Area Of Islamic Finance Research Articles

"Impact Measurement of Value-Based Intermediation Among Malaysian Islamic Financial Institutions "

There are still insufficient data concerning the impacts of Value-based Intermediation (VBI) performance output on sustainability although the Global Alliance for Banking on Values has been used to measure VBI performance of Islamic Financial Institutions (IFIs). Therefore, this study aimed to measure the impacts of VBI adoption among IFIs in Malaysia using the logic model approach. Data were extracted from IFIs’ annual reports published and the Association of Islamic Banking Institution Malaysia (AIBIM)’s report on VBI Implementation issued from 2017 to 2020. The results showed that VBI performance measures were different among Community of Practices (CoPs) according to their different levels of adoption. The levels of VBI adoption were more likely to persistently affect customers, communities, and the environment. The logic model approach clarified that VBI performance reports should not be one-fit-all as the adoption level varied among CoPs. The findings also indicated that VBI performance information in the CoPs’ annual reports might engage them with targeted customers, communities, and the environment, expecting to add new insights into the literature on performance measurement in the area of Islamic Finance. This could assist regulators and industry players in planning more strategic initiatives and provide clear guidelines for VBI adoption. Keywords: impact measurement, Islamic financial institution, performance measurement, value-based intermediation

Theory of Islamic planned behavior: applying to investors’ Sukuk purchase intention

PurposeThe main purpose of this study is to propose an Islamic model of human behavioral analysis that can explain the determinants such as Islamic moral values, internal factors (e.g. self-efficacy or reasons for and against), external factors (e.g. perceived social support or others from external sources) and empathy (EMP) (humane attitude) to predict niyyah (worshipful intention) toward actual behavior (a’mal) in question.Design/methodology/approachWith this end in mind, this research uses the theory of Islamic entrepreneurship and behavioral reasoning theory as their theoretical foundations. To validate the model, the study uses empirical data on investors’ intention toward sukuk (Islamic bonds or Shari’ah-compliant bonds) purchase in the context of Bangladesh, where very recently the sukuk were introduced by the Central Bank.FindingsFindings of the study indicate that Islamic values and internal factors have the highest effects on external factors and EMP, respectively. Internal factors and Islamic values have moderate and almost similar impacts on EMP. Besides, external factors and EMP have somewhat equally moderate effects on niyyah. Islamic moral values and internal factors have the least influence on internal factors and niyyah, respectively. The external factor is also found to be insignificant to influence EMP. The findings also indicate that EMP, internal control factors and external control factors have mediating effects on niyyah toward sukuk purchase.Research limitations/implicationsThese results imply that the present research model successfully predicts and explains the determinants of Islamic worshipful intention toward the actual purchase of sukuk.Practical implicationsSukuk has been an important Islamic financial instrument that has been growing much rapidly in recent times. So, this paper will help to comprehend that pattern empirically.Social implicationsIslamic finance has emerged as a dominant financial tool nowadays. This paper contributes to advance that initiative one step further in terms of social and economic development.Originality/valueThis is a conceptual paper written in the area of Islamic Finance. This model has been validated by collating primary data collected from the selected respondents residing in Bangladesh.

Islamic Finance Education in the Era of Industrial Revoultion 4.0 (Ir 4.0)

The idea of a new era, the Industrial Revolution (IR4.0), encourages the increased use of highly automated tools and the development of cutting-edge technology that limits human interaction and speeds up normal processes in the banking industry's existing environment. This paper attempts to explore the significance of IR4.0 in the Islamic finance education. Thus, this article presents three main purposes; 1) to identify the Fourth Industrial Revolution (4IR); 2) to identify the IR 4.0 and Higher Education In Malaysia and 3) to stress the roles of Islamic Finance Education Providers. This study employed a qualitative research methodology through data collection from several previous works. The findings of this study revealed that the universities as provider of higher education services in the area of Islamic finance must also strategize the Islamic finance education direction and revisit the program that they are currently offering by altering the contents to be in consonance with the IR 4.0.

MARK-UP VS. INTEREST-BASED FINANCING ON GDP: AN APPLICATION OF AGENT-BASED COMPUTATIONAL MODEL

This study aims to introduce the application of artificial intelligence in the area of Islamic finance by examining the dynamic changes of gross domestic product (GDP) under fully markup-based financing. The application of artificial intelligence using agent-based computational model (ABM) is employed to conduct the simulation. The simulation result shows that the movement of GDP under markup-based financing which represents Islamic financial system has better performance compared to interest-based lending. In this regard, profit shared to depositors has positive impact on GDP which also proofs that Islamic banking system may promote sustainable economic growth and may create wealth for the whole society. This study proofs that Islamic bank essentially more stable than conventional bank and hence may fights against crisis. This study is potentially the initial work to examine the dynamic changes of economic growth under fully Islamic financial system by applying artificial intelligence concept as its methodology. Thus, this study is expected to contribute to the development of Islamic economics and finance research.

