Journal of Islamic Finance (JIF)
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Mobile Money as an Effective Financial Tool in Underdeveloped Countries
Full text linkThe available literature has shown that a lot of people in underdeveloped countries do not fulfill the criteria needed to benefit from banking facilities. As a result, the lower segment of these societies has been deprived of basic financial services and left with vulnerable traditional methods of saving and transacting using funds. Fortunately, innovative ideas like mobile money were introduced in the first decade of the 21st century, allowing people in poor countries to access essential financial services and conduct basic transactions in a more advanced and secure manner. This study thus aims to establish mobile money as an effective and Shariah-complaint substitute for banking services particularly in underdeveloped countries. It would do so through the qualitative research method of analysing the relevant materials on the subject matter i.e. books, journal articles, research papers, websites, etc. The study has found that although the presence of mobile money has brought about various benefits to underdeveloped communities, issues that are regulatory, service, or security-related have impeded the service from realizing its true potential. Nonetheless, the study has shown that these issues may be countered by introducing the right measures, which include regulatory reformations, service enhancements, and awareness-building. Such measures would empower members of underprivileged communities and integrate them into the financial industry, which in turn would greatly contribute to their countries’ socio-economic welfare
Conceptual Framework for the Adoption of General Takaful Among MSME Owner-Managers in North-West Nigeria: The Role of MSME Owner-Manager Characteristics
Full text linkThe ability to manage risk is especially important to Micro, Small and Medium-sized enterprises (MSMEs) which constitute more than 90% of all businesses in Nigeria. One of the mitigating techniques in minimizing risk is through insurance and Nigeria being a Muslim-majority country, takaful is the alternative to conventional insurance. Despite their fragile nature and their exposure to various threats, MSMEs are the least segment utilizing insurance cover. Based on the reports from the country’s financial regulators it shows that majority of these businesses do not participate in any insurance scheme. Furthermore, there are less studies that examined takaful adoption by MSMEs, especially in Nigeria. These past studies are also inconclusive on the significant factors influencing adoption especially from the behavioral perspective. This paper aims to propose a conceptual framework to study the factors that influence general takaful adoption among MSMEs owner-managers’ in North-West Nigeria. An integrated framework based on the Diffusion of Innovation Theory (DOI) and the Unified Theory of Acceptance and the Use of Technology (UTAUT) was developed to examine what motivates MSMEs owner-managers to adopt general takaful. Furthermore, the proposed model incorporates MSME owner-manager’s personal and demographic characteristics (age, gender, education, prior loss experience and religiosity) as potential moderators in the study to enhance the predictive power of the model. Validating the conceptual framework of this research will be useful to takaful operators, financial regulators and policy makers in Nigeria to devise appropriate strategies that will increase the adoption rate of general takaful scheme among MSMEs
Green Microfinance Promoting Sustainable Development Goals (SDGs) in Bangladesh
Full text linkGreen microfinance policy encourages Microfinance Institutions (MFIs) to provide green microfinance to promote environmental friendly for substantial financial development in SDGs. This paper examines the relation of profitability with green microfinancing on MFIs in Bangladesh. This paper aims to observe microfinance and Sustainable Development Goals (SDGs) for green microfinance development. The finding suggests that the significant aspects of green microfinancing are very much consistent with SDGs. The paper also investigates how far the MFIs in Bangladesh have been adopting green microfinancing to measure the future of green microfinancing and SDGs for Bangladesh. Among the first few to critically examine green microfinance from the perspectives of MFIs, this study is thought to be beneficial for the organizations and policymakers in the effort to evaluate the function and contribution of MFIs in addressing the primary environmental issues in Bangladesh. Moreover, through a meticulous evaluation of the adherence to the existing green microfinance policy, this research can be expected to become one of the blueprints to encourage green MFIs in Bangladesh
The Effect of Utilizing Zakat Fund on Financing Production to Achieving Social Welfare: in Indonesia as a Case Study
