Islamic Banks In Malaysia Research Articles

The COVID-19 Pandemic and Its Implications for the Performance of the Maqashid Syariah Index of Sharia Banks

The purpose of this study was to test the comparative financial performance of Islamic Commercial Banks in Indonesia and Malaysia before and during the Covid-19 pandemic when viewed from all indicators of the maqashid syariah index. The sample in this study used a purposive sampling method obtained by 7 Indonesian Islamic Banks and 8 Malaysian Islamic Banks. The data analysis technique uses the performance measurement of Maqashid Syariah. The results of the study show that when viewed from all indicators of the maqashid syariah index, there are differences in the financial performance of Islamic Commercial Banks in Indonesia and Malaysia before and during the Covid-19 pandemic.

ASSESSMENT OF VALUE-BASED PRINCIPLES ON ISLAMIC BANKING PRACTICES IN MALAYSIA: AN EXPLORATIVE STUDY USING BANK’S DISCLOSURE

Background and Purpose: This study aimed to understand banking practices to legitimise their role in society and meet stakeholder needs in terms of their products and services. This study narrowed its scope to use the underpinning thrust of value-based intermediation (VBI) as it is a primary pillar of the VBI framework. Towards these same ends, the study also sought to gauge how banks integrated their products and services with the framework.
 
 Methodology: This study employed the triangulation approach, which comprised of a content analysis of annual reports of the bank and trend analysis of court cases. This study used Bank Islam Malaysia Berhad (BIMB) as an explorative study.
 
 Findings: The findings indicated a decrease of total occurrences over the years on litigation cases involving BIMB, related to know-your-customers compliance. Meanwhile, the analysis of annual reports of the bank indicated that shariah non-compliance incidents are due to operational failures and lack of shariah knowledge among the staff. This study highlighted the need for the banks to strengthen the know-your-customer compliance, besides enhancing and promoting Islamic financial literacy and ethics to their stakeholders.
 
 Contributions: This study contributes a novelty in this area of study by using data triangulation on court cases and annual reports to provide a more comprehensive perspective on the issue. This study also added to the current literature on VBI, especially within Malaysian context.
 
 Keywords: Corporate responsibility, due diligence, know-your-customer, Islamic ethics, financial literacy.
 
 Cite as: Talib, S. A., Mohd Iskandar, T., & Muda, R. (2023). Assessment of value-based principles on Islamic banking practices in Malaysia: An explorative study using bank’s disclosure. Journal of Nusantara Studies, 8(TI), 429-452. http://dx.doi.org/10.24200/jonus.vol8issTIpp429-452

Managing and Reporting of Shari’ah Non-Compliant Income in Malaysian Islamic Banks: A Methodology Perspectives

Shari’ah Compliance and Governance Framework is essential to guide the banks on the regulatory requirement as it supports the growth and development of the Islamic finance industry. Section 28(1) and Section 28(3) of the Islamic Financial Services Act (IFSA) 2013, states that IFI needs to comply with the Shari’ah principles in all of their activities religiously. Managing and reporting Shari’ah Non-Compliance (SNC) for instance, are crucial operational matters to the banks. In most cases, Islamic banks could be exposed to SNC incidents due to Shari’ah non-compliance events (SNCE) or Shari’ah Non-Compliant Income (SNCI). This study will be focusing on SNCI, unblessed income that should be de-recognized from the bank’s income. To investigate the end-to-end process of managing and reporting SNCI in Malaysian Islamic banks, the insight of the key functions, and the Shari’ah scholars were obtained. Besides in-depth interviews, documentation review of relevant policy documents, and content analysis on the annual reports of ten Islamic banks were also performed to fulfill the delineated research objectives. Besides data source and methods triangulation, ‘The Six Phases of Reflexive Thematic Analysis’ was also applied to explore and develop an understanding of patterned meaning across the datasets, eased by Atlas.ti. Finally, a guideline of best practices in managing and reporting the SNCI is proposed to Malaysian Islamic banks. 
 
 Keywords: Non-complaint income; financial reporting; disclosure; Islamic banks; triangulation

STABILITY OF ISLAMIC BANK EFFICIENCY IN INDONESIA AND MALAYSIA: HAS COVID-19 MADE ANY DIFFERENCE?

