Journal of Islamic Finance (JIF)
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Encouraging Islamic Financing to Achieve SDGs through Poverty Alleviation
Full text linkPoverty is a challenge that must be encountered by every country in the world. Therefore, it is not surprising that poverty issues occupy the first goal out of the seventeen (17) goals in the Sustainable Development Goals or SDGs framework. Although, in general, the trend of poverty in Indonesia continues to decline, it turns out that the indication of a more acute poverty level is still difficult to be alleviated. The poverty index is reflected by the poverty severity index and poverty gap index. In this case, Islamic financing provides a more inclusive concept of poverty alleviation. The results of estimation by using panel data from 32 provinces from 2014 to 2018 in Indonesia reveal empirically that Islamic financing contributes to poverty alleviation programs through the financing of productive working capital. Hence, the financing made by Islamic banks are greatly supporting in achieving the SDGs’ Goal 1 i.e. towards having no poverty. However, the achievement of Islamic banks needs to be expanded to reach the lowest point of people that are experiencing poverty through financing and productive economic activities
Factors Affecting the Acceptance of Financial Technology among Asnaf for the Distribution of Zakat in Selangor - A Study Using UTAUT
Full text linkFinancial technology or fintech, which is technology-based financial services has become a major role player in enhancing the effectiveness and efficiency of financial services. The financial industry has evolved significantly globally with the impact of technological innovation. For example in Malaysia, the financial institution can offer various services to their customers in facilitating and fulfilling their financial needs. Furthermore, the impact of fintech also had changed the social finance sector such as Zakat Institutions. For example, in Malaysia during the old days people have to go to the counter to pay zakat or to collect the zakat as well. Nevertheless with the help of various technology-based financial services such as online banking, mobile banking and others that are provided by the financial institution, the collection of zakat has been empowered. Contrary to that, in terms of the distribution aspect there are still a lot that can be improved with the help of fintech. Thus, in this study mobile banking will be the focus in improving zakat distribution rate. This study aims to explore factors that could influence asnaf acceptance rate in adopting mobile banking for the distribution of zakat using the UTAUT model. This study consists of empirical data collected from the state of Selangor, Malaysia
Potential Development of SRI Sukuk Models for Higher Learning Institutions in Malaysia based on Wakalah and Waqf
Full text linkFunding for Higher Learning Institutions (HLIs) in Malaysia has become increasingly constrained as the government faces increasing costs and global economic slowdown. Central to this issue is the challenge to raise the funds needed to sustain HLIs’ operations and development. It has therefore become a necessity for HLIs to come up with innovative ways to raise funds and move towards to becoming more self-sustainable. Malaysia can possibly learn from HLIs in the UK, US, and Australia where universities have managed to obtain funds through the capital market by issuing bonds. This paper focuses on exploring alternative financing modes for HLIs through Socially Responsible Investment (SRI) sukuk and Social Impact Bonds (SIBs). The methods utilized in this study are critical review of literature, case study analyses and interview sessions with experts. This study recommends two SRI sukuk models: firstly, in the situation where the proceeds are used for income-generating activities, sukuk based on wakalah is proposed; while secondly for non-income generating activities, a cash-waqf sukuk with temporary and permanent features is suggested. In term of the structure of the sukuk, the returns and repayments of both sukuk are dependent on key performance indicators (KPIs) being achieved. In both cases, it is recommended that the sukuk be issued by a consortium consisting of a number of different universities in order to lower the cost of issuance and fund management, as well as efficiently utilizing resources. It is also recommended that the sukuk is guaranteed by a third party, preferably by the government
The Dynamics of Malaysian Takaful Market: Challenges and Future Prospects
Full text linkWhile Islamic finance industry has witnessed a tremendous growth across the globe, one of the markets, takaful, still requires attention in order to strengthen their position in the industry as well to increase their market share over their conventional counterparts. In the first part of this study, an overview of takaful and Malaysian takaful market will be discussed. Next, this paper will deliberate the challenges facing the takaful operators in developing the market and lastly, future prospects of takaful business will be discussed. This study is important to policy maker, practitioner and researcher who are dealing in Islamic finance, especially the takaful market. This study is useful as a guideline to revamp strategies in promoting the market as well as in enhancing the understanding on the local takaful market
Perception of Riba Among the Muslims in Malaysia: An Exploratory Study
Full text linkThis study explores the perception of Muslims in Malaysia’s about ribaÌ„, eating pork, drinking alcohol and dating. A pilot questionnaire was developed. To avoid social desirability, the questionnaire treated respondents as informants. 267 informants responded to the pilot. The Cronbach alpha was 0.743. The questionnaire was improved with the addition of four additional questions. A new questionnaire was answered by 351 informants. The Cronbach alpha increased to 0.78. The findings were compared to similar data collected on the perceptions’ towards eating pork, drinking alcohol and dating. About 31% of Muslims have no problems taking ribaÌ„. About 40% of Muslims seem unsure about the legal status of ribaÌ„. 55% said that Muslims take ribaÌ„ from time to time, 48% said that Muslims were forced to take ribaÌ„ while only 36% found that ribaÌ„ was the logical thing to do. Only 25% of Muslims believed that ribaÌ„ would a good thing. Further analysis suggests that there are structural reasons why Muslims take ribaÌ„. This author suggests that these findings establish a base-line from which future researchers might understand how sins become cultually acceptable or become culturally unacceptable.  
