Finance In Malaysia Research Articles

The Mirror of Malaysia Real Estate Investment Trust Stock Return in the Short-Run Dynamics

The formation of Islamic capital market under the subcomponent of Islamic financial system scratch a milestones development of Islamic finance in Malaysia. The Islamic capital market operates in mirror with convention capital market in expending, deepening and broadening Malaysia financial system. Malaysia is one of the REIT markets that value both the Islamic and conventional practices, such flexibility makes the attract not only to the local investor but also Islamic investors and foreign investor. The major source that generates income for REIT is the rental of the commercial real estate invested and hold as portfolio by the REIT management company. Furthermore, Malaysia REIT is known to be defensive stocks which consist of cyclic income producing assets that has some potential of asset appreciation. On the other hand, it witnessed by the moderation of Malaysia government bond yields created a lower pressure on the REIT stock price and analyst’s report highlighted the uncertainties on global crude oil prices and inflation is main concerned to REIT investors. In addition, the revision of 2019 tax system in Malaysia furnished a long run affected the dividend payout and volatility of REIT stock price. Therefore, this impact on the REIT stock liquidity and trading volume experiencing anil liquid trading. Therefore, the impact of external forces towards the mirror of two type of Malaysia REITs is significant to the investors, policy makers and government to outline the short-run relationship and facilitate future growth. The Vector auto regression model, granger causality and variance decomposition employed in this study to analyze the mirror of two types Malaysia REIT stock return. The empirical finding shows that the variability of dividend yield is vital explanatory variables to explain the both type of REIT stock return in Malaysia followed by interest rate for Islamic REIT stock return. The mirror of conventional REIT further implicated that trading volume and global crude oil price are useful to forecasting the changes in the stock return. Nutshell, this study provides a discussion of Malaysia REIT stock return behavior and it should be given necessary attention by researchers in ensuring the newly develop Islamic REIT are competitive and stability as the conventional REIT.

Critical analysis of beneficial ownership in mushārakah based home financing in Malaysia

PurposeThis paper critically aims to examine the concept of beneficial ownership and its application in musharakah-based home financing.Design/methodology/approachThe study applies the method of juristic interpretation in analyzing the meaning of beneficial ownership in legal documentation of musharakah-based home financing. This qualitative study uses content analysis approach that investigates the works of Islamic scholars on the concept of ownership and evaluates the concept of beneficial ownership in musharakah-based home financing from the Islamic perspective.FindingsThe result finds that beneficial ownership is considered a true ownership, as Shari’ah allows the transfer of ownership based on the offer and acceptance in a contract. Furthermore, the absence of legal registration does not mean the absence of true ownership, whereas all documentations and agreements have clearly stated rights and liabilities of each contracting parties.Originality/valueThis paper provides a fiqhi discussion of analyzing beneficial ownership in musharakah-based home financing. It shows that Shari’ah parameters are essential for the use of beneficial ownership to ensure its compliance with the Shari’ah requirements of milkiyyah (ownership).

An Investigation into the linkage between Malaysian Listed Manufacturing Companies' Business Health and Financial Results

Malaysia is widely considered to be a key leading economy in the Asia Pacific region. This research paper investigates the linkage between the business (or financial) health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in this market (the ‘BURSA’ or Bursa Malaysia Stock Exchange, formerly known as the KLSE or Kuala Lumpur Stock Exchange). A linear regression has been conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a five-year period have also been analysed. The analysis covers the period from 2013 to 2017 (inclusive) and yields a statistically positive correlation between ROE and the Z-Score for the market. Malaysia registered moderate-to-strong mean and median Z-Scores. These findings further support the strong economic position of this market as an Asian giant.

Money in politics: a recipe for corruption in Malaysia

Purpose This paper aims to investigate how money in politics contributes to corruption in Malaysia. Design/methodology/approach This study used in-depth semi-structured interviews to collect primary data. The interviews were conducted with two elite groups comprising seven politicians and seven corporate leaders. Data were then analysed using a thematic analysis approach. Findings The findings indicate how money in politics contributes to corruption in Malaysia. Various types of corruption in the country are identified, namely political donation, bribery and money politics. This study also provides evidence of the underlying factors driving money politics. Practical implications This paper offers valuable insights to policymakers and enforcement agencies for vigorous prosecution or appropriate sanction against the perpetrators. Especially on the weak regulation of political finance in Malaysia, this paper provides insights into how the weakness is used to manufacture corruption. Originality/value This paper provides evidence of how money politics cultivate corrupt activities, which are relatively sensitive and controversial by nature. The rarely obtained views from the elite groups provide a significant value to research.