Full text linkIndonesia has tremendous potential for the development of Islamic social finance. Besides having the largest number of Muslims in the world, Indonesia is also the most generous country in the world (World Giving Index 2018). However, the reality in the field of management of Islamic social finance, especially Zakat, is still far from expectations. It was projected that in 2018, Indonesia would be able to collect only 28% of the total potential Zakat funds. This situation was compounded by the fact that only 84% of the collected funds were distributed (BAZNAS 2019). One of the reasons was the absence among the Zakat institutions of efficient Zakat programs that are in line with the needs of the community. Therefore, there is an urgent need for synergy between Zakat institutions and Islamic microfinance institutions that are experienced in developing SMEs, which are mostly under-funded. This paper will discuss the synergy scheme between Zakat institution and Islamic microfinance in maximizing the distribution of productive Zakat to the public. This paper uses qualitative methods, analyzing references from journals, Zakat institutions' reports and other related literature. From this current research it is found that the management of productive Zakat funds in Indonesia is still not unsatisfactory, as evidenced by the low distribution rate of Zakat funds. This paper provides recommendations so that Zakat and Islamic microfinance institutions can work together in the management of productive Zakat that reaches the targeted poor and alleviates poverty and enhance community welfare
Halal Financing in the COVID-19 Pandemic: Analysis of Rukhṣoh on Halal Transactions
Full text linkHalal (permissible) covers wājib, mandūb, mubah, and makrūh categories in the rulings of Islamic jurisprudence based on the personal situation of the subject matter. The outbreak of COVID-19 across the globe has triggered the quest for the scope of halal financing and management. Does the pandemic situation is enough justification for allowing financing of some non-permissible activities? This study aims to explore the principles of Rukhṣoh in Islamic jurisprudence and its implication on the scope of funding halal transactions amidst the COVID-19 pandemic. This study is mainly qualitative-based research. The study employs a doctrinal approach in exploring the principles of Rukhṣoh and Azīmah and their contemporary application to the scope of halal financing in the context of COVID-19. The study identifies the general scope of halal (permissible) within the contexts of wājib, mandūb, mubah, and makrūh. The result further suggests that even though Haram (forbidden) might be granted the Rukhṣoh based on specific circumstances, the Islamic jurists differ in giving it the equal status within the halal scope except that there is a waiver of punishment on the Mukhalaf (accountable person). The study out that many people might have violated contractual obligations because of the COVID-19 pandemic. Thus, Islamic financial institutions should apply the Quranic inunction of "If the debtor is in difficulty, grant him time till it is easy for him to repay. But suppose ye remit it by way of charity. In that case, that is best for you if ye only knew" [Al-baqarah: 280] as respite and benevolence on loans to promote financial recovery of Muslim economy in the pandemic. Although there are studies on halal financing, this study is a novel contribution to the contemporary application of the concept of Rukhṣoh and Azīmah to halal financing amidst the COVID-19 challenges
The Relevance of Conventional and Islamic Crowdfunding as Financing Instruments for SMEs
Full text linkSmall and Medium Enterprises (SMEs) are the backbone of economy in most of the countries across the globe. SMEs support towards the economic growth and development has influenced country’s GDP. Despite that, the sector still faces numbers of main constraints including lack of access to credit from formal financial institution. Nevertheless, with the advancement of financial technology, crowdfunding has emerged as an alternative platform that enables SMEs to seek fund for their business. This paper provides an overview to examine the relevance of conventional crowdfunding and Islamic crowdfunding as a financing instrument for SMEs and determine the appropriate model in crowdfunding that best suits to finance SMEs. This research applied the qualitative approach by reviewing the latest key literature in crowdfunding. Hence, the results show that the best model to be adopt as a financing tools among SMEs is equity-based crowdfunding either for conventional or Islamic crowdfunding platform
Islamic P2P Crowdfunding (IP2PC) Platform for the Development of Paddy Industry in Malaysia: An Operational Perspective
