Developing a Shari’ah based FinTech money creation free [SFMCF] model for Islamic banking

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Othman Ibrahim Altwijry ◽  
Mustafa Omar Mohammed ◽  
M. Kabir Hassan ◽  
Mohammad Selim
Keyword(s):  
Structured Interview ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Proposed Model ◽  
Qualitative Research Methodology ◽  
Money Creation ◽  
Research Gap ◽  
Practical Implications ◽  
Financial Technology

Purpose The purpose of this study is to develop and thereafter validate a Sharīʿah-based FinTech Money Creation Free [SFMCF] model for Islamic banking. Design/methodology/approach The study has adopted a qualitative research methodology, using three approaches, namely, a survey of the literature to identify the research gap and the variables needed for developing the model, content analysis to construct the variables into a model and semi-structured interview with 10 experts in banking, Sharīʿah and Financial Technology (FinTech) to validate the SFMCF model. Findings The major findings of the study lie in developing the SFMCF model for Islamic banking, empirical validation of the model’s viability and acceptability and the implications for the main stakeholders of Islamic banks. Research limitations/implications The SFMCF model is specific to Islamic banking and its validation is based on the views of 10 experts. Practical implications The SFMCF would necessitate changes to the central bank regulatory framework, convince Islamic banks to forego their powers and advantages of creating money and enhance their abilities to fully adopt Sharīʿah-compliant FinTech. Social implications The proposed model if implemented would change positively the perception of the society particularly the stakeholders of Islamic banks and restore their trust and confidence about the direction of the institution toward achieving the Sharīʿah objectives. Originality/value The novelty of this work lies in developing and validating the viability and acceptability of the SFMCF model for Islamic banking.

Are Islamic banks different? The application of the Radical Affinity Index

2019 ◽  
Vol 12 (1) ◽  
pp. 2-29 ◽  
Author(s):  
Leire San-Jose ◽  
Jon Cuesta
Keyword(s):  
Great Britain ◽  
Design Methodology ◽  
Islamic Banking ◽  
Ethical Dimension ◽  
Islamic Banks ◽  
Ethical Perspective ◽  
Content Type ◽  
Social Commitment ◽  
Practical Implications ◽  
Ethical View

Purpose The purpose of this paper is to extend the literature on Islamic banking by examining their ethical dimension using transparency, placement of assets, guarantees and participation from Radical Affinity Index. Design/methodology/approach To this end, a sample of 20 Islamic banks from 13 countries (Bahrain, Saudi Arabia, Malaysia, Pakistan, Kuwait, Tanzania, Great Britain, Oman, Iraq, Egypt, Bangladesh and Qatar) was used. Findings The results are robust to ethical effects. The evidence suggests that among Islamic banks, at least some of them could improve their ethical requirements of the Sharia; they obtained lower scores than ethical banks in terms of RAI variables (transparency, placement of assets, guarantees and participation). Research limitations/implications It is used a random sample rather than population with the limitations that entails. The variables in the index are based on ethical perspective; then, the index is applied in Islamic banking but with the ethical view limitation. Practical implications The Islamic banks have the option to increase their transparency including further information regarding the beneficiaries of the benevolent funds; moreover, it would offer a clearer view about their ethical and social commitment towards society. Originality/value Additionally, this paper broadens the scope of the literature by analysing the determinants of Islamic banking around ethical dimensions of financial entities.

Value- based Islamic banking and reporting in Bahrain

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Akhtar Ali Saeed Mohammed ◽  
Fadillah Mansor
Keyword(s):  
Annual Reports ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Reporting Standard ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Islamic Economic ◽  
Practical Implications ◽  
Specific Contribution

Purpose This paper aims to analyse whether the practices of Islamic banks in Bahrain are in line with value-based Islamic banking (VBIB) and reporting disclosure in the annual reports towards achieving their fundamental objectives of human-centred economic development and social justice. Design/methodology/approach Based on Islamic finance, Islamic economic principles and perception of Maqasid al-Shari’ah, this paper examines and assesses the current practices of Islamic financial institutions (IFIs) in Bahrain through content analysis of financial and annual reports of Islamic banks in Bahrain and interviews of Islamic banking experts. Findings The findings reveal that value-based banking (VBB) has not been translated fully into practice by the Islamic banks in Bahrain. Research limitations/implications The data analysis was restricted to Islamic banks in Bahrain. Practical implications This paper identifies the need for reporting standard development to improve the VBB practice in Bahrain in the future. Looking at the objectives of the IFIs, this paper introduces the concept of VBB in Bahrain, which includes ethical banking, responsible banking and social responsibility. The study adds value not only to the current Islamic finance literature but also helps many stakeholders, including prospective academics, who may conduct comparative studies in different jurisdictions throughout the world. Originality/value The specific contribution of this paper is the identification of the VBB practices and related disclosure in the Islamic banking industry in Bahrain. The study is useful to harmonise and standardise the practices of VBIB by the contemporary Islamic banks in Bahrain.