Survey on Sharīʿah non-compliant events in Islamic banks in the practice of tawarruq financing in Malaysia

Purpose Tawarruq (Islamic commodity financing) has evolved as the most ubiquitous concept in Malaysia’s Islamic banking industry. Nevertheless, the extensive use of tawarruq has invoked a number of Sharīʿah (Islamic law) concerns in its practice. This study aims to investigate the Sharīʿah non-compliant (SNC) phenomena in the practice of tawarruq financing in Malaysia. Design/methodology/approach This study adopts qualitative research methodology, combining both descriptive and content analysis. A self-administered questionnaire was distributed to 16 Malaysian Islamic commercial banks to unveil the Sharīʿah non-compliance issues in the application of tawarruq in Islamic banks (IBs) in Malaysia. Findings The study found that some practices of tawarruq in Malaysia might not comply with the Sharīʿah, mainly due to the improper sequencing of contracts. The study also discovered that IBs adopt different approaches in dealing with SNC events and the income derived therefrom. Finally, the study noted the influence of board of director/management on certain Sharīʿah decisions particularly on the treatment of non-ḥalāl (impermissible) income. Practical implications The findings of the study serve as a reference to industry players and regulators in formulating a Sharīʿah non-compliance risk management framework for tawarruq practices. Originality/value The survey on SNC issues in tawarruq practice constitutes the first of its kind in the existing literature.

CROWDFUNDING FOR DEVELOPING WAQF LAND A STUDY ON MALAYSIA

This present study aims to develop an alternative model of financing that address theproblems of waqf land financing in Malaysia, analyse the probability that waqf institutionwill use the proposed model and recommend policies to enhance the optimisation ofcrowdfunding for developing waqf land. This study focuses on potential donors in the fourstates in Malaysia, namely Pahang, Pulau Pinang, Selangor and Johor since these areas havesignificant waqf lands. The analysis is conducted using statistical analysis and logisticregression analysis. The study finds that there is a high probability of donors willing to usethe proposed model (CWM), particularly among non-married donors, females, low-middleincome donors, and those with more awareness of crowdfunding and waqf.

Two Stages Fitting Techniques using Generalized Lambda Distribution: Application on Malaysian Financial Return

The underline distribution assumption used in the analysis of share market returns is crucial in risk management. An important aspect related to stock return modelling is to obtain accurate prediction. This paper presents an innovative fitting method called two stages (TS) method for modelling daily stock returns. The proposed approach by first establishing trend in the series, and then separately performing L-moment estimation on the generalized lambda distribution (GLD) parameter. The performance of the TS-GLD models had been evaluated using Monte Carlo simulation and Malaysian Kuala Lumpur Composite Index (KLCI) returns from year 2001 to 2015. Based on k-sample Anderson darling goodness of fit test, the two stages GLD model in location parameter (GLD.1) performed well in all studied cases. The GLD.1 model benefits risk management by providing effective distribution fitting.

Recovery Issues on Murabahah Financing in Malaysia

This qualitative research paper considers the recovery issues on Murabahah financing as the theme as to add to the existing Murabahah literature. The purpose of this paper is to investigate the recovery issues on Murabahah financing in Malaysia, specifically on the recovery via court cases. A descriptive and content analysis were performed on six Murabahah cases heard in the Malaysian court extracted from Lexus Nexus database. The results suggest that the issue on ta’widh, Murabahah restructuring and guarantees is of common weight while the issue on ibra is also important lately. Apart from the recovery issues, it is noted that failure to adhere to the guidelines formulated by the regulator persists and heavy reliance on common laws is unavoidable and continue to be the subject matter. Future research should further discuss on the efficiency of the recovery activities and discuss the area of developing Islamic banking laws appropriate to cater for the issues discussed herein.