Full text linkCrowdfunding for agriculture provides a new social financing medium for agricultural financing, which is essential for promoting farmland revitalization and targeted poverty reduction among paddy farmers. The government sector and the social security system are unable to meet the demands of this growing systemic problem. In addition, paddy farmers in most developing countries strive to attain their basic needs and are among the most impoverished communities on the planet. This paper aims to present an Islamic P2P crowdfunding model as an alternative financing solution for paddy farmers in Malaysia. Besides, a standard operations procedure (SOP) has also been developed to ensure efficient management of the paddy project investments. This study uses document research methodology to analyze the related papers, journal articles and other published sources. Also, the literature on the financing gap faced by farmers and the crowdfunding solutions in agriculture has been reviewed critically and used to develop an alternative model. This study's findings reveal that Islamic P2P crowdfunding is expected to provide paddy farmers in Malaysia with an alternative source of funds to meet their liquidity constraints and finance their small businesses. The paper has also proposed an end-to-end operational procedure that can ensure the complete protection of different players' rights in the platform. The proposed model and SOPs can help policymakers and regulatory authorities to develop the required policies and create the needed agricultural crowdfunding regulations
Effectiveness of Zakat Community Development Program: A Case Study in West Sumatera
Full text linkThis research aims at assessing the effectiveness of zakat community development program, a community-based development program funded mainly through zakat, undertaken at Tanah Datar District, West Sumatera. The program was intended to establish a center for superior goat breeding in the district which was expected to enhance the quality of life of the program beneficiaries (zakat recipients) and to transform them to become zakat payers. The program was designed as four years program which was started in 2016 and ended in 2020. The research was designed as case study research involving in-depth interviews, site observations, and documentary analysis. The time spent for conducting the case study research was two years and 9 Months (December 2018- October 2021). The findings of the study showed that the program can be categorized as ineffective program due to the following reasons. First, the program had been introduced as a top-down approach. The program attempted to create a totally new community, a breeder community, in the selected village while the residents do not have qualities required to become a good breeder. The program could have been a successful one if the program focusses on developing the existing local economy potency. Next, the Zakat Board of Tanah Datar District has no institutional capacity to implement the program. The implementation had relied on the assistance from a research center in North Sumatera Province. Once the support was withdrawn, Zakat Board of Tanah Datar could not do much with the program. Finally, the program was lacked stakeholders’ support and lacked transparency and accountability
The External Environment Driving Internal Organizational Change: Empirical Evidence from Commercial Banks’ Adoption of Islamic Financial Transactions in Libya
Full text linkThis paper examines the Libyan commercial banks’ adoption of Islamic financial transactions to achieve a real value for stakeholders related to internal environmental adaptation. Accordingly, a questionnaire was designed and distributed to 14 commercial banks in Libya. Structural Equation Modelling (SEM) has been employed for testing the hypotheses. In the context of hypothesized modelling, the conceptual framework portrayed the constructs of the variables employed in the study to be Libyan commercial banks’ adoption of financial transactions as the dependent variable and the external environment as factors driving organizational change as the independent variable. The adaptation of the commercial banks’ internal environment acts as a mediating variable. The Confirmatory Factor Analysis (CFA) is applied to the relationship between measures of constructs and indicators. The results showed that the estimations of maximum likelihood (ML) were satisfactory. The results of SEM showed that commercial banks’ adoption of Islamic financial transactions is more related to their capability of adapting their internal environment than achieving an economic and social value of stakeholders. Finally, the article provides future research directions on commercial banks’ ability to adapt to their internal environment to drive change and commercial banks’ adoption of Islamic financial transactions
The Realism of Islamic Economics: Abbas Mirakhor's Methodological Structure of Islamic Economics
Full text linkThis study aims to explore and elaborate the structure of the Islamic economic methodology of Abbas Mirakhor. For this, the study applies an inter-textual approach to Abbas Mirakhor's works which are closely related to the methodology of Islamic economics. In addition, pairwise comparisons with texts that elaborate on the methodology of economics were also carried out, to see the genealogical structure of the methodology offered by Abbas Mirakhor. In essence, this study is able to identify the unique structure of the Islamic economic methodology introduced by Abbas Mirakhor which lies in two aspects. First is the intensification of the use of hermeneutics to produce substantive postulates of Islamic economics from sources of Islamic meta-framework (Quran, Hadith and Turats); while second, making substantive postulates as the foundation in verifying or falsifying economic experience. In conclusion, Abbas Mirakhor is considered as the bearer of Islamic economic realism