Shariah Compliance Research Articles

ANALISIS SHARIAH COMPLIANCE PENETAPAN HARGA LELANG BARANG JAMINAN DALAM MENGURANGI RISIKO PADA PEMBIAYAAN IB GRIYA DI BANK SUMUT SYARIAH CABANG MEDAN

This research was conducted to determine shariah compliance in determining the auction price of collateral for ib griya financing at Bank Sumut Syariah Medan Branch. The research method used in this research is a descriptive method, in which data are collected, compiled, grouped and analyzed based on facts obtained from the field and then integrated into a clear and focused picture of the problem being studied. While the types of data needed are primary data in the form of interviews with internal bank parties and secondary data in the form of libraries, brochures, articles, and websites. From the results of this study, the authors conclude that 1) the implementation of the mechanism for pricing in the auction of collateral goods is to set a limit value based on the market value and the determination of the auction price set by the Public Appraisal Service Office (KJPP).After the stages of determining the auction price are completed, the bank will submit an auction application and other requirements to the State Property and Auction Service Office (KPKNL). 2)inthe mechanism of price fixing and auction implementation as seen from Shariah Compliance (according to Islamic Sharia) is in appropriate to sharia rules and applicable legal rules, because each step by step the pricing mechanism and auction implementation look at the base price of the auction first bysurveyingto the local market and the central market, a re- assessment carried out by experts in their respective fields, following the rules of procedure, and using the valid data so that it can be facilitated and it does not cause loss to both parties. Therefore it can be concluded that the determination of the auction price for collateral goods in Reducing Risk in Ib Griya Financing at Bank Sumut Syariah Medan Branch is in accordance with shariah compliance (sharia provisions).

INVESTIGATING THE OPERATIONAL ISSUES OF ISLAMIC HOTEL BUSINESS IN MALAYSIA: A CONCEPTUAL PAPER

The increasing demand over Shariah compliant services since past one decade has significantly contributes to the development of Islamic hotel business in Malaysia. Several factors such as the increasing number of global Muslim population, high disposable income among Muslims and high awareness on getting Shariah compliant services becoming the main contributors to the growing of this business segmentation. However, it is reported by many scholars that this business segment is still not stable since there are loopholes mentioned by previous scholars found in the operational side of Islamic hotel business. Concerned to determine the extent to which this business segment is still not stable, several journal articles was selected and reviewed by this research. It is hope that this paper will be able to provide a comprehensive information related to the inadequacy in the Islamic hotel business in Malaysia and at the same time serving as an idea for future research in this area of interest. Keywords: Islamic Hotel Business, Muslim Friendly Services, Shariah Compliant Hotel

Effectiveness of Islamic Microfinance Institutions Through Customer's Satisfaction in Pakistan

In developing economies, microfinance institutions have become an increasingly popular approach to reducing poverty, social empowerment (especially among women), and economic growth by providing new opportunities for the poor for entrepreneurship. This study investigates the effectiveness of Islamic microfinance programs on the comfort level of the Islamic Microfinance (IMF) system in Pakistan. The study examines the effectiveness of IMF institutions in the country's small and medium enterprises (SMEs). Quantitative research based on primary data is conducted to evaluate the effectiveness of various IMF institutions in Pakistan. The data is collected from the 88 SME owners located near Lahore (Punjab), Pakistan. The independent variables are the cost of the loan, income and living standard, loan repayment policy, Shariah compliance, and loan utilizing opportunities. The dependent variable is microcredit customer satisfaction examined through a 5-point Likert scale questionnaire. Regression analysis is applied and found that income, loan repayment policy, loan utilization opportunities, loan cost, and Shariah compliance have a statistically significant positive influence on the microcredit customer's satisfaction. The study implies that understanding customer satisfaction helps IMF institutions enhance their financial performance, improve client retention, and fulfill their social mission.