Profit and Loss Sharing (PLS) and Non-PLS Financing in Malaysia: Which One Should Be the One?

The motivation in this study lies on the fact that despite the tremendous development of the Islamic finance industry, some scholars argue that the development was driven by the debt-based or non- Profit sharing and losses sharing (PLS) contract instead of the widely proposed Profit sharing and losses sharing (PLS) contracts perceived to be as the ideal mode of financing. The question that arises is why non-PLS based? Why not PLS? Which one should the concepts use in Islamic finance then? Hence, this paper tries to explore the reason behind such development, discuss the future development as well and finally answer the main issue of which one should be the one? Initially the PLS was introduced in Malaysia; however the trend moved to non-PLS as a result of the current situation. The introduction of non-PLS products has been approved by shariah scholars hence making it shariah compliant. Since ‘sin’ is not an issue anymore, the investors now look for the best instrument that can give them higher return in line with the investment concept of high risk high return. Therefore, both PLS and non-PLS can be used side by side at the present moment.
 
 Keywords: Profit and loss sharing; Islamic finance concept; Malaysia

Critical success factors for the receptiveness of Islamic home financing in Malaysia

PurposeThe purpose of this study is to examine the critical success factors (CSFs) for the receptiveness of Islamic home financing in Malaysia.Design/methodology/approachA framework of the CSFs for the receptiveness of Islamic home financing is developed. The framework evaluates the effects of product type, competitive value proposition, Islamic debt collection policy, Islamic bankers' knowledge and maqasid al-Shariah compliance on the receptiveness. Data from 744 usable questionnaires are analysed to confirm the applicability of the framework in Islamic home financing context.FindingsThe results suggest that product type, competitive value proposition, Islamic debt collection policy, Islamic bankers' knowledge and maqasid al-Shariah compliance are significantly related to the receptiveness of Islamic home financing.Research limitations/implicationsTwo limitations are available for future studies. Firstly, the respondents of this study are limited to Malaysians, signifying further testing of the proposed model across different geographies is required to determine the generalisability of the model. Secondly, the contributions of the proposed framework are confined to a specific area of Islamic banking products. Thus, extending the framework to other banking products or conducting a comparative study between Islamic home financing and its conventional peer can improve its generalisability.Practical implicationsThe results obtained offer a fresh direction on how to market Islamic home financing products successfully, where the new CSFs are brought into play.Originality/valueThis study examines the new proposed CSFs for the receptiveness of Islamic home financing in Malaysia.

House financing: contracts used by Islamic banks for finished properties in Malaysia

PurposeThe purpose of this paper is to find out the existing practices of the Islamic banks in providing financing to the customers who have a requirement to purchase a finished property and to examine the existing products used by the Islamic banks in this regard by providing an insight into the modus operandi of these products. In doing this, attempt is made to find out the most famous product offered by the Islamic banks in this regard and to find out whether in reality, Malaysian Islamic banking industry has moved away from Bai Bithaman Ajil (BBA) or not.Design/methodology/approachThis is a qualitative research, largely library-based, and it will consist of secondary sources such as books, journals, articles and other sources related to the Islamic house financing in Malaysia for finished properties. Recent information of the practises of the banks in this regard is obtained from the official websites of the banks.FindingsIt is found from this study that majority of Islamic Banks in Malaysia prefer to use the Commodity Murabahah facility for finished property. This finding contradicts with the observations made by some scholars who state that in Malaysia, BBA was initially used, and nowadays, the use of Musharakah Mutanaqisah is more common. The reason why Commodity Murbahah has gained popularity is because of the fact that via the Bursa Suq Al Sila platform, it is easy, swift, reliable, profitable, cheaper, convenient and has zero risk to do this type of transaction at the comfort of the office. It is recommended in this paper to use Musharakah Mutanaqisah, as this contract is an innovative contract that is classified as an equity contract under shariah where risk is shared between the parties. There is need to conduct further research to implement Musharakah Mutanaqisah in Malaysia, specifically to reduce the risk that Islamic Banks will bear by practicing this contract.Originality/valueThe findings of this paper might create confusion among readers, as some may perceive that the finding of the paper is not new as BBA has been dominating Islamic house financing industry from the inception of Islamic banking in the country, and BBA and Murabahah are similar in nature, and as such, commodity Murabahah is also a Murabahah transaction. The reality that needs to be understood is that the way BBA was or is practised in Malaysia in relation to Islamic house financing is that in the name of BBA, the transaction actually followed the Bai’ ‘inah contract, which is a controversial contract among the shariah scholars. Likewise, commodity Murabahah is also a different contract than Murabahah, as it actually refers to tawarruq. As such, this research finding is important to the Islamic banking industry to understand that Malaysia has moved away from the Bai’ ‘inah contract practised in the name of BBA in Islamic house financing, and there are new products introduced by the Islamic banks in Malaysia to replace this practice which were criticised by Shariah scholars.

