Islamic Financial Instruments Research Articles

The Comparative Analysis of Islamic and Conventional Monetary Financial System

This article aims to analyze the uniqueness of Islamic financial instruments compared to conventional financial instruments and to find out what distinguishes the Islamic monetary framework from the standard monetary framework. The advantages and disadvantages of Islamic and traditional monetary frameworks are also discussed in this paper. This paper uses a writing concentrate approach by collecting information from the analytical writing in question. The side effects of the review suggest that the Islamic Monetary Framework is developing rapidly, playing its part in allocating assets and working on the turn of financial events, and implementing Islamic banking. The results also show that the advantages of Islamic finance can survive despite different monetary emergencies. The progress of Indonesian Islamic Banking evidences it compared to traditional banks.

Optimization of Management of Islamic Philanthropy Based on Productive Ownership Efforts for Empowering the Economic Independence

Islamic philanthropy is a practice of generosity in the Islamic tradition through zakat, infaq, alms, and waqf (ZISWAF). In Islamic history, the practice of waqf has had a socio-economic impact on society. Waqf is one of the Islamic financial instruments that have the potential as an instrument for developing the national economy. Modern Islamic Boarding School Darussalam Gontor waqf institute has the highest structure in determining policy and economic development, namely the waqf institution. Among the boarding school that can be considered successful in managing productive waqf is Boarding School Darussalam Gontor. The purpose of this study is to analyze productive waqf managed by PMDG. The research method uses a qualitative descriptive approach. Data collection techniques include observation, documentation, and deep interviews. Data analysis uses Miles and Huberman's model theory. The findings of this study state that the collected waqf funds are managed properly and professionally so that the distribution of productive waqf can be carried out in a dialogical manner for the development of several business fields in PMDG. The implementation of productive waqf has long-term implications for PMDG, especially in the field of education and teaching. The growing facilities can have a big impact on improving the quality of education which is getting better. Productive waqf funds also contribute to the economy of the surrounding community. It is hoped that the productive waqf management model carried out by PMDG can be a reference for practitioners in managing productive waqf.

Accounting for Murabahah – Reviewing the Need for Exclusive Accounting Standards

Purpose: This paper examines the need for exclusive financial reporting standards for Islamic financial transactions by considering the accounting treatment of deferred payment Murabahah, as practiced in Pakistan. Being analogous to the conventional banking model, Murabahah is one of the most widely deployed modes in Islamic banks. The paper compares the quality of presentation of deferred payment Murabahah as practiced, following both conventional and Islamic accounting standards. Design: The paper presents the deferred payment Murabahah (credit sale) using International Financial Reporting Standards (IFRSs) and Islamic Financial Accounting Standards (IFASs) and collects the opinion of experts (accountants, academicians, and Islamic bankers) on the extracts of the prepared financial statements. The opinions are centered on three qualitative characteristics of the financial information (relevance, faithful representation, and comparability) and a t-test is applied to examine the statistical significance of the difference of opinions received. Findings: The results show that the overall quality score for IFRSs is higher than the IFASs for the selected qualitative characteristics. However, the difference observed is not significant, advocating the possibility of the harmonization among both Islamic and conventional accounting practices of the financial intuitions operating in Pakistan. Originality: Earlier studies (Morshed (2022); El-Halaby, Albarrak, and Grassa (2020); Ullah (2020); Ibrahim and Ling (2016)) do not directly compare the presentation of the Islamic financial instruments by applying the financial reporting standards issued by AAOIFI and IASB on same instrument. This paper addresses this gap by comparing the qualitative characteristics of presented financial information for deferred payment Murabahah as guided by conventional and Islamic accounting standards by introducing an innovative approach for presentation (from the perspective of a credit sale). The paper also compares the accounting treatment of IFRSs with IFAS 1 (Pakistan), which has not yet been done. Implications: Based on the findings of the paper, it is recommended that, like Malaysia, the IFIs in Pakistan should adopt the IFRS framework. The focus of the regulatory bodies functioning in Pakistan should be to improve existing accounting standards through meaningful engagement with standard-setting bodies and take an active part in making IFRSs more compatible with the nature of Islamic financial transactions. An instrument-wise handbook should be published for the IFIs to help in the application of the IFRS framework, ensuring a Shariah-compliant presentation where alternative measuring and valuing approaches are allowed by the framework.