Shariah Compliance Practice: An Analysis of Trends among Islamic Banks in Nigeria

The objective of this study is to examine the trends related to the Shariah compliance practice among Islamic banks in Nigeria. It is also conducted to establish the loopholes in the existing Islamic banking system and to suggest measures to remove Shariah non-compliance in Islamic banks in Nigeria. The study is based on primary data. The data was gathered through a questionnaire survey with the employees, researchers, and Islamic banking experts. The study is based on descriptive findings by analysis of mean, standard deviation, and variance to examine the trends of Shariah compliance practice in Islamic banks in Nigeria. The study found that Islamic banks in Nigeria are doing well in terms of Shariah compliance practice relating to their products and services. Besides, the advisory committee of experts are quite knowledgeable in determining fatwa and rulings in all Islamic banking matters in Nigeria. This is because Shariah compliance is considered as the backbone of Islamic banking as it gives legitimacy to their products and services. The study has implications for all the banks, customers, Shariah Advisory Committee, regulatory bodies, and other stakeholders in Nigeria to further checkmate the various factors that could prevent Shariah non-compliance. The study, therefore, recommends extensive efforts via Shariah knowledge and seriousness of the bank employees as well as regulatory authorities to enforce Shariah compliance thereby guiding customers to choose Islamic banking products in a better and improved way.

Tingkat Kepatuhan Syariah Bank Pembiayaan Rakyat Syariah Berbasis Maqashid Syariah

Knowledge of shariah compliance in the sharia banking industry is still low. Shariah compliance is a special uniqueness that exists in sharia banking. The correct knowledge of shariah compliance has an important urgency in the operations of Islamic banks. The purpose of this study was to determine the level of sharia compliance of Islamic Rural Banks in Indonesia. The research method uses a quantitative descriptive approach. The data source of this research is secondary data. The data collection technique uses documentation in the form of annual reports of all Sharia Rural Banks (BPRS) which are the combined financial statements of BPRS in the Sharia Banking Statistics Report for September 2021 Otoritas Jasa Keuangan (OJK) with a total of 165 BPRS. The results show that the level of sharia compliance of Islamic Rural Banks (BPRS) as measured by the Maqashid Shariah Index (MSI) for a period of 10 years is still very low with an average index value of 0.32319 or 32.319%. Research findings reveal that the allocation of funds to aspects of education, research and training as well as the ratio of zakat to income is very relatively low, even information related to zakat payments until 2018 is non-existent or zero. The results of this study can be used as input for the management of Islamic Rural Banks (BPRS) special attention to the dimensions of which the index value is still very low

The Influence of Investment, Debt, and Dividend Policies on the Stock Return of Shariah Compliant Companies in Indonesia (ISSI)

This study aims to analyze the impact of investment, debt, and dividend policies on the stock return of the companies listed in the Indonesia Sharia Stock Index (ISSI) from 2016 up to 2020. The sample stocks used in this study covers all the shariah compliant companies that were consistently listed during the study period, involving 158 companies with 790 observations. The proxies of stock return are annualized stock return, Sharpe ratio, and Treynor ratio. Investment policy is represented by price earnings ratio (PER), debt policy by debt to asset ratio (DAR), and dividend policy by dividend yield (DY). The generalized method of moment (GMM) is a regression technique that is employed in this study. The regression model should pass the AR(2) and Hansen tests to avoid autocorrelation and validity issues. This study provides important evidence that investment policy positively affects stock return (annualized stock return and Treynor ratio). In contrast, investment policy negatively affects the Sharpe ratio. Furthermore, there is a significant negative relationship between debt policy and the Sharpe ratio. Lastly, dividend policy is reported to significantly influence stock return, positive with Treynor ratio, while negative with stock return (annualized). The study relates its findings to the relevant theories involving the trade-off, signalling, and the bird in the hand theories.