Discussion on Islamic Finance and Small Medium Enterprises’ Financial Accessibility

This study attempts to provide insights on SMEs’ financial accesibility through Islamic finance and its successfulness in Malaysia. The innovation in the Malaysia financial landscape especially Islamic finance has benefits the SMEs in accessing financial assistance without rely on traditional mode of financing. SMEs in Indonesia represent about 99 percent in all economic sector and involved labor participation of almost 95 percent but the issue of financial accessibility remain perpetual problem and block the development of SMEs in Indonesia. Therefore, the present study utilizes content analysis to critically look at the successful of SMEs Islamic financing in Malaysia and various published report and literature in generate better overview on the progression of SMEs. At the end of the study, this study provides some recommendations based on Malaysian SMEs financing successfulness for Indonesian authority to further restructure and enhance their existing financial assistance to the SMEs based on Islamic financing.

The Linkages Effect of Service Quality, Customer Satisfaction and Customer Loyalty of Automobile Financing within the Malaysia Islamic Banking Industry

Nowadays, Islamic banks are facing tough competition among themselves and conventional banks that offer services and banking products based on Islamic principles. Such competition leads to issue involving customer satisfaction regarding the Islamic financing products and the efficiency of the services offered. Thus, the aims of this paper is to investigate the linkage effect of service quality (efficiency) on customer satisfaction and customer loyalty of Islamic automobile financing in Malaysia. Survey data was collected from 584 walk-in customers of selected bank outlets in the state of Selangor, Wilayah Persekutuan Kuala Lumpur and Putrajaya. The data was then analysed using Pearson Correlation and Multiple Regression technique. Results show that customer satisfaction and customer loyalty were positively affected by quality of service offered by Islamic Banks. Hence, based on the results, Islamic bank should have an effective computerised system, good legal advisory, Islamic compliance, well-trained staff, secure transaction, sufficient bank branches, and as well as sufficient facility and information in order to uplift and improve efficiency of the bank.

EMBRACE THE ALTERNATIVE DISPUTE RESOLUTION IN ISLAMIC FINANCE

Alternative dispute resolution (ADR) is always seen as substitute way for the disputants and the court to look for dispute resolvers. ADR too has always been keen to solve any civil matters in a harmonious way. Due to its process which has many merits. First is of being cost effective. Then, the ability to resolve a dispute using a document only procedure and face to face discussion between the parties involved has been found to be both convenient and applicable. Moreover, with the increase cases involving Islamic finance disputes in Malaysia and the world in recent years, parties in dispute have become increasingly aware that disputes may be resolved quickly and without the quality of the decision impaired when applying the ADR mechanism. This paper discusses issues related the evolution of ADR and Islamic finance in Malaysia. In addition to that, researchers will also be conveyed to discover Islamic ADR as one vital role to resolve the dispute. Therefore, new recommendation should be imposed to solve legal conflicts related to Islamic finance in Malaysia.

