Islamic Contracts Research Articles

THE CHARACTERISTICS OF PROPORTIONALITY PRINCIPLE IN ISLAMIC CROWDFUNDING IN INDONESIA

Proportionality is a legal principle not only requires equility of the rights and obligations among parties based on competing values, but also has purpose to deliver justice among parties. This principle is in line with the Al Musawah principle in the Islamic contract or agreement which it also has the same goal: ad ‘adl wa tawazun. This principle is the implementation of the principle of good faith, the principle of transactions based on honesty including in terms of determining the profit margin. The research significance are to provide enhance knowledge about proportionality principle in Islamic crowdfunding in Indonesia, especially in financing contract in Islamic financial technology as a new business innovation scheme. This paper in order to promote the impartial perception and to harmonize the Islamic law and Indonesian laws. The type of the research is legal research. The research methods apply the conceptual approach to the the Islamic crowdfunding under proportionality principle in financing contract.

A Social Impact Bond (SIB) : A Shariah Appraisal

Social Impact Bond (SIB) is a funding mechanism for social projects whereby the payment for the projects is anchored on meeting the outcome metrics, otherwise the investors risk losing their money. The mechanism emerged since 2010 in the United Kingdom and has quickly spread to other parts of the world. In the past, there has not been any popular fatwā on this mechanism from a Sharīʿah point of view. Therefore, this article will examine the funding and payment arrangement and then conduct takyif fiqhi (jurisprudential adaptation) to ascertain the degree of Sharīʿah compliance and determine the most appropriate Islamic contract most suitable under the arrangement. The article adopts qualitative method of research by making in-depth analysis of Islamic contracts including the primary and secondary sources of Islamic law. It also relied on literature on SIB from conventional point of view and internet materials. Major findings of the research show that SIB, whilst its pay-for-success mechanism does not contain ribā, it contains excessive gharar. The excessive gharar, however, was found ineffective to void al-jaʿālah-based SIB and hibah li thawāb which is the second contract similar to SIB. This is because of hājah and element of gratuity respectively.

Contemporary issues of form and substance: an Islamic law perspective

Purpose This paper aims to analyse the concept of form over substance and introduces the term substance gap to the literature. The substance gap is defined as the difference between the way a concept is expressed and its intended result. Besides, the study investigates the issue from both classical and contemporary viewpoints. Design/methodology/approach The methodology adopted in this paper is descriptive research. Findings This paper has depicted the substance gap in contemporary contracts and found that form is equally important as substance in Islamic finance contracts. This paper offers a fresh outlook on form and substance to highlight the importance of the issue and its significance. The findings of the study will help researchers address the issue at its roots and help them to bridge the gap between the form and substance of Islamic finance contracts. Originality/value This paper investigates the substance gap in contemporary contracts that exists between the fiqh rules and conditions of an Islamic contract, and their development and construction. Further, the gap could also be attributed to the pressure to cope with a complicated modern finance environment.

Non-Usury Bank Corporation (NUBankCo): The Solution to Islamic Banking

In this paper, we are going to introduce a new Islamic financial institution with elaborated economic and financial characteristics. «Non-Usury Bank Corporation» (NUBankCo) is defined in a way that depositors are the shareholders of the Bank. This corporation is a new kind of shared ownership corporation which its shareholders are deposit holders and their deposits work as corporation’s equities. The defined bank can perform non-usury operations, and by designing a behavioral model, it is shown that NUBankCo can draw an environment that the welfare of society is to be maximized. Mobility of deposit resources in NUBankCo is less than conventional banks, and there are fewer conflicts between large and small shareholders/depositors and limits the emergence of shareholders’ cartels and thus huge sudden outflow of funds which creates bankruptcy crises.OECD’s corporate governance criteria are completely adaptable to this bank. Other pronouncements like Basel, AAOFI, IFSB, and FSF can be applied to this bank. NUBankCo can be established in different countries and can be adapted to different monetary, banking, foreign exchange, and commercial laws and regulations and can coexist in competition with conventional banks.NUbankCo will be Islamic in deposit mobilization side and will be Islamic in the loan/credit side for certain Islamic contracts and banking operations. Foreign currency exchange operations, bonds, commercial papers, and precious metals transactions, cash and draft operations, and credit and beneloan (non-interest loan) operations are characterized for NUBankCo to be fully Islamic.