This study examines whether COVID-19 has affected the stability of Islamic banking efficiency in Indonesia and Malaysia using the Data Envelopment Window Analysis (DEWA) using data from 2017 to 2022. The findings indicate that Islamic banks in Malaysia exhibit a higher level of efficiency and stability as compared to their counterparts in Indonesia across all three efficiency measures, namely Technical Efficiency (TE), Pure Technical Efficiency (PTE), and Scale Efficiency (SE). In addition, the findings show that Islamic banks in both countries have stable efficiency performance over the period under investigation and hence the Covid-19 pandemic has not affected their efficiency levels. From the analysis, we further note that financing and labor costs are the main sources of inefficiency in Malaysian Islamic banks while fixed assets and operating revenue contribute the most to Indonesian Islamic banks’ inefficiency.

The Comparative Analysis of Financial Distress Precipitating Factors in Islamic Banking in Indonesia and Malaysia Based on Bankometer Variables

This study seeks to identify and compare descriptively the factors that influence the likelihood of financial distress in Indonesian and Malaysian Islamic banking. This study selected some variables and standard ratio values based on the Bankometer model such as Islamic banks’ capital adequacy, leverage level, credit risk, efficiency, and liquidity. The financial ratio data collected from published financial reports from five Indonesian Islamic banks and four Malaysian Islamic banks then analyzed using binary logistic regression. The results indicate that during the observation periods, the capital level (CA and CAR), leverage level (EA), and credit risk (NPF) of Islamic banking in Indonesia and Malaysia met the Bankometer standard. Meanwhile, the liquidity level (LA) of Islamic banks in both countries slightly exceeded the Bankometer's maximum standard, especially before the pandemic period. The findings in this study may enrich the discourse on the factors that trigger possible financial distress in Islamic banking by collaborating with the Bankometer model and binary logistic regression.

FINANCIAL PERFORMANCE OF ISLAMIC BANK IN MALAYSIA: DO BANK-SPECIFIC FACTORS MATTER?

Healthy, resilient and sustainable profitability is vital in maintaining the stability of the banking system. Research on a bank’s financial performance is an important tool towards improving performance, evaluating bank operations and determining management plans for the bank’s survival in competitive markets. Therefore, this study was conducted to fill a demanding gap in the literature by providing new and the latest empirical evidence on the determinants of the financial performance of Islamic banking institutions in Malaysia. The objective of this paper is to examine the impact of bank-specific factors on Islamic banks’ financial performance. The performance of Islamic banks is measured based on return on average assets (ROAA). An Ordinary Least Squares (OLS) panel data analysis on EViews 12 was used to analyse annual data from 16 Islamic banks in Malaysia for the period of 2012 to 2021. The results revealed that only bank size from bank-specific factors has a significant positive impact in determining banks’ financial performance. Therefore, this research can be a hint at how banks should plan and measure the direction of their operations and assets management in order to sustain their performance.

Waqif Preference of Waqf-Based Qardhul Hassan Financing in Malaysia: An Analytic Hierarchy Process Perspective

Although Islamic banking products like tawarruq and bay al-inah personal financing products available in the Malaysian Islamic banking market, their ability to meet the need of those disadvantaged in the case of health crisis like COVID-19 or financial crisis are somehow marginal. There is a need for Islamic social finance products to meet this challenge and one of them is the offered qardhul hassan financing funded through crowdfunding on the basis of waqf. This is called waqf-based qardhul hassan financing. For this purpose, this study introduces QAFSCALE, referred to qardhul hassan financing scale to gauge waqif preference on the facility should it is made available in the market. A total of 324 waqif or donors were participated in this study to identify their preference in donating their money in the facility should it is introduced. This study used Attia’s (2010) maqasid al-Shariah theory to generate the QAFSCALE, beginning from the conceptualisations, dimensions and importantly the batter items that represent the QAFSCALE. Analytic Hierarchy Process (AHP) is used. The results obtained indicate that humanity factor is ranked first in importance, followed by family factor, consumer factor and ummah factor. This study limitation is the sample size. A broader sample would have made the result better. Adding to that, the newly designed scale is first of its kind in the context of waqf-based qardhul hassan financing and more studies needed to prove its applicability and generalization, at least. The results obtained might be of interest to managers of Islamic banks and the like to understand their potential waqif preference in the context of waqf-based qardhul hassan financing. Four factors drawn from QAFSCALE were evaluated to identify important factors leading to the waqif contribution on waqf.