The Shariah Compliance of Islamic Peer-to-Peer (P2P) Lending Practices in Indonesia: Identification of Issues and the Way Forward

Shariah compliance is an important aspect of all Islamic financial instruments and transactions. With the growth of innovation in the finance industry, Islamic fintech's presence has added players, such as digital platforms, which need to comply with shariah. Therefore, this study aims to examine Islamic Peer-to-Peer (P2P) financing activity implementation as part of the fintech business model. Through a descriptive qualitative approach, a thorough analysis was conducted of digital contract papers, prospectuses, and the positions of parties involved in six Indonesian Islamic fintech companies. This involved analysing the shariah compliant quantitative characteristics of a company's prospectus, with financial reports related to interest, debt, and non-permissible income screening. The shariah compliance implementation is not only the duty of Shariah Supervisory Boards, but also involved all interested parties, namely investors, providers, partners, and business owners/borrowers. The results of the study show that shariah compliance in Islamic P2P platforms has been well enforced, therefore avoiding usury (riba), uncertainty (gharar), and gambling (maysir), while ensuring that businesses are offering halal products. Also, the results are expected to provide insight into shariah compliant fintech and how it can continue to develop in terms of Islamic financial products and services. In addition, this study can become a benchmark in the implementation of shariah compliant fintech products.

PRODUCTIVE ZAKAT AS A FINANCIAL INSTRUMENT IN ECONOMIC EMPOWERMENT IN INDONESIA: A LITERATURE STUDY

The Muslim population who has great potential in tithing is Indonesia. As the largest Muslim country in Asia, one of the financial instruments that should be appreciated is productive zakat. This program can not only help underprivileged people but also can make people who have been lacking in the economy and have always been recipients of zakat can change their positions into muzakki. This study describes the extent of research on productive zakat and its empowerment in Indonesia by obtaining the results of 375 published articles that have been eliminated according to search data from 2017 to 2021. Besides that, it also shows that productive zakat is very great in playing its role as one of the Islamic financial instruments in Indonesia in empowering and alleviating poverty through philanthropic institutions that shelter it.

Zakat and Poverty Alleviation Among People With Disabilities In Gombe State Nigeria: A Critical Analysis

<p><em>Zakat is an Islamic financial instrument that plays a variety of roles in human life, including providing assistance to vulnerable members of society, with particular reference to people with disabilities. This paper examines the institution of Zakat as a tool for alleviating poverty in Nigeria in general and Gombe state in particular, as well as the key roles of Zakat institutions and their problematic operation in the study area. The qualitative method for the study was developed through a literature review and interviews with relevant individuals. The study's findings revealed that the poverty rate of individuals with disabilities is higher than that of any other sub-group of individuals without a disability; thus, societal attitudes toward people with disabilities must be reconsidered immediately. The use of zakat income is a relevant tool for strengthening the skills of vulnerable people, part of which is disabled people.</em> <em>The implications of this study serve as a basis for making recommendations for expanding the scope of distribution of Zakat properties by including consumable properties and cash, as well as textile materials and entrepreneurial packages for the most talented disabled individuals to develop and finance the businesses they have in order to develop poverty alleviation programs in the state.</em></p>

Specifics of Managing Financial Instruments in Islamic Banks

This professional paper aims to bring closer to readers the basic characteristics and business features of Islamic banks as well as islamic financial instruments. Islamic banking has proven to be a potential and, above all, ethical, alternative method of banking worldwide. The transactional prohibition of collecting and earning interest is the most important prominent feature of Islamic banks. In other words, it is inadmissible that 'money create money' without the labor and the real sector effort. Islamic banks consider ethical responsibility on the supply side and thereby supply the market with an offer-based on trust. The most important characteristics of Islamic banks are participation and guarantees. Islamic banks perform with two major types of contracts: non-participatory or asset-based (murabahah, ijarah, istishna and salam) and risk-sharing/participatory or equity-based (musharakah, mudarabah).