Are Shariah-compliant firms less prone to stock price crash risk? Evidence from Malaysia

PurposeThe term “Shariah compliance” states that a firm conducts business activities within the boundaries stipulated by Islamic law. The purpose of this study is to empirically examine whether a firm’s Shariah compliance helps in reducing firm-specific stock price crash risk (SPCR).Design/methodology/approachUsing the data of 10,391 firm-year observations of non-financial public listed firms in Malaysia from 2001–2017, this study uses the panel data estimation technique for regression analysis. Moreover, a series of alternative estimations has been applied to check the consistency of results.FindingsThe findings reveal a significant negative impact of firms’ Shariah compliance on SPCR. The results indicate that Shariah-compliant (SC) firms are less likely to hoard bad news, ultimately reducing SPCR. The results also unveil a possible mechanism through which SC firms reduce SPCR. The findings reveal that SC firms are less likely to be involved in earnings management, which reduces the risk of a stock price crash in SC firms. It highlights the behavioral differences in financial reporting between SC firms and Shariah non-compliant (SNC) firms.Practical implicationsThis research adds to the existing literature of Islamic capital markets from the perceptive of SPCR. The SPCR exhibits a tail risk of the stocks and is very important for risk management and investment decisions. The findings of this study will help risk-averse investors to include SC firms in their investment portfolios for risk minimization. The results also guide policymakers and regulatory bodies to rethink the monitoring mechanisms of publicly listed firms.Originality/valueThis study is unique, as it highlights that firms’ Shariah compliance reduces SPCR.

Classical Islamic Principles and Present Islamic Banking

Purpose – The purpose of this paper is to assess perception of the stakeholders about Islamic banking and find out approaches to make it closer to the Shari’ah.
 Methodology – The paper adopts direct survey approach to find out perception of stakeholders about the Islamic banking. The survey results have been evaluated using Ordinary Least Square method. 
 Findings – The paper reveals that respondents have negative perception about the present form of Islamic banking, due to multiple similarities in conventional and Islamic banking products and operations. The respondents supported the idea of different model of Islamic banking.
 Research limitations – The study relies solely on the opinion of limited number of respondents, living in few major cities of Pakistan. It does not provide any empirical evidence for the proposed model of Islamic banking.
 Practical Implications – Riba is significantly condemned and prohibited in Islam. Therefore, avoiding riba in all business transactions is very important for our faith. Islamic world started practicing banking under the branding of Islam which has approval of a sizable group of Islamic scholars but still there is no consensus among the Islamic scholars on this issue. This paper helps in addressing perception issues and suggests a future direction of Islamic banking for the customers, practitioners and the regulators.
 Originality – Many researchers have questioned the Shariah compliance and perception issues of Islamic Banking but most of them have suggested only awareness programs. This research proposes a new model for Islamic banking which has not been witnessed in any other research. 
 Keywords: Islamic Banking and Finance, Perception, Criticism, Regulations, Regulator, New Model.

Empirical comparison of Shariah-compliant vs conventional mutual fund performance

PurposeThis paper investigates the performance of locally focused equity mutual funds (LFEFs) in Saudi Arabia as compared with the performance of benchmark funds. More specifically, the focal question pertains to whether Shariah-compliant mutual funds (SMFs) and conventional mutual funds (CMFs) outperform their respective benchmarks. Undertaken in the context of Saudi Arabia's economic planning under Vision 2030, the study offers a foundation for determining whether and the extent to which Shariah-compliant investment strategies are competitive—a matter of considerable importance across 57 Muslim countries.Design/methodology/approachThe Carhart four-factor model is applied to a sample of 39 Saudi Arabian mutual funds (MFs) using the monthly net asset value (NAV) per share. The sample period, April 2007 to October 2016, is considered in its entirety and as three sub-periods, i.e. low-, medium- and high-volatility.FindingsThe results show that the locally focused equity mutual funds (LFEFs) significantly outperformed their benchmark, i.e. the Tadawul All Share Index (TASI), during the full sample period and the low-volatility period. According to the empirical comparison, the CMFs also outperformed their TASI benchmark for the full sample period and the low-volatility period. However, the SMFs neither outperformed nor underperformed their S&P Saudi Arabia Domestic Shariah Index benchmark. That is, for each of the SMFs included in the sample, the Jensen's alpha was insignificant for both the full sample and all three volatility sub-periods.Research limitations/implicationsIn this paper, the four-factor model is used in the context of a single country. The results, therefore, may not be generalizable to the multi-country level in the Gulf Council Cooperation (GCC) region given differences between the member countries in terms of financial structure and economic focus.Practical implicationsThe results reported constitute a useful guide for policymakers and faith-based-sensitive investors concerned about the Shariah compliancy of their portfolios given that there is very little difference between how CMFs and SMFs performed in the focal period. This research can be extended to include other Islamic countries in the GCC region as a basis for identifying optimal investment vehicles, i.e. those most likely to produce high returns at low risk.Originality/valueThe work reported in this paper is original and constitutes a valuable asset for ethnoreligious-sensitive investors. The research has not been published in any capacity and is not under consideration for publication elsewhere.