ANALISIS PERKEMBANGAN PERBANKAN SYARIAH DI MALAYSIA

This article discusses the development of Islamic banking in Muslim-majority countries, namely Malaysia. Malaysia was one of the first countries in Southeast Asia to establish an Islamic bank. The marketing management of Islamic banks in Malaysia is an interesting subject to study, this study uses a qualitative descriptive method, by taking several literature studies that are in accordance with the theme in accordance with the writing of this article.
 The existence of Islamic banks in Malaysia is strongly supported by the Malaysian government so that Islamic bank funds in Malaysia come from the government, namely 90 percent of government funds, while funds originating from the public are only around 10 percent. In general, the performance of Islamic banking continues to grow with a market share of 29% which can be seen from three indicators, namely the number of assets collected, the amount of financing disbursed by banks (PYD), and third party funds (DPK). In 2018, asset growth was 12.57%, PYD 12.17%, DPK 11.14%, 2019 asset growth 9.93%, PYD 10.89%, DPK 11.93%, and in 2020 asset growth 13 .11%, PYD 8.08%, and DPK 11.88% with total assets of 608.9 trillion, pyd 394.6, and dpk 475.8.

The Determinants and Treatments of Shari?ah Non-Compliant Events in Malaysian Islamic Banks

The Determinants and Treatments of Shari?ah Non-Compliant Events in Malaysian Islamic Banks

Stakeholder engagement for value‐based banking: The case of Malaysian Islamic banks

This study explores the practices of stakeholder engagement (SE) in Malaysian Islamic banks. In 2017, Bank Negara Malaysia (BNM) introduced the Value‐Based Intermediation (VBI) framework, with the aim of promoting a more sustainable and responsible banking system in the country. Among others, the VBI framework requires Islamic banks to adopt a stakeholder‐driven approach to their business operations, which involves understanding and responding to the needs and expectations of their stakeholders. Within this context, we apply a content analysis of the annual and sustainability reports of all stand‐alone Islamic banks in Malaysia to document the changes in the banks' quality of SE after the introduction of the VBI. The content analysis is guided by a new index that we construct, termed as the Stakeholder Engagement Quality Index (SEQI), which covers four dimensions of SE process: the purpose, stakeholder mapping, scope and approach to the engagement. Our results indicate that the SE quality significantly increases overall and for the third (i.e., scope of SE) and fourth (i.e., SE approach) dimensions subsequent to the VBI. Additionally, in terms of bank types, we find that the SEQI score is higher for commercial Islamic banks than development Islamic banks in the post‐VBI period. Despite such improvements, our study alerts policymakers that there are areas that need further attention. Among others, these include integrating SE into the banks' internal managerial functions and encouraging active stakeholder participation in the design and implementation of the engagement itself.

Syariah Governance and Disclosure Islamic Corporate Social Responsibility: A Comparative Study of Indonesian and Malaysian Islamic Banking

The existence of the Sharia Supervisory Board in the Sharia banking GCG structure is a unique feature that distinguishes it from the GCG structure of conventional banks. The inconsistency of the results of previous research related to the relationship between GCG and CSR disclosure is the motivation of this study, in addition to the differences in the progress of Indonesian and Malaysian Islamic banks. The research population of Islamic banking is listed on the Indonesia Stock Exchange and the Malaysia Stock Exchange. Research period on 2016 – 2019 before covid 19 pandemic. The research sample was determined based on purposive sampling, 12 Islamic banks in Indonesia and 14 Islamic banks in Malaysia was selected. The method of analysis is multi group using Partial Least Squares. The results of this study provide empirical evidence that the Sharia Supervisory Board, Board of Commissioners and Board of Directors have not succeeded in playing a role in increasing I-CSR disclosure except for the Independent Board of Commissioners and Independent Board of Directors. The results of the study also have not shown any differences in the influence of GCG on I-CSR in Indonesian and Malaysian Islamic banking.

A Comparative Analysis of Shariah Governance Framework of Islamic Bank in Malaysia and Pakistan

The aim of this paper is to investigate the differences between the contemporary Shariah governance frameworks of Malaysia and Pakistan. The study also examines the ways in which the Shariah governance frameworks of both countries can complement each other. This research concludes that the SGF principles of both countries under discussion abide by the AAOIFI and IFSB guidelines regarding SGF. Many aspects of the SGF of Malaysia are similar to the SGF of Pakistan. For example, both structures need to further develop the ethical aspect. While the similarities are plentiful, a few differences can be found between the two as well. This research provides insights to policy makers, regulators, and practitioners on approaches in governance policy and an assessment of the governance scope adopted by Malaysia and Pakistan via their respective SGFs. The SGFs have also been assessed for their conformance to international standards, including the AAOIFI and the IFSB.