Shariah Non-Compliance Treatment in Malaysian Islamic Banks

Islamic finance in Malaysia has been growing rapidly in the past 30 years. In 2019, there is a total of 16 Islamic banks listed and supervised by Bank Negara Malaysia (BNM), with 5 out 16 banks are foreign entities. In view of the rivalry with the conventional banking sector, Islamic banks offer new innovative Islamic products and financial projects which may lead to greater risk of Shariah Non-compliance (SNC) exposure to the Islamic Financial Institutions (IFIs) in its effort to stay competitive. This paper attempts to explore the current practices of Islamic banks in treating (SNC) and the extent of compliance with BNM rules and guidelines, particularly BNM Operational Risk Integrated Online Network (ORION) requirement on SNC reporting event. This paper adopts a qualitative research method by conducting semi-structured in-depth interview with the Islamic banking professionals targeting five Islamic banks. Both primary and secondary sources are used for data collection. The finding shows that these Islamic Banks adhere to the BNM rules and requirements, with some minor differences in the implementation process. The findings would contribute positively in terms of enriching and contributing to the existing literature on the SNC practices by Islamic Banks whilst at the same time establishing the levels of compliance of the banks under investigation.

An Investigation Of Islamic Finance And Islamic Banking In Malaysia

İslami finans alanında dünyada lider ülkelerden olan Malezya’da İslami bankaların varlıkları yanı sıra sukuk ve diğer İslami fonlar İslami finansal sistemde önemli bir pay almaktadır. Ülkede, İslami finansal sistemin gelişimini sürekli kılmak adına Şeriat kuralları dikkate alınarak yeni İslami finansal enstrümanların geliştirilmesi konusunda önemli inovasyon çalışmaları yapılmaktadır. Ülkede İslami bankacılık uygulamalarının başlatıldığı 1983 yılından günümüze sektörde önemli ilerlemeler kaydedilmiştir. Günümüzde 65 milyar $’ı aşan sermayesi ile İslami bankacılık sektöründe Malezya, model bir ülke konumundadır. İslami bankacılık sisteminin ortaya çıkışında mudilerden gelen faizsiz hizmet alma talebi önemli bir motivasyon olmuştur. Bankacılıkta dual/ikili sistemin uygulandığı ülkede, yerli ve yabancı İslami bankaların yanı sıra konvansiyonel bankalar da faaliyette bulunmaktadır. Malezya’da Şeriat kurallarınca uygun görülen Mudaraba, Muşaraka, Murabaha, Selem, Vadîa gibi çok çeşitli İslami kontrat modelleri uygulanmaktadır. Öte yandan, 2002 yılında Şeriat hükümlerine uygun olarak Sukuk ihracına başlanmıştır. Malezya günümüzde sukuk ihracı konusunda dünyanın önde gelen ülkeleri arasında yer almaktadır. Ancak Malezya’da, İslami finans konusunda diğer ülkelere göre rekabetçi üstünlüğe karşın, uygulamada bazı güçlükler yaşanmaktadır. Bu çalışmanın amacı, Malezya’da İslami bankacılık ve İslami finans uygulamalarını incelemektir. Malezya’da İslami bankacılık ve İslami finans uygulamaları hakkında ayrıntılı bilgiler verildikten sonra bu ülkede İslami finansın geliştirilmesine yönelik öne çıkan politika önerileri üzerinde durulacaktır. Çalışma, Malezya’da finansal sistemin yapısı yanında İslami bankacılığın yapısı ve işleyişi, İslami finansal enstrümanlar, sukuk ve tekâfül uygulamaları ile İslami finans sistemin gelişmesine yönelik politika önerileri başlıklarından oluşmaktadır.

The Perception of Micro-Entrepreneurs towards the Adoption of an Islamic Equity-Based Financing: Evidence from Malaysia

This paper aims to explore the perception of micro-entrepreneurs towards the adoption of equity-based financing models in Malaysia. The investigation has covered the following characteristics of equity-based financing such as fairness, partnership, risk sharing, business size, and MFI. The current micro-financial products in Malaysia are focusing more on debt-based financing, which is holistically increasing the financial risk level of entrepreneurs in the case of defaults. There is a dire need to identify the relevancy and viability of equity-based financing in Malaysia, it will ultimately reduce the financial risks of entrepreneurs in case of default. The Islamic financial concept offers a solution to this problem, Musharakah and Mudarabah are among the other Islamic products that offer equity-based micro-financing to entrepreneurs. However, its practical implementation is still vague. In relation to this, the study adopts a cross-sectional study with a sample size of 700 micro-entrepreneurs from the state of Selangor Malaysia. The results of this study found that micro-entrepreneurs tend to register a positive perception of the characteristics of equity-based financing and risk-sharing score as the highest factor towards the adoption of the proposed equity-based PLS model in Malaysia.