The need for Islamic accounting standards: the Malaysian Islamic financial institutions experience

Purpose The purpose of this paper is to examine views of financial statements preparers with regard to the practices in reporting Islamic Financial Institutions (IFIs), thereby contributing to answer whether there is indeed a need for a separate set of Islamic accounting standards for IFIs. Design/methodology/approach Drawing upon seven in-depth semi-structured interviews conducted with IFIs’ leading officers who are highly involved in preparing financial statements in Malaysia, the paper offers evidence on the current stance of reporting the operation of IFIs, the influence of AAOIFI accounting standards and the feasible application of IFRSs in reporting IFIs. Findings While it is shown that most of the interviewees admit the feasibility of IFRSs in reporting IFIs, many interviewees placed greater emphasis on the spirit of Islam based on Islamic contract. In that case, the findings show that to convince the public that they offer Shariah compliance products approved by Shariah Advisory Council, there is a need for specificity guidelines or standards for IFIs within the IFRS framework. The main concern raised in the paper is that separate Islamic accounting standard is not needed, instead the option needs to be within the IFRS framework with the collaboration work of Accounting and Auditing for Islamic Financial Institutions (AAOIFI) and the International Accounting Standard Board (IASB). Originality/value With the recent rapid growth of IFIs, this paper contributes regarding the inconclusive stance on the need for specificity accounting standards for IFIs such as the ones issued by AAOIFI. It adds to the current body of knowledge by highlighting the collaboration of the AAOIFI and the IASB for the intended specific guidelines for IFIs to be accepted globally.

Exploring The Effect of Physical Delivery verses Cash Settled Futures Contracts with the Prospective of Obligatory Delivery in Islamic Contract of Sales

This study emphasizes that either physical delivery or cash settlement method for futures contract is better for precious metal such as gold and the storable commodities like rice, wheat, sugar, as well as check the effect of both settlement method on the volatility of futures and spot price, to examine this issue we use bivariate GARCH model to discover the interaction between the spot price return and futures price return, the result shows basis variability of spot price and futures prices returns was substantially reduced in the case of physical delivery as compare to the cash settlement of same commodities, which means the physical delivery is more reliable for the rice, wheat, sugar, and gold futures contracts. In addition physical delivery settlement method is more better than the cash settlement because it cover the gap of demand and supply in the market which effect on price and the physical delivery method is more reliable, as it restrict the liquidation of futures contact which decline the price and provide the social benefit as well.

Exploring the Effect of Physical Delivery V/S Cash Settled Futures Contracts with the Prospective of Obligatory Delivery in Islamic Contract of Sales

This study emphasizes that either physical delivery or cash settlement method for futures contract is better for precious metal such as gold and the storable commodities like rice, wheat, sugar, as well as check the effect of both settlement method on the volatility of futures and spot price. To examine the issue we use bivariate GARCH model to discover the interaction between the spot price return and futures price return. The result shows basis variability of spot price and futures prices returns was substantially reduced in the case of physical delivery as compare to the cash settlement of same commodities, which means the physical delivery is more reliable for the rice, wheat, sugar, and gold futures contracts. In addition, physical delivery settlement method is better than the cash settlement because it covers the gap of demand and supply in the market which effect on price and the physical delivery method is more reliable, as it restricts the liquidation of futures contact which declines the price and provide the social benefit as well.