PENGARUH INSTRUMEN KEUANGAN SYARIAH TERHADAP PERTUMBUHAN EKONOMI INDONESIA

The growth of Islamic finance in Indonesia has experienced very significant growth. The Indonesian government hopes that the financial sector will become an important instrument in promoting economic growth in Indonesia, but it seems that the percentage of economic growth in Indonesia has declined over the past decade. This study aims to analyze the impact of Islamic financial instruments on economic growth in Indonesia. This study uses a quantitative method with an Autoregressive Distributed Lag (ARDL) model analysis tool. The results of this study show that all Islamic financial instrument variables have a negative effect on economic growth in the short term. Meanwhile, in the long term, all independent variables have a positive effect on economic growth except for Sharia Mutual Funds which show a negative effect and Sharia Bank Financing and Sharia Stocks have no effect on economic growth in Indonesia. Thus, it can be concluded that Islamic financial instruments in the long term have a positive influence on encouraging economic growth in Indonesia.

Portfolio replication: Islamic vs conventional

PurposeThis conceptual paper aims to explore portfolio replication to resolve post-COVID pandemic private and public debt. This paper stresses the need to be less dependent on a debt-based system and the emergence Islamic equity market.Design/methodology/approachThis study analyses different types of risks involved in Islamic and conventional portfolios by using risk measures such as relative beta and comparatively examining the systematic and downside risk exposure of Islamic and conventional portfolios. Data was collected monthly from 2016 to 2022.FindingsThe findings indicate that the replications of a conventional portfolio into an Islamic portfolio are compatible with the regulatory standard, sharia boundaries and professional practices developed from investment theory. The result shows that Islamic portfolios have lower risk exposure compared with their conventional counterparts in most of the sample years, therefore, become further attractive for debt–equity portfolio swaps and Sharia-compliant investors preferring low-risk preferences. The result confirmed that the Islamic portfolios have a higher return and less risk than conventional portfolios.Research limitations/implicationsThe implications of this research are to provide a road map to the regulators, policymakers, governments and the financial industry on how to rearrange some of the public and private debt. A likely remedy is incorporating Islamic financial instrument principles through the equitisation of public and private debt.Practical implicationsThis research contributes to investors (particularly those who want to avoid riba [usury] based investment) to make more diversified portfolios by considering Islamic portfolios to reduce risk exposure.Originality/valueTo the best of the authors’ knowledge, this is the first paper to create bivariate debt–equity portfolios swaps composed of Islamic and conventional assets.

Keynote Speech: Sustainability of Fiscal Policy in Malaysia

This keynote speech was delivered at the International Conference on Interdisciplinary and Strategic Studies (ICRIS) on August 12, 2021. It shed light on the sustainability of fiscal policy especially during the COVID-19 pandemic and call for re-structuring fiscal reform to achieve more sustainable fiscal policy. The proposed reform covers enhancing the efficiency of revenue generation, increasing the efficiency and productivity of government spending, improving the enforcement against the black market as well as utilising Islamic financial instruments namely zakat and waqf to finance fiscal policy.

Qard Hasan as a feasible Islamic financial instrument for crowdfunding: its potential and possible application for financing micro-enterprises in Malaysia