The Application of Shari’ah Contract in Islamic Financing Guarantee Schemes of Credit Guarantee Corporation (CGC)

Islamic financing is regarded as one of the financing alternatives that enterprises may utilize to fund their business. This financing type is characterized as free from riba and is based on illiquid assets which create real assets and inventories. The aim of this conceptual paper is to highlight the Shari’ah contract of al Kafalah that is used by Credit Guarantee Corporation (CGC) to attach to its Islamic financing guarantee scheme offered to business enterprises. Kafalah refers to an obligation to pay in the event the principal debtor is unable to honour his obligation. Through this Shari’ah contract, the CGC has indeed paved a new way of financing enterprises which are keen on having halal financing to fund their business activities. Most importantly, this addition of halal financing has accelerated the growth of Islamic finance in Malaysia.

A Proposal of AMM (Adapted Mudarabah Model) for Shariah Compliant Home Financing in Malaysia

This study aims to propose a Shariah compliant mode of house financing named as “Adapted Mudarabah Model” or abbreviated as AMM. The proposal is made after discussing the most two common schemes for Islamic home financing i.e. BBA (Bayʿ Bithaman Ajil) dan MM (Musharakah Mutanaqisah) and their Shariah related issues. Thus, it is exploratory and conceptual in nature. This Shariah compliant financing model is proposed due to the shortfalls in the BBA and MM models where there are some unresolved and controversial Shariah and legal issues. This study uses the concept of mudarabah in this model and suggests that by implementing this model, all of the issues discussed in BBA and MM can be mitigated as the model does not require the Islamic banks to fulfill any of the conditions and obligations of counter-values. The proposal discussed in this article could contribute to the diversification of Shariah contracts for Islamic financing products. It is one of the celebrated ways in developing Islamic finance practices. The discussions of this paper focus on the Shariah aspects of the proposed model especially on mudarabah and qard contracts. The technical applications presented stand as illustrations and require further investigations and examinations for further application.

Standardisation of legal documentation in Islamic home financing in Malaysia

PurposeThis paper aims to provide an analytical literature survey of selective studies on legal documentation in Islamic home financing with particular reference to Malaysia.Design/methodology/approachThis study adopts the legal positivist methodology, with particular reference to inclusive legal positivism which takes into consideration the possibility of moral values challenging positive law. Within the context of this study, though positive law provides for rules that govern contractual matters in Islamic home financing, standardisation is a functionality of maslahah (or public interest) which transcends the mandatory provisions of positive law but helps to protect the interest of all stakeholders. This is analysed through a systematic literature review which aims to provide practical insights into industry practices relating to Islamic home financing in Malaysia.FindingsThis paper provides information on the standard documentation used by conventional banks and existing practices of diverse models of legal documentation in the home financing sector within the Islamic financial services industry in Malaysia. It also recognises the need for standard documentation that is not only Sharīʿah-compliant but also consumer-friendly, as the terms of any standard financing agreement ought to ensure consumer protection. There is also the need for a Shari’ah-compliant Sales and Purchase Agreement, as it forms part of the complete set of legal documentation for Islamic home financing.Research limitations/implicationsIt is not an exhaustive study, as it did not consider practices in other jurisdictions offering Islamic financial services and products but only focusses on Malaysia. Though one may not generalise the findings of this study, Malaysia remains a leading model and a global hub for Islamic financial services and products.Practical implicationsA very useful source of information on the current state of legal documentation in Islamic home financing in Malaysia and the prevailing practices in the industry, which may serve as a guide for policymakers such as the Association of Islamic Banks in Malaysia (AIBIM) to embark on a full scale project of standardisation of all the legal documentation used in Islamic home financing.Originality/valueThis study fulfils an identified need of standardisation of legal documentation used in Islamic home financing in Malaysia and offers practical help to policymakers and future researchers starting out on systemic reforms.