Efektivitas Monopoli Akad Syariah (Monasy) Sebagai Media Pembelajaran Literasi Keuangan Syariah Bagi Mahasiswa

<p><em>This study aims to: developing Islamic monopoly </em><em>contract </em><em>learning media in muamalah fiqh courses. This study uses a research and development model with a procedure that is simplified into three stages according to the ADDIE model (Analysis, Design, Development or Production, Implementation, Delivery and Evaluation).</em><em></em></p><p><em>Design (conversion of the functions of the general monopoly component to the Islamic monopoly contract and designing media designs before being made using Corel Draw X5), Development or Production (based on the design that has been made on paper, the researcher made a monopoly Islamic contract (monasy) learning media with Corel Draw X5 and validated the material test, media test</em><em>)</em><em>. </em><em>Effektivitas</em><em> of monopoly Islamic contract (monasy) learning media according to material experts and media experts is "feasible" to be used as</em> <em>Islamic financial literacy learning media</em><em>.</em></p>

Sosialisasi dan Pelatihan Implementasi Akad-Akad dan Produk Perbankan Syariah

DISSEMINATION AND IMPLEMENTATION TRAINING OF CONTRACTS AND ISLAMIC BANKING PRODUCTS. The aim of this community service program is to improve comprehensive and integrative understanding of the community, religious leaders and students regarding products/contracts in Islamic banking. It is expected that the training provided by the dedication objects will be able to implement Islamic banking products / contracts in Islamic economic life. Increasing the effectiveness of sharia banking socialization is very important, for that it requires real efforts. To achieve a goal that is desired, it is necessary to make improvements in socializing Islamic banking in the community, it can be seen from what factors are a problem in increasing the effectiveness of sharia banking dissemination in the community, especially in the community. The results of the activities are the community, religious leaders and students who have knowledge of Islamic banking products and contracts and are able to implement in an Islamic economic life.

Islamic Financial Institutions and Participatory Finance Constraints: The Case of Pakistan

Islamic financial contracts are designed to facilitate financing according to Islamic norms. Islamic financing in its first stages used only the partnership modes of Musharakah and Mudarabah. Later it is realized that, to avoid moral hazards, yet compete successfully with conventional banks, it is necessary to use all permissible Islamic modes and consequently, trade and leasing techniques were developed. This paper aims to identify the constraints faced by Islamic financial institutions in the adoption of participatory finance i.e., Musharakah and Mudarabah financing. The two basic categories of financing are: 1) profit-and-loss-sharing (PLS), also called participatory finance, i.e. Musharakah and Mudarabah and 2) purchase and hire of goods or assets and services on a fixed-return basis, i.e., Murabahah, Istisna', Salam and Ijarah also called non-participatory finance. This paper suggests that innovation and creativity is necessitated more than ever to promote participatory modes of financing and to make it the preferred choice for meeting the increasingly sophisticated and diversified financial needs.

Peran Notaris-PPAT dalam Pembuatan Akta Pembiayaan Kepemilikan Rumah Melalui Bank Syariah

This research was conducted to analyze the role of the Notary and Land Titles Registrar (PPAT) in the drafting of the deed of financing a home ownership through a Sharia Bank and what obstacles were experienced in the financing method. This research uses a normative approach with a literature study supported by the results of the interview. The results show that the Notary has a different role when becoming a partner of Bank Muamalah Yogyakarta and Bank BTN Yogyakarta. In addition, the Notary also made a certificate of financing recognition, a Purchase Binding Agreement (PPJB), a Buy Back Guarentee Deed, and a Power of Attorney Imposing Mortgage Rights (SKMHT). While the role of PPAT is to make Deed of Sale and Purchase Deed of Mortgage Right (APHT). In making APHT, the PPAT cannot convert into a financing guarantee because its default provisions have been regulated in the Head of the Republic of Indonesia's National Land Agency Regulation No. 8 of 2012 concerning Land Registration, therefore the PPAT still writes it as a debt guarantee. As for several obstacles experienced, among others, the number of customers who do not comprehend the Islamic contract, the absence of one of the parties during the reading and signing of the deed, as well as the process involving BPN which is still too complex that the acceleration method at BPN is often used.