Pengaruh Sharia Compliance Terhadap Customer Satisfaction dan Dampaknya pada Intention To Revisit

Indonesia as the largest Muslim country certainly has the opportunity to control world halal tourism. Through the Ministry of Tourism, Indonesia develops halal tourism by developing infrastructure including sharia hotels (Ministry of Tourism, 2015). This study aims to 1) analyze the effect of shariah compliance on customer satisfaction. Analyze the effect of shariah compliance. The type of research used in this research is associative research with surveys. The method of data collection by accidental sampling. The population and sample in this study were visitors to sharia hotels in Malang City. Number of samples The data analysis method used is PLS. This study uses TKT 3. The mandatory output in this research is in the form of scientific articles (JOURNAL) which will be published in the MALIA journal (SINTA National Accredited Journal).

WHY DOES BANGLADESH REQUIRE A CENTRALIZED SHARIAH GOVERNANCE FRAMEWORK FOR ISLAMIC BANKS?

The main objective of this article is to describe the logical reasons why a Centralized Shariah Governance Framework (CSGF) provided by the Central Bank of Bangladesh (Bangladesh Bank) is essential for the country’s Islamic banks. In doing so, it identifies the major regulatory challenges (self-developed and disparate use of Shariah Governance (SG) practices) faced by Islamic banks in Bangladesh. It considers an analytical approach to explore the significance of a CSGF for Islamic banks in Bangladesh and examines the current diversified procedures of SG practices. This article reveals that the self-developed SG practices of Islamic banks in Bangladesh have created confusion and pessimism among the practitioners, bankers and even to the general people and regulators which is negatively affecting the overall image of Islamic banks. Such incongruent governance practices have led to inconsistencies in SG structures, implementation procedures, monitoring activities. In addition, this article reveals that these deficiencies usually exist due to weak monitoring systems of the Central Bank, ineffective functioning of individual Shariah Supervisory Boards (SSB) and the absence of comprehensive SGF. The article argues that the Central Bank of Bangladesh should initiate to reform its Islamic banking industry by introducing a CSGF aimed to identify the roles, responsibilities, powers, and functions of SSB; thereby improving governance, accountability, and overall Shariah compliance quality. This article is hoped to be beneficial for the regulators and practitioners to consider revising current practices.
 
 Keywords: Centralization, Bangladesh Bank, Islamic banks, Shariah governance framework.
 
 Cite as: Alam, M. K., & Thakur, O. A. (2022). Why does Bangladesh require a centralized Shariah governance framework for Islamic banks? Journal of Nusantara Studies, 7(1), 24-42. http://dx.doi.org/10.24200/jonus.vol7iss1pp24-42

