to classify Islamic financial inclusion determinants, while the Structural Equation Modelling was used to test the hypothetical relationships. The results showed that social influence is a significant determinant of Islamic financial inclusion in Indonesia. Therefore, policymakers and the Islamic financial industry need to improve social influence through campaigns that involve local culture and public or religious figures to enhance inclusion. Future studies need to provide other validated constructs to assess Islamic financial inclusion from the demand and supply aspects
A Systematic Literature Review on Zakat
Full text linkAlthough zakat is an extremely studied topic in Islamic Social Finance, a systematic, comprehensive, and diverse review in the domain of zakat is lacking. This paper attempts to conduct a systematic review on the status of zakat literature, taking Malaysia as a case study. The article searched on the Scopus database and identified sixty-three (63) related studies. However, only thirty-one (31) studies throughout 2009-2020 met the criteria set for the study. This study examined several aspects of literature review which include research type, research approach and subject area. The outcome of this article is to provide direction for future studies
The Theory of Product Innovation and Its Application in Islamic Banking
Full text linkThe success of banking institution depends on continuous innovation and improvement of the product offering to increase profitability and marketability. Product innovation is also one of the important aspects for Islamic banking institution, but it requires attention in observing Shariah requirements. This article will analyze the principles of innovation and development and its application in Islamic banking product. The analysis is based on qualitative research approach where reference will be made to primary and secondary sources gathered through library research. The discussion will study several literature on the concept of product innovation and analyze the applicable Shariah principles in the aspect of innovation of Islamic banking product. From the study, it is concluded that the general concept of product innovation in conventional banking can be applied in the context of Islamic banking. This is because Islamic banking is still within the framework of banking which is also subject to similar commercial aspects but with the requirement to uphold Shariah principles. Product innovation in Islamic banking involves the role of creativity and the concept of reform in Shariah as well as the approach in the construction of Shariah ruling. Therefore, continuous product innovation is significant for Islamic banking institution to remain competitive with other financial institutions in the industry
How Middle-Low Income Muslim Group Financially Reacts in Pandemic Crisis
Full text linkThe purpose of this study is to determine factors constituting financial behavior of middle - low income group living in the sub-urbs area in Indonesia during a pandemic. This paper employs Structural Equation Modeling Partial Least Square (SEM-PLS), with a selection of 150 respondents that meet the criteria, based on: jobs, income, and house location (purposive sampling). The findings indicate that Islamic financial literacy, locus of control, and attitudes affect positively and significantly the financial behavior of this segment. While locus of control serves the highest factor, it is pertinent to emphasize the findings that Islamic financial literacy shows the lowest value than other variables. This situation has a real implication, essentially for policymakers and religious scholars, to create a continuous program targeting on improvements of Islamic financial literacy in general aiming on building a responsible financial behavior for middle-low income Muslim groups particularly during the pandemic crisis
Impactful and Collective Microtakaful in Addressing the Impact of COVID-19 Pandemic
Full text linkPresent economic condition during the COVID-19 pandemic affects an uncertain environment to every level of community which leads to a nerve-wracking financial concern. The low-income group or popular known as ‘B40’ group seems to be unswervingly affected by recent instability in the nation’s economy that results to situations having multiple uncertain outcomes requiring them to manage their unique risks and seek protection thereof. Vulnerable in their financial position, COVID-19 poses more threat to the health of the low income-earners group more than others especially when the environment they mostly live in is not adequate for hygiene standard level. Previously, there was a concerted effort taken up by a group of Takaful Operators to provide a micro-Takaful protection to the ‘BR1M’ (‘Bantuan Rakyat 1-Malaysia’/1-Malaysia People's Aid) recipients. It was intended to provide Takaful coverage to the breadwinner of a B40 family with an aim to minimize the adverse effect of a possible financial catastrophic if the sole breadwinner of the family died. Micro-Takaful is a way to jointly attend, cater and mitigate the financial risks, which is in line with the Islamic principle of Harm Prevention. The concept of helping and assisting particularly the unfortunate ones to mitigate risk and reduce losses and sufferings due to misfortune constitute the very aspiration of the micro-takaful principles. This study aspires to examine the extent of effectiveness of the previous collective Micro-Takaful projects on BR1M recipients that were proven to benefit 7.2 million recipients as of in 2018 nationwide. Takaful operators who persistently aiming to become the value-based intermediary (VBI) inspired by the Regulator in order to achieve the Sustainable Development Goals by providing Micro-Takaful to the needy people. The data is mainly from the participating Takaful operators in the previous Micro-Takaful and BR1M project in order to evaluate the present and future direction of micro-Takaful initiative in the present ‘BSH’ (‘Bantuan Sara Hidup’/Living Aid)
Exploring the Reasons for the Low Level of Awareness and Knowledge of AAOIFI Accounting Standards in Nigeria