PurposeThis paper aims to explore the viability of applying Qard Hasan as an Islamic crowdfunding financial instrument to finance micro-enterprises in Malaysia.Design/methodology/approachThis is a qualitative study in which semi-structured interviews were conducted with several crowdfunding professionals concerning the application of Qard Hasan in Islamic crowdfunding. To realise the purpose of this study, the data is subjected to thematic analysis.FindingsThe finding reveals that though it is often argued that Qard Hasan is basically not a business-oriented instrument, a closer look at the framework reveals the uniqueness and flexibility of this instrument to be adopted as a viable financial instrument for crowdfunding in financing micro-enterprises in Malaysia. Although it is associated with various risks including default risk and the risk of attracting big funds. However, these risks can be managed and overcome by using FinTech mechanisms such as blockchain to carry out due diligence, monitor the project and ensure the repayment in installment.Research limitations/implicationsThe findings of this study may not be suitable for generalisation to all crowdfunding practices as the semi-structured interview is concentrated predominantly in Malaysia. However, it still provides valuable contributions to the Islamic crowdfunding sector in Malaysia between theory and practice.Practical implicationsThe Qard Hasan crowdfunding framework in this study can potentially be applied to help micro-entrepreneurs reach out to financial services within their means. This framework provides means to grow the micro-enterprise sector.Social implicationsQard Hasan crowdfunding will effectively alleviate poverty by creating an avenue of opportunities for business enterprises and close the gap between the wealthy and the poor classes in society, which will eventually bring about more cooperation, more collaboration and cultivate a generous society.Originality/valueIn spite of the fact that Islamic crowdfunding is not a new topic in research, it lacks empirical studies, particularly qualitative analysis. As this study engages with experts in Shari’ah and crowdfunding regarding the potential application of Qard Hasan, it highlights a fresh discussion both in theory and practice.

Zakah Contribution for Community Economic Development with Analytical Networking Process Method

The purpose of this study is to describe theoretically and applied zakat as an Islamic financial instrument that has one function to alleviate poverty. The function of zakat is in line with the goal of sustainable community economic development which is a form of global commitment in spurring economic growth for the better. This type of research is mixed methods using the Analytical Process Networking approach. The analysis technique of this research used purposive sampling. Objects in the study include zakat management organizations, academics, government, and practitioners. The findings of this study are that the priority of implementing zakat distribution in supporting sustainable community economic development is the social aspect with a rater agreement W=0.36444. Four strategies can achieve sustainable community economic development, namely: 1) Improving the quality and quantity of concern for community social institutions and stakeholders; 2) Improve disaster risk reduction comprehensively and efficiently; 3) Improving the quality of fair law enforcement 4) Increasing job opportunities and concern for community MSMEs.

The Birth of the Islamic Investor

Abstract What is Islamic about Islamic finance? How does the industry’s Islamicity compare to the notions of trade and commerce in classical sharīʿa? In this essay, I explore the genealogy of Islamic finance by scrutinizing twentieth-century fatwās on share certificates. I argue that these fatwās gave rise to shareholding as a novel property relation, one that severs the shareholder’s non-financial interest in the company’s property. Twentieth-century muftīs unanimously accepted the legitimacy of shareholding, which, in turn, contributed to the rise of the Islamic investor: a profit-maximizing, socially-disinterested homo economicus whose ethical conduct is validated in reference to modern Islamic law. The unanimous acceptance of shareholding and the investor contributed to the consolidation of the central institutions of Islamic finance: Islamic banks and joint-stock companies. It also contributed to the thinning of Islamicity. Whereas the classical sharīʿa discourse produced partnerships as, at once, social and economic entities, fatwās on Islamic financial instruments reduce Islamicity to economic considerations and a set of maneuverable protocols.

Penerapan Wakaf Saham di Indonesia dalam Perspektif Islamic Social Finance Abdul Manan

Abstract 
 The object of waqf can also be in the form of investment profits from sharia shares, either capital gains or dividends. Waqf assets, either shares or investment profits, will be managed by the Waqf Fund Management Agency (Nazhir). Later, waqf assets will be used for community empowerment programs (mauquf alaih). Share waqf has been recognized and has a legal umbrella such as a Government Regulation. According to M.a Mannan, there is still sufficient flexibility and space for further reforms for the development of waqf management and administration in Muslim countries or countries with a majority Muslim population, especially those related to cash waqf. The research method used is library research. Data collection techniques use written sources such as books, or articles related to cash waqf. The primary data are the works and books of Muhammad Abdul Mannan (Certificate of Cash Waqf: An Islamic Financial Instrument Innovation). While secondary data, namely other literature that supports primary data.