Interest Free Banking in Ethiopia: Prospects and Challenges

Ethiopia has a substantial number of Muslims estimated more than 38 million. Ethiopia accommodated Islamic finance in its financial system through interest-free banking window in 2011 and Full-fledged interest-free banking by the end of 2019. This study aims to investigate the prospects and challenges of the newly adopted full-fledged interest-free banking system. For these purposes, several secondary data collected and analyzed descriptively. The result indicates that Islamic finance has a notable opportunity in Ethiopia. Unbanked huge customers, lofty demand, the profitability of IFB windows and the ability of under formation full-fledged interest-free banks to collect the minimum paid-up capital easily indicate the prospects. While negative perception toward Islamic finance, legal framework challenges like the exclusiveness of banking business activity, limitation on investment of banks, tax system and unavailability of controlling mechanism last but not least lack of experts and skilled resource are identified as the main impediments of the sector. Therefore, it is recommended to the government of Ethiopia to make accommodative adjustments on the legal frameworks to resolve the shortcomings and for educational institutions to provide programs, seminars, and training in the area of Islamic finance in order to produce experts that serve the sector.

Factors persuade individuals’ behavioral intention to opt for Islamic bank services

Purpose The sustainable development of Islamic banking services has motivated a significant number of depositors to choose Islamic bank services instead of the conventional bank. There are various factors that can persuade the depositors’ choice to choose an Islamic bank. This paper aims to examine the factors that persuade individuals’ behavioral intention to choose Islamic bank services. Design/methodology/approach To achieve this objective, this study uses the theory of planned behavior (TPB) as the underlying theory to measure the factors that persuade the depositors’ behavioral intention to choose Islamic bank services. A total of 300 questionnaires were distributed to the Malaysian Islamic Bank’s depositors in Peninsular Malaysia. The data from the questionnaires were analyzed using structural equation modeling (SEM). Findings The result showed the three variables that predicted behavioral intentions of the depositors, namely, attitude (ATT), subjective norms (SN) and perceived behavioral control (PBC), were found to be significant in persuading depositors’ behavioral intention to choose Islamic bank services. Furthermore, the findings of the study also confirmed the relevance of using TPB to measure the depositors’ behavioral intention. The results could advance knowledge in the area of Islamic finance and also have positive implications for practitioners. Originality/value The study offers an insight into the present environment involving Islamic banking services which was established in Malaysia 30 years ago. In the context of the current study, the present environment refers to the depositors’ intention to opt for the service and the factors that influence the depositors to choose Islamic banking services apart from the religious factor which has been well acknowledged by a significant number of previous studies.

Financial development, Islamic finance and economic growth: evidence of the UAE

PurposeDoes Islamic finance affect economic growth? The empirical literature in this area seems to be in early stages and the results are often mixed and inconclusive. This paper aims to examine the causality between financial development in general, Islamic finance in particular and real economic growth in the United Arab Emirates (UAE).Design/methodology/approachUsing time series data from 1990 to 2012, a bivariate vector autoregressive model was used to document the financial development-Islamic finance-growth causal nexus and to forecast growth under various scenarios. A composite indicator, as a proxy for financial development, was determined using a non-parametric approach: data envelopment analysis.FindingsThe direction of causality runs from financial development to economic growth and the reverse causality does not drive this relationship; however, the real gross domestic product (GDP) causes Islamic financial development with no reverse effect. Furthermore, the forecasting results indicate that the past relation has been a proxy for the future where financial development leads to better progress in real economic activity. This will likely continue to stimulate the development of Islamic finance.Research limitations/implicationsBecause the financial markets in the UAE were established in 2000, this study ignored Islamic bonds and equity product. The value of the Sukuk listed on Dubai’s exchanges is around US$36.75bn (Thomson Reuters, 2015), reinforcing Dubai’s position as an international center for Sukuk activity. Among the most important tools of the Islamic financial sector, Sukuk deserves a closer empirical study. This can set the agenda for future work.Practical implicationsThe financial sector appears to be one of the main drivers of real economic activity. However, more effort in the area of Islamic finance is needed to promote Shari’ah-compliant economic activities and thus better contribute toward making Dubai-UAE the capital of the Islamic economy.Originality/valueA new indicator was used to evaluate the financial strength of the UAE and analyze its effect on economic development. In addition, as one of UAE’ emirates, Dubai declared its vision in 2013 to become the “capital of the Islamic economy”, this study analyzed the finance, Islamic finance and growth relations over the period 2013-2022.