Full text linkThis study aims to explore the reasons for the low level of awareness and knowledge of AAOIFI accounting standards in Nigeria. The data were generated through documentary evidence and semi-structured interviews. The study established the non-integration of AAOIFI accounting standards into the Benchmark Minimum Academic Standards (BMAS) for Nigerian universities and almost all the accounting curricula of Nigerian universities and professional accounting examination syllabus. Besides, the standards were given little or no attention by the professional institutions in their Mandatory Continuing Professional Development (MCPD) programs. Lack of examination centers and an inadequate number of qualified members of AAOIFI in the country were also key reasons that contributed significantly to the low level of awareness and knowledge of these standards. Hence, the study recommended that AAOIFI should collaborate with the relevant Nigerian regulatory authorities, Nigerian professional accounting bodies, IFIs and Nigerian universities in order to enhance the awareness and knowledge of the standards as well as their level of adoption. This is because the adoption of the standards by IFIs would improve their accountability and transparency, which would attract more investors and customers into the industry, more especially in this COVID-19 pandemic when Islamic banking and finance are considered as the best alternative for the revival of the global economy
Potential Solutions to Financing Problems among the Poor: A Case of Baitul Maal Wa Tamwil (BMT) in Indonesia
Full text linkMany people in the poor category do not have access to most financial services, especially from formal banking institutions. For example, in Indonesia, as of 2020, there are approximately 91.3 million Indonesians who still do not have access to financial or banking services in the country. Given the difficulties to access financing to undertake their economic activities, the poor have been economically unproductive and remains in poverty. There is a need for non-banking financial institutions (NBFIs) to play a role in reaching people who are still disconnected with the banking system. Several models of NBFIs can be engaged to solve the problem. Indonesia, as a country with the largest Muslim population in the world, has a very well-known NBIFI, namely Baitul Maal wa Tamwil (BMT). With a business model that focuses on the lower-middle-class economy and the MSME sector, it is hoped that BMT is able to provide a solution to the problem of access to financial services for the poor. This study aims to determine the issues and challenges of BMT in providing financial service solutions to the poor in Indonesia. In addition, this study provides alternative solutions to the problems faced by BMT in their efforts to improve financial inclusion in Indonesia. The study adopted a qualitative method based on a review of literature from research journals and other types of publications. The study hopes to provide enriching inputs in the development of the Islamic microfinance industry in Indonesia and other countries
English Case Law on Islamic Finance: Interpretation and Application of Shariah Principles
Full text linkThe emergence of Islamic finance in the United Kingdom (‘UK’) has rendered it a remarkable alternative to conventional finance. The following paper studies how the English and Welsh courts interpret and apply Shariah-based Islamic finance principles under English law. The paper takes the view that Islamic finance arrangements and the Shariah principles that inspire them are capable of being conveyed through their conventional counterparts under English finance law, insofar as doing so does not contravene English law. The focal points enshrined under this paper are: [1] the means through which Islamic finance arrangements are interpreted and applied under English law; [2] the approaches undertaken to honour such Islamic finance principles without contravening English law; and [3] the approach taken when the courts are faced with a conflict of laws. Using legal analysis, this paper finds no one-fit-for-all method for the English and Welsh courts when dealing with Islamic finance cases. However, the unanimous principle is that Islamic finance arrangements will never be treated exceptionally to their conventional counterparts
Islamic Financial Literacy for Indonesian MSMEs during COVID-19 Pandemic: Issues and Importance
Full text linkFinancial literacy has been universally regarded as one of the crucial pillars for the achievement of the financial inclusion programmes. Having financial literacy enables people to make more efficient and effective decisions related to the monetary aspect of their lives. The concept of financial literacy also extends to the domain of business financial management. This paper aims to explore and identify the critical issues, challenges, and opportunities for Micro, Small, and Medium Enterprises (MSMEs) in Indonesia to improve their Islamic financial literacy levels and consequently influence their decision to participate in Islamic financial services. The paper also discusses the critical role of financial literacy for MSMEs in facing the uncertainties brought about by the COVID-19 pandemic. The paper adopts the qualitative method by implementing a critical review of the key literature related to financial literacy, financial inclusion, and MSMEs in Indonesia. Subsequently, the paper reveals several issues and challenges faced by MSMEs, particularly in embracing the Islamic financial literacy concept and suggests several opportunities that may be explored by MSMEs to improve their literacy and consequent inclusion in Islamic financial services in Indonesia
Available Financing Resources For Islamic Microfinance Institutions To Alleviate Poverty- Cash Waqf Approach
Full text linkIslamic Microfinance (IM) is considered an important element of economic prosperity and an instrument in reducing poverty rates in the Islamic world. However, the IM industry faces many problems in its efforts to serve the community. One of these problems is the lack of financing resources. This research studies the current Islamic financing channels that are used to finance IM institutions and determine the appropriate mechanisms or models practiced by IM institutions to finance the micro-enterprises and therefore reduce the poverty rate in Muslim communities. This research applied a qualitative approach by reviewing the current literature in the IM industry. This research focused on Cash Waqf as an alternative channel to finance IM institutions as this model has been successfully implemented and experienced by many Islamic countries, to deal with various social problems and poverty alleviation. The desired development can be achieved by investing Cash Waqf funds in micro-enterprises that may help to maximize investment and low-income people’s returns also enhance economic development to a direct impact poverty alleviation. It has been found that the Cash Waqf model is considered an appropriate source of funding to finance IM instigations that will utilize the Cash Waqf fund to finance micro-enterprises through several models like Mudarabah, Murabaha, Musharakah Mutanaqisah and Qard Hassan. These models were discussed after merging them with the concept of Cash Waqf through the previous literature, weighing the advantages and disadvantages of each one, and proposing some solutions that could contribute to solving the problems faced by the micro-enterprises