Filantropi Zakat Laziskaf Untuk Pemberdayaan Ekonomi Masyarakat Pesisir

Zakat is part of an Islamic financial instrument which has one function to alleviate poverty. In general, the empowerment of zakat to mustahik is consumptive, zakat is given in the form of cash or basic necessities directly to zakat recipients or mustahik, however, consumptive zakat becomes ineffective in improving the welfare of mustahik in long-term or sustainable, because it only makes mustahik survive and will not encourage mustahik to try to get out of the poverty line.
 
 It is the empowerment of zakat in productive forms that is more effective in increasing the welfare of mustahik and can alleviate mustahik from the poverty zone. However, LAZISKAF must also be supported by supervisors and assistants by LAZISKAF in the field, so that zakat recipients are more enthusiastic in doing business. 
 
 Mustahik's welfare can be seen from several factors, namely business development, increased income, and has become a muzakki or the ability to give alms and donate after receiving zakat empowerment funds. Their livelihood is the mustahik, by applying this effort it is hoped that they will be able to fulfill their own life. The further goal is to make the mustahik zakat a muzakki zakat.

Analysis of Sukuk Research in Indonesia Bibliometric Approach

The concept of sharia-based finance is currently growing rapidly in Indonesia. One form of sharia financial instrument that has been issued by both corporations and the state is the sukuk. Sukuk is one of the most innovative forms of product in the development of the contemporary sharia financial system. It can be concluded that sukuk is an alternative source of funding, especially for the government and corporate companies. The growth of sukuk in Indonesia has increased sharply compared to other Islamic financial instruments, the growth reaching 84% ​​per year if analyzed from 2001 to 2007. Thus, sukuk has developed into one of the most important mechanisms in increasing finance in the international capital market through an Islamically acceptable structure. This study aims to determine the development of research trends in sukuk in Indonesia published by leading journals on Islamic financial economics. The data analyzed consisted of 47 papers that Scopusindexed research publications. The data is then processed and analyzed using the VOSviewer application to find out the bibliometric map of the development of sukuk research in Indonesia.

Islamic Financial Literacy Amongst Muslim Students in Indonesia: A Multidimensional Approach

Although Indonesia is the largest Muslim country in the world, the level of Islamic financial literacy in Indonesia is still very low. The Islamic financial literacy index in Indonesia is at 8.93%, much lower than the conventional financial literacy index which reached 37.72% in 2019. Therefore, this study aims to analyze the determinants of Islamic financial literacy in Indonesia amongst university students which is a group prioritized by government policies in improving Islamic financial literacy. To achieve this goal, this study develops a multidimensional Islamic financial literacy instrument that includes aspects of knowledge, attitudes and behavior and measures the multidimensional Islamic financial literacy amongst university students. The study collected primary data from 439 students from University of Indonesia and analyzed them using logistic regression method with Islamic financial literacy scores as the dependent variable and socio-demographic factors as the independent variables. The results of this study found that the majority of students (50.1%) had moderate levels of Islamic financial literacy, while 43.5% and 6.4% had high and low levels of Islamic financial literacy respectively. In addition, this study found a positive influence on the field of study, income, and Islamic bank account ownership on the level of Islamic financial literacy. In particular, students who come from the faculty of economics and business, have higher incomes, and have Islamic bank accounts tend to have higher Islamic financial literacy than other students. Based on these findings, relevant stakeholders in Indonesia are expected to continue improving Islamic financial literacy through various strategies and massive educational programs, especially for the groups which have low and moderate Islamic financial literacy. The results of this study are also expected to enrich the literature on Islamic financial literacy in Muslim countries.