Current Regulation and Supervision for Islamic Financial Market: Evidence from Australia

Purpose –The paper‟s purpose is to contribute to the existing body of work in the area of Islamic finance (IF) by examining its activities in Australia and evaluating the country‟s current regulation and supervision of Islamic financial market (IFM) to cater the need of IF for Muslims living in Australia. Design/methodology/approach – The method employed in this study is a mixture of direct observation from legal and regulatory perspectives and author‟s association with IF industry in Australia. However, Islamic legal context remains the only theoretical basis of the study. Findings –Through examining the above, the paper proposes regulatory changes to the Australian regulatory regime and recommends establishing an Islamic bank (IB) to meet the Islamic banking and finance needs of Muslims living in Australia. Research limitations/implications – The paper concentrates on examining the regulation of IF in Australia in terms of financing instruments and institutional risk management of Islamic financial institutions (IFIs). However, it has not been supplemented by any empirical work, nor have been attempted to evaluate the economic efficiency and profitability or otherwise, of IF in Australia. Originality/value – Besides the direct policy recommendations and suggestions for further research provided for authorities concerned, the paper sheds new light on how the legal and regulatory challenges of IF in Australia are met for its substantial growth.

Legal and regulatory issues of Islamic finance in Australia

PurposeThe purpose of this paper is to contribute to the existing body of work in the area of Islamic finance by examining the regulation of Islamic finance in Australia.Design/methodology/approachThe method employed in this paper is a mixture of direct observation from legal and regulatory perspectives and authors' personal experience, curiosity, and association with this industry.FindingsIn Australia, where Muslims are minorities and full‐fledged Islamic banks are absent, it is expected that regulatory authorities would ensure there is a level playing field, so that neither Islamic financial services providers (IFSPs) nor conventional financial institutions are disadvantaged. They have also been expected to approve and monitor Islamic financial products, including those offered by Islamic managed funds.Research limitations/implicationsThe study is undertaken through the Shari'ah, where law, finance, economics, and business form a single dimension only, even though a very significant one. No attempt is made to evaluate the economic efficiency and profitability or otherwise, of IFSPs in Australia. Also, the approach for the study is not supplemented by any empirical work (e.g. by quantitative analysis of data or by survey or other qualitative methodologies).Practical implicationsThe paper practically examines: the impact of banking and financial services regulation on Islamic banking and financing practice in Australia; and what further legislative measures and changes are needed to accommodate Islamic financing practice into Australian society to make it a truly viable alternative system of financing for Muslims in Australia.Originality/valueExamination of the issues of the study is originally undertaken through one of the authors' personal expertise and working experience with some IFSPs in Australia, aiming at developing the relevant regulations by the Australian regulatory regime to make Islamic finance a viable alternative system of financing for Muslims in Australia.

Waqf-Based Islamic Philanthropic Instruments for Micro-Funding of Micro-Finance

Islamic Finance is based on the philosophy of social justice by sharing risk and rewards. It prohibits interest payments, short-selling and contracts considered excessively risky. Islamic finance is based on Shariah, or Islamic law. It requires that gains be derived from ethical and socially responsible investments and discourages interest-based banking and investments in sectors like pork, gambling and pornography and other immoral activities. Investments in long term projects considered to benefit society are held in high regard. Islamic microfinance which is a part of Islamic Finance blends well with the goal of microfinance as both Islamic finance and traditional micro-finance institutions are aimed at achieving economic justice. Islamic microfinance contributes toward uplifting the poor with funding based on profit and loss sharing instead of the high-interest bearing credits offered by traditional microfinance institutions. It has the potential to address the ultra-poor who lack collateral owing to its profit-loss sharing mechanism. This paper shall explore an area of Islamic Finance that deals with one of the two major sectors of Islamic endowments, zakat and waqf. It will elaborate the concept of implementing specialized financial instruments, Cash Waqf to deal with the long mismanaged charitable fund of waqf. It will discuss opportunities for enhancing participation, provide efficient and improved management of endowments, ensure selective investments to maximize the socio-economic benefit and most importantly invest the scattered funds in a productive usage as opposed to current practice of consumerism through the mechanism of micro funding of Islamic microfinance institutions.