Towards establishing an Islamic retail bank in a Muslim-minority country

PurposeThe purpose of this research study is to explore and analyze the factors that will favour or constrain the introduction of an Islamic Retail bank in a Muslim-minority country such as Mauritius. This research attempts to fill the gap in the empirical literature on the setting up of an Islamic Retail bank in a Muslim-minority country. It recognizes upfront that Islamic banking offers an alternative banking system that is attractive to both Muslims and non-Muslims.Design/methodology/approachThe research adopts a mixed approach to address the prospects and challenges of establishing an Islamic Retail bank in Mauritius.FindingsThe research finds that there are various prospects for an Islamic retail bank in Mauritius for Muslims and non-Muslims, including enabling legal, fiscal and regulatory framework, the financing of small- and medium-sized enterprises and the issuance ofṣukūk(Islamic investment certificates). The research also finds that the development of an Islamic retail bank in Mauritius face various challenges. Some of these challenges are lack of Sharīʿah-compliant liquidity instruments and inter-bank deposits, lack of knowledge and understanding of Sharīʿah-compliant products and the enforcement of Islamic contracts in court.Originality/valueThis in-depth study appears to be comprehensive and will help in developing a solid foundation for establishing an Islamic retail bank in Mauritius.

A Comparative Study of Islamic Contracts and Islamic Banking Support Contracts (A Study on Bank Shahr)

A Comparative Study of Islamic Contracts and Islamic Banking Support Contracts (A Study on Bank Shahr)

Commodity Murabahah Contract in Microcredit Financing

Microcredit financing has play a vital role in development of household income in urban area. In Malaysia, one of the institution which offering microcredit scheme for small entrepreneur is Amanah Ikhtiar Malaysia known as AIM. This type of microcredit financing has been offered to the women only. Before they can acquire the financing, they should be a member of AIM with regarding to the term and condition stipulated by the management of AIM. Nowadays, AIM has been applied an Islamic contract known as Commodity Murabahah. Thias article is focus on the application of Commodity Murabahah in microcredit which practiced by the members of AIM (sahabat). The sources of data and information for the article is getting from the interview with the management of AIM and related documents. Hopefully, the findings will giving the prudent understanding about performing Commodity Murabahah contract and make AIM as foremost institutional which offering Shariah Compliant financing.

Designing a model to determine the preferred Islamic contract for a bank facilities applicant

This paper aims to present a model to determine the preferred Islamic contract for the bank facilities applicant in the industrial sector. For this purpose we use a consolidated method which includes the compromise solution multi-criteria optimization in the first phase, and the calculation of the cost of financing for the applicant of facilities in the second phase. Afterwards, by using the output of the both-phase, the preferred Islamic contract based on the combinational criterion has been determined for the applicant of the facilities. According to the fact that in the financing of the projects, in addition to the criteria related to the cost of financing, the qualitative criteria are also important, so both the qualitative and quantitative criteria have been considered in this research. In this study, we used four widely applied Islamic contracts (Jo’aalah Instalment sales, Hire purchase, Participation). The assessment criteria of the Islamic contracts have been extracted in the form of a questionnaire based on the previous studies and the expert’s point of view. In the first phase, the Analytic Hierarchy Process (AHP) has been used in order to determine the weights of the evaluation criteria of the Islamic contracts; and, in order to select an appropriate contract for the applicant, the compromise solution multi-criteria optimization approach (VIKOR), which is based on the decision matrix, was used. In the second phase, the cost of financing from the bank was estimated for the applicant of the facilities in the four contracts. Finally, the obtained results of the qualitative questionnaire and the cost of financing from the bank have been combined; thus, the preferred contract for the applicant of facilities has been determined based on a combinational criterion.

The Effect of Islamic Contracts of Mudaraba and Rent from Two Aspects of Desired Productivity and Job Satisfaction: Audit Firms’ Staff Viewpoints

The Effect of Islamic Contracts of Mudaraba and Rent from Two Aspects of Desired Productivity and Job Satisfaction: Audit Firms’ Staff Viewpoints

Standard Contract in Financing at Sharia' Bank

Standard contract is a contract which is merely made by one of the parties and other parties agree to a contract. In practice Indonesia sharia bank, all financing contracts are made by Islamic bank in the form of Islamic standard contract. As a result, there is no negotiation between the parties. Therefore, this research will analyze standard contract in financing at sharia bank X and sharia bank Y in Indonesia. This research employs statute approach, conceptual approach and contractual approach. The outcome of this research is Islamic standard contract of financing at Sharia’ Bank are not contrary to Islamic principles throughout the contract meets the validity of contract, there is no element of which is prohibited according to the Shariah, namely gharar, maysir, usury and does not violate the principles of sharia agreement. Islamic standard contract at sharia bank X and sharia bank Y in Indonesia had described the characteristic of each Islamic financing and has met the minimum requirements accordance with the fatwa of Sharia’ supervisory board (DSN-MUI) which is regulated by the regulations of Bank Indonesia.