Financial Stability of Islamic Banks of Bangladesh: An Empirical Study
No full textThis paper examines the financial stability of eight (8) full fledge Islamic banks in Bangladesh for the period of 2010 to 2017 using the technique of Z-score along with different financial ratios such as NPF Ratio, IDR Ratio and Liquidity Ratio that are widely accepted to assess the financial stability of Islamic banks. The relevant data are collected from the published annual reports of these Islamic banks. The finding of the paper reveals that most of the Islamic banks have lower Z-score in recent years and thus suggests that Islamic banks at present aren’t on the whole financially stable. The results of the study suggest that Islamic banks in Bangladesh are now experiencing higher IDR ratio which indicates these banks are making excessive financing. Although the NPF ratios for some Islamic banks are decreasing but the pace of this decrease is very low
The Effect of Corporate Governance on Islamic Banking Performance: A Maqasid Shari'ah Index Approach on Indonesian Islamic Banks
Full text linkThis study aims to provide empirical evidence on the Maqasid al-Shari’ah performance of Islamic banks in Indonesia for the period from 2012 to 2016. The Simple Additive Weighting (TSAW) is employed to obtain the performance of IBs according to the Maqasid al-Shari’ah. This study found that the Maqasid Index for Indonesia IBs within the range between 11% and 28% with only few banks achieved above 20%. The impact of SSB characteristics and board structures are then tested on the IBs Maqasid al-Shari’ah performance. Regression result indicates that SSB characteristics (SSB size, SSB cross membership, SSB Education and SSB reputation) and board structures (Board size and Board independence) have an essential role in improving the performance of IBs. The findings denote SSB with smaller size, higher portion of SSB cross membership, lesser SSB hold doctorate degree, lesser reputable scholar, more members on board of directors, and less independence non-executive directors enhance the performance of IBs. This study offers practical implication and regulators in Indonesia should set up and impose a more robust and new tool to evaluate the Maqasid al-Shari’ah performance index in order to assess how far the role of IBs have contributed to the society. This will help all stakeholders to have informed decision which not only concentrates on performance based on financial ratios but also the entire dimensions of IBs that reflect the main purpose of IBs
Structural Development of Ijarah Sukuk: An Appraisal
Full text linkSukuk structures rely on the performance of an underlying asset or on a contractual arrangement pertaining to that specific asset. This makes sukuk an important facility in Islamic finance since it can be used to provide regular payments throughout the life of the financing plan. This study highlights some important sukuk structures, such as ijarah for asset acquisition and sukuk with a sale and lease-backed structure. Additionally, this study suggests some important proposals to help overcome the Shari’ah issues in sukuk structures. This study suggests that sukuk structures involving the combination of sale and lease-backed contracts should involve a third party who enters into the Ijarah transaction with the investors rather than the originator himself. A benefit of this change will help avoid Inah Ijariyyah (Inah trick for) in the structure. The sukuk structure for asset securitization on the other hand, should not be traded in the secondary market because it involves a sale of debt for debt which is prohibited according to the Shari’ah principles. As for the forward lease sukuk, sukuk holders should wait for the commencement of the project before trading their sukuk in the secondary markets. This is to ensure that the Ijarah property exists before the sale process began
An Empirical Study of Shari'ah Compliance in Islamic Banks of Pakistan
Full text linkThe study is aimed to find out the need of Shari’ah compliance in general and specifically in Islamic banking. It is also to identify the loop holes in the existing Shari’ah compliance system and to recommend some measures to remove Shari’ah non-compliance in Islamic banks in Pakistan. The study is based on both primary and secondary material. Primary data is gathered through a survey and personal interviews with the Islamic banking experts, employees and researchers. This study is based on descriptive method, related testing tools like weighted average, standard deviation and variance. These methods are applied to ensure the reliability of data and research. Shari’ah compliance is regarded as the foundation of the Islamic banking. Though Islamic banks give priority on Shari’ah compliance, a number of factors hinder Shari’ah compliance. Shari’ah knowledge, efforts, and seriousness of the bank authorities and bank employees are the prerequisites for complying appropriately with Shari’ah. Regulatory bodies, executives, and employees of Islamic finance industry are expected to get the idea of the present situation of Shari’ah compliance and to identify their weaknesses. Clients are expected to get guidelines to choose and study Islamic banking products in a better way. The researchers are expected to find new issues and get a more comprehensive statistical and analytical study regarding Shari’ah compliance in Islamic banking which was not done so far
Financial and Social Performance Impact on Corporate Governance Mediated by Earnings Quality: Evidence from Indonesian Islamic Stocks
Full text linkGood Corporate Governance (CG) ensures the availability of better accounting information with higher transparency and accountability. Implementation of good CG in Islamic stock issuers should have a more positive impact than non-Islamic stock issuers as the former are selected based on a strong financial fundamental. This study aims to empirically examine the impact of CG on earnings quality. It also examines the impact of earnings quality on firm’s value. Thus earnings quality is considered as a mediating variable. This study uses the Structural Equation Model (SEM)-Partial Least Square (PLS). The final sample consists of 58 firms-years listed in Jakarta Islamic Index (JII) from 2008 to 2015. The study found that CG directly affects firm value with a positive direction. CG also increases earnings quality. The better the quality of CG, the better the quality of earnings. Then earnings quality increases firm value. In summary, earnings quality partially mediates the relationship between CG and firm’s value. This study uses the Corporate Governance Performance Index (CGPI) published by IICG (the Indonesian Institute for Corporate Governance) as the indicator of corporate governance quality. Predictability, neutrality, timeliness, and earning smoothness are used as the indicators of earnings quality. Tobin’s Q and corporate social performance represent firm value