Attributes of Shariah Supervisory Board and shariah compliance

Shariah’s compliance in bank operations guarantees that Islamic bank (IB) directors must maintain. The importance of shariah compliance has not been widely explained by previous researchers, especially the attribute factor of the Shariah Supervisory Board (SSB). Only Basiruddin and Ahmed (2020) have researched shariah compliance using the indicator or shariah non-compliant income (SNCI). This study uses zakat expenditure as an indicator to measure shariah compliance. The study aims to prove the role of the SSB attributes (the number of members, SSB expertise in finance/banking, experience, and educational background in shariah) on the risk of shariah compliance. This study uses a sample of 9 Islamic banks in Indonesia observed from 2010 to 2019. Using unbalanced data, the number of units of analysis is 102 bank years. Data were analyzed using panel data regression. We find that the number of SSB members and the educational background of SSB are proven to increase Shariah compliance. However, SSB’s experience and expertise in finance/banking are not proven to affect Shariah’s compliance. In general, SSB’s involvement in strategic bank policy-making to improve Shariah compliance is evident.

The Determinants of Customer Satisfaction in Islamic Banks in Libya

In the face of financial globalisation, the Islamic banking system seems to be thriving and robust, coexisting peacefully alongside the regular banking system. The study will look at a variety of areas, including service quality, government assistance, Shariah compliance, religious support and price. The data for this study were gathered via a survey of Tripoli’s consumer bankers. 200 questionnaires were sent to selected respondents. Conclusions may be taken from this sample by generalising the population’s interests. Random sampling was used to identify the basic units. The findings of this study will assist banks and connected stakeholders in the financial industry, including policymakers and senior management, in making Islamic banking more acceptable and beneficial to clients. The study’s key finding is that Shariah-compliant goods and services are more likely to increase customer purchase intent. These provisions would enable all parties engaged in Islamic banking, especially Libyan banks, to be more proactive in developing effective marketing strategies to recruit new customers.

Islamsko centralno bankarstvo u teoriji i praksi

Thanks to their role as creators and implementers of monetary policy, central banks in most modern countries have the status of key financial institutions and pivots of financial system stability. During the centuries of evolution of central banking, numerous models and instruments of monetary policy were developed, the application of which depended largely on the political environment and the dominant economic model in specific countries. Unlike conventional central banking, Islamic central banking has been in global economic practice for only a few decades. An authentic and Shariah-compliant model of Islamic central banking is still in its infancy. Therefore, the practice of Islamic central banking is largely based on the application of instruments of conventional central banking, which, according to Shariah compliance, are used in their original or modified form or are excluded from use. In this paper, we will present the development path of Islamic central banking, the goals and obligations of Islamic central banks, a set of Shariah-compliant monetary policy instruments, the practice of Islamic central banking in certain countries, and limitations for the efficient functioning of Islamic central banks in practice.

External Shariah Audit Services from Practitioners’ Views: The Case of Malaysian Islamic Banks

Objective – This paper investigates the possibility and feasibility of Malaysia's Islamic banking industry hiring external Shariah audit (ESA) services in the audit fraternity as one of the Shariah governance mechanisms. Some of the scholars argued that ESA is more independent and is able to strengthen the existing Shariah compliance in the industry. Methodology – This study employs a qualitative method by utilising semi-structured interviews with nine key industry players: Shariah auditors, Heads of Shariah audit, Shariah Committee (SC) Member, and Chief Shariah Officer. Data gathered from the interviews was transcribed and analysed using Atlas.ti software. Findings– A series of interviews reveal that given the current practices by the Islamic banking industry, it could be inferred that the Malaysian Islamic banking industry is not ready to exercise the ESA practices. This unreadiness is due to several factors, such as ESA costs outweighing its benefits, the fear of reputational risk, and anxiety of leaking confidential information to rivals. Novelty – The Shariah audit research especially relates to external Shariah audit is considered limited. Type of Paper: Empirical JEL Classification: E44, G10, G20. Keywords: External Shariah audit; Islamic Banks; qualitative method; Shariah governance; Malaysia

Customer Awareness of Shariah Compliant Hotels (Study on Hotel Customers in Malang)