Comparative Analysis of Islamic Banks’ Performance in Indonesia and Malaysia with RGEC and the Islamicity Performance Index (2018-2021)

Using the RGEC (Risk Profile, Good Governance, Profit, Capital) method for measuring financial performance and the Islamicity Performance Index (IPI) for measuring Shariah performance, this study seeks to identify differences in the performance of Islamic banks in Indonesia and Malaysia for the period from 2018-2021. Target sampling was used to select the sample, which consisted of secondary data from two Islamic banks in Indonesia and two Islamic banks in Malaysia from the banks’ 2018-2021 annual reports. Financial ratio analysis and various test analyses using the non-parametric Mann-Whitney U method are used as analytic methods. According to the statistical calculations of the RGEC method, there is no difference in the average values of NPF, GCG, ROA, and BOPO, but there is a difference in the average values of FDR, ROE, NI, and CAR between Bank Syariah Indonesia and Bank Syariah Malaysia. The IPI method reveals that the average values of PSR, ZPR, EDR, and the ratio of Islamic Income vs non-Islamic Income recorded differences in average value, and the ratio of Islamic Investment vs non-Islamic Investment demonstrates that there is no difference between the average scores of Indonesian Shariah Banks and Malaysian Shariah Banks.

Relationship between Islamic bank consumptive financing and gross regional domestic product in Indonesia, 2016-2020

IntroductionPrevious literature discussed financing's impact on performance without separating the financing model.ObjectivesThis study uses the consumptive financing data of Islamic commercial banks, inflation rate, and population as independent variables, and the GRDP of 33 provinces in Indonesia as the dependent variable. MethodThe study used Indonesia and Malaysia banks for its pioneering efforts in establishing Islamic banking in Southeast Asia. The study collects data from five Indonesian and four Malaysian Islamic banks, with an observation period of 2011–2020. The data analysis used in this study was the Generalized Method of Moment (GMM).ResultsThe results of this study explain that the consumptive financing of Islamic commercial banks has a negative insignificant effect on GRDP in Indonesia, the inflation rate has a negative insignificant effect on GRDP in Indonesia, and the population has a positive and significant impact on GRDP in Indonesia. Consumptive credit in conventional banks and consumptive financing in Islamic banks account for more than 45% of total financing. ImplicationsThe Indonesian Financial Services Authority should adopt policies to maintain the growth of Islamic Bank productive financing, that is, working capital and investment financing, because Islamic bank consumptive financing has a negative effect on GRDP in IndonesiaOriginality/NoveltyThis study has a unique feature compared with previous studies that use consumptive financing at Islamic banks with inflation and population variables to analyze the contribution of the local economy to gross regional domestic product.

Pemikiran Ekonomi dan Kewangan Islam Profesor Dr. Joni Tamkin Bin Borhan Islamic Economic and Financial Thought of Professor Dr. Joni Tamkin Bin Borhan

Professor Dr Joni Tamkin bin Borhan was a Shariah scholar who has made a great contribution to Islamic economics and finance in Malaysia. He was a Professor in Islamic economics at the Department of Shariah and Economics, Academy of Islamic Studies, University of Malaya. Since the establishment of the first Islamic bank in Malaysia in 1983, the role of Shariah scholars has become increasingly significant, especially in designing the Islamic financial system in Malaysia. This study aims to analyze his ideas and thoughts in Islamic economics and finance. The data was collected from his own UM-Expert database before he passed away. This database is used to share with others of his academic activities and also used as evaluation for his achievements by University of Malaya. In addition, interviews with his wife were also conducted for additional information and confirmation of some relevant facts. As a professor in this field, his views and thoughts regarding the Islamic economic and financial system are something very valuable and need to be highlighted to the highest level.

Pemikiran Ekonomi dan Kewangan Islam Profesor Dr. Joni Tamkin Bin Borhan Islamic Economic and Financial Thought of Professor Dr. Joni Tamkin Bin Borhan

Professor Dr Joni Tamkin bin Borhan was a Shariah scholar who has made a great contribution to Islamic economics and finance in Malaysia. He was a Professor in Islamic economics at the Department of Shariah and Economics, Academy of Islamic Studies, University of Malaya. Since the establishment of the first Islamic bank in Malaysia in 1983, the role of Shariah scholars has become increasingly significant, especially in designing the Islamic financial system in Malaysia. This study aims to analyze his ideas and thoughts in Islamic economics and finance. The data was collected from his own UM-Expert database before he passed away. This database is used to share with others of his academic activities and also used as evaluation for his achievements by University of Malaya. In addition, interviews with his wife were also conducted for additional information and confirmation of some relevant facts. As a professor in this field, his views and thoughts regarding the Islamic economic and financial system are something very valuable and need to be highlighted to the highest level.