PRODUCTIVE ZAKAT AS A FINANCIAL INSTRUMENT IN ECONOMIC EMPOWERMENT IN INDONESIA

The Muslim population who has great potential in tithing is Indonesia. As the largest Muslim country in Asia, one of the financial instruments that should be appreciated is productive zakat. This program can not only help underprivileged people but also can make people who have been lacking in the economy and have always been recipients of zakat can change their positions into muzakki. This study describes the extent of research on productive zakat and its empowerment in Indonesia by obtaining the results of 375 published articles that have been eliminated according to search data from 2017 to 2021. Besides that, it also shows that productive zakat is very great in playing its role as one of the Islamic financial instruments in Indonesia in empowering and alleviating poverty through philanthropic institutions that shelter it.

Pandangan Hukum Islam terhadap Status Muflis (Debitur Pailit) sebagai Gharimin (Mustahik Zakat)

The development of sharia economy in Indonesia is increasing. Islamic economic development can be seen from the development of Islamic financial institutions and the Islamic financial instruments they offer, ranging from Islamic banks, Islamic capital markets, and Islamic insurance. With these developments, nowadays financing activities with sharia contracts are increasing and growing rapidly. However, only a few can pay it off. In other words, non-performing financing or bad loans at Islamic financial institutions often occur. Non-performing financing caused by the inability of the customer as a debtor to pay debts to a financial institution as a creditor resulted in the customer being bankrupted by the financial institution as a creditor. Bankruptcy is defined as the inability of the debtor or debtor (can be a person, legal entity, company) which is proven based on a court decision that the debtor has stopped paying his debts (unable to pay off debts) which results in general confiscation of his assets, so that the debtor is no longer entitled to manage his assets. . If it is associated with zakat, one of the ashnaf of zakat is gharimin or people who are in debt. Zakat institutions in Indonesia have not made bankrupt customers as gharimin who are entitled to receive zakat. The formulation of the problem in this paper is to find out the views of Islamic law on the status of bankrupt debtors as gharimin. The conclusion is that the status of a bankrupt debtor can be determined as a gharimin who is entitled to receive zakat. The use of debt in question can be for personal or public interest. The distribution pattern can use the qardh hasan pattern where the zakat given to the gharimin is not to be owned but to be returned again. The zakat funds are not only used to pay off debts, they can also be used as initial capital for bankrupt debtors to restart their business.
 Keywords: bankrupt debtor, gharimin, zakat mustahik.

Poverty Alleviation Strategies Through Sharia Microfinance Institutions Politico-Economics Study With Tawhidi Approach

This research aims to formulate a poverty alleviation strategy in Indonesia by empowering Islamic Microfinance Institutions (IMFI) based on political-economic studies. The Indonesian political-economic system is stipulated in Article 33 of the 1945 Constitution and its Explanatory Paragraph, making the people the center of attention for national economic development. The research uses the Analytic Network Process (ANP) method developed by Saaty. The ANP construction uses a model consisting of 3 main clusters, namely Problems, Solutions, and Strategies. The qualitative-quantitative assessment data is determined based on the Saaty Scale obtained through an in-depth interview of 9 expert respondents and practitioners in Islamic economics and finance. The results show that poverty alleviation strategies need to be carried out through cultural and structural approaches. The cultural approach includes revitalizing the concept of the people's economy as stated in the 1945 Constitution, campaigning for using the domestic product, socialization to increase literacy about waqf and zakat, improving the practices of bureaucratic ethics, and strengthening the values of togetherness and anti-monopoly. The strategy at structural approach is carried out by implementing policies to enhance the role of cooperatives in the national economy; increasing the education budget for the poor and needy; increased coordination between authorities; bureaucratic reform; and honest and fair law enforcement against corruption. For the micro-level at the LKMS institution, the cultural approach is carried out by strengthening literacy on Islamic financial instruments, increasing financial inclusion programs, social inclusion programs, and strengthening methods for obtaining funding sources from Islamic financial instruments. On the structural side, it is necessary to improve the professionalism and capability of supporting LKMS, institutional strengthening, internal control and supervision system, improvement of supporting infrastructure, and enhancing service convenience.