The Legal Protection For Applying Islamic Contract Law In Banking Regulation In Indonesia And Turkey

This article discusses about the extent of readiness of the government regulation to meet the need of Islamic investment in the field of banking in Indonesia and Turkey, especially how legal protection to the banks and the customers in implementing sharia investment in both countries. This article is based on normative legal research, descriptive comparative through analysis the literature and regulatory provisions in force in the two countries. It is concluded that both Indonesia and Turkey have an arrangements of legislation and procedures in which guarantees the legal protection for every parties to apply islamic contract law through its secular legislation system. Depending on the customers would need to seek an appropriate mechanism in sharia based on freedom of contract. The difference is that in the legal systems being used also has differences, in which Indonesia has such a specific sources of law in which regulating the syariah principles. On the other hand Turkey does not.

Rekontruksi Prinsip Keadilan dalam Kontrak Pembiayaan Dengan Sistim Kemitraan Musyarakah dan Mudharabah di Perbankan Syariah

Contract or agreement among the system muamalah an integral part of the content of the Qur'an and Sunnah, either in the form of figurative and most actual cases and contemporary. Norms and rules of the game have been set to be applied in life. New or old system applied in life not be a problem, because the important thing is for a system that meets Shar'ie rule does not contain elements that are prohibited, such as; riba, gharar, and qimar (speculation) is not a new issue to be decided by the new Islamic law as well, but decided on the basis of a comprehensive Sharia law which can cope with and decide how the complexity of the problem. It is a problem in this paper is How the reconstruction of the principle of fairness in financing agreement with Musharaka and Mudaraba partnership system. The conclusion that can be drawn based on the discussion of this paper is Construction Mudaraba and Musharaka financing agreement in the Islamic Bank / Bank Indonesia imposed Mumalat now not reflect fairness and equality. Therefore, the contract needs to be reconstructed based on the opinion of the scholars, National Sharia Board fatwa Majlis Ulama Indonesia and refers to the theories of Islamic contract. Reconstruction must be carried out by the competent authorities, such as the National Islamic Council, the policy makers and experts. The results of the reconstruction will give birth to a standard contract which applies to all Islamic banks in Indonesia.

Application of law of evidence to Islamic banking with special reference to Malaysia

PurposeThis research aims to deal with the law of evidence invoked in Islamic banking cases reported in Malaysia from 1983 to 2015 and determine whether the invoked provisions of the statute in the case law have any conflicts with Islamic law that are threatening the development of Islamic banking in Malaysia.Design/methodology/approachThe methodology used in this research is assessing the implication by studying the provisions of the law of evidence that has been invoked in the reported case law.FindingsIt is evident from this research that following are the evident conflicts found in the Evidence Act 1950. In this arena, the following changes are significant for sustaining Islamic banking in Malaysia. Expert opinion under Section 45 of the Evidence Act 1950 should be amended such that in Islamic banking, under this Act, expert opinion can be sought by the court. The rule and exceptions of parol evidence in Sections 91 and 92 of the Evidence Act 1950 need to be amended such that in Islamic banking matters, anything that is contrary to Sharicah is mentioned in the contract; this amendment will be an exception to the parol evidence rule on the grounds that the written Islamic contract can be amended or set aside depending on the circumstances of the case.Originality/valueIt is anticipated that this research will assist jurisdictions to understand that even adjective laws applicable to Islamic banking will be harmonized with Islamic law. This is because the prefix Islam attached to the term banking is not merely a namesake, but it means more than that, i.e. all aspects of Islamic banking will be consistent with Islamic law.