This study aims to describe and analyze comprehensively and in detail the factors that are considered by customers in choosing hotels that comply with sharia principles in Malang City. This type of research is quantitative research. The data collection method used by researchers is the survey method. Respondents in this study were 171 sharia hotel consumers in Malang City. The data collected by questionnaire. The statistical test used Exploratory Factor Analysis (EFA). The results showed that there are 9 factors considered by customers in choosing a hotel that is in accordance with sharia principles in the city of Malang, namely Sharia Compliant Concept, Information, Sharia Service, Customer Acceptance, Reference, Needs, Experience Anda Art

Shariah Compliant Hotel Deployment: Unveiling A Case within the Hotel Industry in Malaysia

This study examines the deployment of Shariah Compliant Hotel [SCH] in the Malaysian hotel industry. Proponents of SCH suggest that Shariah compliant accommodation for tourists is an important strategy deployed for competitive advantage in the Islamic hospitality sector. However, little is understood about the deployment of SCH within the Malaysian hotel industry. The present study addresses this literature gap by focusing on both the SCH deployment practices and key business considerations of the organisational Shariah governance within the Malaysian hotel industry. The study adopts a qualitative research methodology, with data collected through semi-structured interviews and document reviews from a single Shariah Compliant case hotel operating in Malaysia. Consistent with the literature, our findings suggest that the case hotel uses a holistic, process approach to deploy SCH practices. This structured, regulated SCH deployment approach involves several key business considerations of organisational Shariah governance that directly supports SCH practices encompassing the financial management, operations, interior and design as well as the services and facilities offered to customers of the hotel.

ANALISIS SHARIAH COMPLIANCE PENGAJUAN KOMPLAIN DI BUKALAPAK

Problems still arise in the online buying and selling process even though there are strict rules made by Bukalapak as a service provider. Violation of the rules by unscrupulous users will harm the buyer. To minimize violations, buyers are provided with facilities so that they can make complaints about the products received. Complaints and other processes that follow it seem like khiyar in Islamic law that needs to be analyzed based on shariah compliance. This research is a library research, with descriptive data presentation, data collection using documentation techniques and data analysis using Miles and Huberman models. The results of this study show an analysis of shariah compliance with the complaint process, the choice of reasons for the complaint and the choice of complaint solutions provided by Bukalapak. The results of the analysis show compliance with sharia principles based on the fatwa of the Dewan Syariah Nasional Majelis Ulama Indonesia (DSN-MUI) and the Kompilasi Hukum Ekonomi Syariah (KHES).

Shariah Compliance in Islamic Economics: A Bibliometric Analysis

This study aims to examine the literature related to shariah compliance in the Scopus database. Furthermore, classification and critical commentary were applied to find a new direction for developing studies on shariah compliance in Islamic economics. The bibliometric approach was used to analyse 233 articles, while a systematic literature review was used to classify issues from 82 articles on this paradigm. The results showed that the examined studies grew significantly and were influential in developing the shariah compliance paradigm. This was indicated by the author’s highest m-index of 0.666. However, this literature primarily concerns financial institutions and their relationship with the paradigm, followed by related literature in various industries, with extensive discussion on ethics and in the normative context. In this regard, shariah compliance issues can be classified into three topics, namely Islamic banks, non-bank financial institutions, and general firms. Shariah compliance was insufficiently used as an instrument to measure the product restructuring impact of an Islamic bank and a reflection of the compliance from the customer psychology perspective. In this context, it is necessary to transform the paradigm into “preventing exploitation” by introducing the customer exploitation index.

NON-SHARI’AH COMPLIANT INCOME GAIN OF ISLAMIC BANKS AND ITS IMPACT ON CUSTOMERS TRUST AND COMMITMENT: A QUALITATIVE APPROACH

The aim of this paper is to focus on the impact of non-sharia compliant income of Islamic banks on customers’ trust and commitment. The research work has followed the qualitative strategy as it has worked on secondary qualitative data. Books, journals, and credible websites have been reviewed as the primary methods of collecting secondary qualitative data. Thematic analysis has been used to analyse the gathered data. According to the findings of this paper, those banks which are not focusing on shariah compliance cannot achieve the trust of the customers which ultimately leads to a lack of customers commitment.