Do financing models in Islamic bank affect profitability? Evidence from Indonesia and Malaysia

IntroductionPrevious literature discussed financing's impact on performance without separating the financing model. Additionally, previous research has used financing in the form of Loans to Total Assets (LTA); a proxy used to assess bank liquidity.ObjectivesThis study aims to analyze the influence of financing models on Islamic Banks’ performance in Indonesia and Malaysia. MethodThe study used Indonesia and Malaysia banks for its pioneering efforts in establishing Islamic banking in Southeast Asia. The study collects data from five Indonesian and four Malaysian Islamic banks, with an observation period of 2011–2020. The data analysis used in this study was the Generalized Method of Moment (GMM).ResultsIn Indonesia, debt financing has a positive and significant impact on Return on Assets (ROA), while equity financing has a negative and significant impact on ROA; debt financing significantly affects Return on Equity (ROE), while equity financing does not have a significant impact on ROE. In Malaysia, equity financing has a positive and significant impact on ROA, while debt financing does not significantly affect ROA; debt financing has a positive and significant impact on ROE, while equity financing has a negative and significant influence on ROE. ImplicationsThe results highlight the importance of considering the specific characteristics of each country's Islamic banking industry when formulating financing strategies.Originality/NoveltyThis study highlights unique aspect of financing that contribute to Islamic banks profitability in Indonesia and Malaysia.

Interest rates and Islamic commercial property financing: can there be a possible solution?

PurposeThis study aims to investigate the dynamic interaction between interest rates and commercial property financing offered by Islamic banks in Malaysia.Design/methodology/approachThe authors use the autoregressive distributed lag (ARDL) cointegration methodology to analyse the short- and long-run effect of the interest rates and rental rates on commercial property financing of Islamic banks in Malaysia between 2010: Q1 and 2018: Q2.FindingsThe findings reveal that changes in interest rates affect Islamic commercial property financing. This indicates that Islamic banks still rely on interest rates as a benchmark without fully implementing Islamic rental rates. This corroborates the subsequent finding, where overnight policy rates influence commercial property financing.Research limitations/implicationsDespite the authors’ attempt to provide insights into Islamic commercial property financing, the study is limited to secondary data; further research can use survey information to obtain other details that are not included in this study. Similarly, this study does not cover the operation and financial lease debate in Musharakah Mutanaqisah. Future studies can examine the challenges faced by the financial institution towards implementing rental rates in other emerging and developing countries using a different methodology.Originality/valueThis study is the first to investigate the dynamic changes in overnight policy rates, average lending rates and rental rates on Islamic commercial property financing in Malaysia using ARDL techniques. The authors uncover the research and institutional implications of Islamic commercial property financing rates and provide policy and future research directions coupled with the proposed modified rental rate to be developed.

Comparison Study Influence The Third-Party Fund On Profitability With Bank Size As The Moderating Variable In Indonesia And Malaysia

The objective of this research is to compare the correlation between third-party funds and profitability using bank size as a moderating variable of Islamic banking in Malaysia and Indonesia. The sample in this study used purposive sampling and obtained a sample of 10 Islamic banks in Malaysia, 10 Islamic banks Indonesia in 2016-2020. The data used is secondary data in the form of the annual reports or financial reports through the official website of each Islamic bank. To examine research data in the form of financial statements, this quantitative study used regression and moderate regression analysis. The results of the first analysis show that third-party funds from Indonesia and Malaysia Islamic banks show a significant effect on profitability (ROA), while the results of the second analysis show that third-party funds moderating the profitability of Indonesia and Malaysia Islamic banks.

Financial innovation in Islamic banks: evidence on the interaction between Shariah board and FinTech

Purpose This study aims to investigate the significant role of the Shariah Board (SB) in the innovation of digital finance products through SBs’ interaction with financial technology (FinTech). Design/methodology/approach By using semi-structured interviews, the paper examines 34 views and experiences of scholars and other practitioners from the FinTech and Islamic banking industries to gain an in-depth understanding of SBs’ Shariah compliance roles in FinTech inclusion in Malaysian Islamic banks (IBs). Findings Taking advantage of Malaysia’s comprehensive Shariah Governance Framework for IBs, the study highlighted the importance of SBs to better address the opportunities and challenges of financial innovation for the development of IBs with the inclusion of FinTech. The authors found that digital solutions and tools, such as Robo Advisory system and blockchain, enhance SBs’ roles by providing more effective and timely Shariah assurance regardless of the volume of data information and storage. Practical implications Given SBs significant roles in conforming to the Shariah, the study contributed significantly to assisting the regulatory and policy promulgation that enhance SBs’ integrity and credibility in response to the growth of IB infrastructures and financial innovation. Originality/value To the best of the authors’ knowledge, this is the first study to investigate the significant role of SBs in the innovation of digital finance products through their interaction with FinTech, while prior studies focused on the characteristics and structure of Islamic digital financial products.