Measuring Shariah non-compliance risk (SNCR): claw-out effect of al-bai-bithaman ajil in default

2017 ◽  
Vol 8 (3) ◽  
pp. 272-283
Author(s):  
Saiful Azhar Rosly ◽  
Muhammad Arzim Naim ◽  
Ahcene Lahsasna
Keyword(s):  
Content Analysis ◽  
Design Methodology ◽  
Islamic Banking ◽  
Legal Environment ◽  
Islamic Banks ◽  
Legal Cases ◽  
Content Type ◽  
Potential Loss ◽  
Critical Requirement ◽  
Practical Implications

Purpose The purpose of this paper is to examine the meaning, nature and measurement of Shariah non-compliant risk faced by Islamic banks. Design/methodology/approach Al-bai-bithaman ajil (BBA) contract documentation is analyzed in the light of the legal environment in Malaysia and measurement of Shariah non-compliant risk based on constructed or hypothetical cases. Findings Shariah non-compliant risk will adversely affect bank’s earnings when BBA contracts are deemed invalid in the court of law, either in a foreclosure or ruling via court declaration. Research limitations/implications The paper is written based on content analysis, Malaysian legal cases with hypothetical examples for better understanding. Practical implications Islamic banking should be able to use the findings to estimate potential loss from Shariah non-compliant risk and make the necessary provisions. Originality/value This paper provides new insights of risks faced by credit-intensive Islamic banks, that when relinquishing critical requirement of Islamic contract such as ownership risk will suffer loss.

Shari’ah issues in Islamic banking: a qualitative survey in Malaysia

2014 ◽  
Vol 6 (2) ◽  
pp. 198-210 ◽  
Author(s):  
Abdelghani Echchabi ◽  
Hassanuddeen Abd. Aziz
Keyword(s):  
Design Methodology ◽  
Structured Interview ◽  
Point Of View ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Research Approach ◽  
Islamic Banks ◽  
Content Type ◽  
Qualitative Survey ◽  
Customers Perspective

Purpose – The purpose of this paper is to examine the customers’ perception regarding the current shari’ah issues of Islamic banks in Malaysia. Specifically, the study attempts to examine the awareness of the current criticisms of the main shari’ah issues in Islamic finance, and the perception of the selected customers towards these criticisms. Design/methodology/approach – The study uses a qualitative approach to understand in detail the customers’ perception and experiences about shari’ah compliance of Islamic banks. Semi-structured interview is used with ten Islamic banks’ customers in Malaysia. The study also used phenomenological techniques to analyse the data. Findings – The findings revealed that the interviewees have considerable exposure and awareness of the current criticisms of the shari’ah compliance of Islamic banks. Originality/value – This research is the first to study the shari’ah issues of Islamic banks in Malaysia from the customers’ perspective, by using a qualitative research approach. The findings of this study are of original importance, because they unveil the customers’ experience in an area that has been severely looked at from the professional and experts’ point of view only.

scholarly journals Making the brand appealing: advertising strategies and consumers’ attitude towards UK retail bank brands

2017 ◽  
Vol 26 (6) ◽  
pp. 531-544 ◽  
Author(s):  
Emmanuel Mogaji ◽  
Annie Danbury
Keyword(s):  
Financial Services ◽  
Structured Interview ◽  
Content Type ◽  
Advertising Appeals ◽  
Data Collection And Analysis ◽  
Emotional Appeals ◽  
Qualitative Research Methodology ◽  
Corporate Social ◽  
Charitable Activities ◽  
Practical Implications

Purpose The present state of the financial services industry suggests the need for banks to appeal to consumers’ emotions with the aim of improving their reputation; this study aims to explore how UK banks are using emotional appeals in their advertisements and how this shapes consumers’ attitudes towards their brands. Design/methodology/approach Qualitative and quantitative data collection and analysis in a two-stage study – Study 1 analysed the content of 1,274 UK bank advertisements to understand how the banks convey emotional appeals, whereas Study 2 elicited consumers’ perceptions of these advertising appeals and how they influenced their attitudes through semi-structured interview with 33 UK retail bank customers in London and Luton. Findings UK banks are using emotional appeals in their marketing communication strategies. The qualitative findings highlight the bi-dimensional nature of feelings towards the advertisements and how this relates to the brand. There is a lacklustre attitude towards the brands; there was no sense of pride in associating with any bank, even with though there are possibilities of switching; and consumers feel there is no better offer elsewhere as all banks are the same. Practical implications Bank brands should present distinct values about their services to the target audience, endeavour to build relationships with existing customers and reward loyalty. Importantly, financial brands need to engage in and highlight charitable activities and any corporate social responsibility as this can help to improve consumers’ attitudes as they often consider bank brands greedy and selfish. Originality/value Qualitative research methodology was adopted to better understand consumers’ attitudes towards UK retail bank brands.

Index for measuring convergence between objectives and practice of Islamic banking

2021 ◽  
Vol 14 (2) ◽  
pp. 205-229
Author(s):  
Zahid Siddique
Keyword(s):  
Design Methodology ◽  
Theory And Practice ◽  
Islamic Banking ◽  
Mathematical Form ◽  
Islamic Banks ◽  
Content Type ◽  
Loan System ◽  
Additive Form ◽  
Practical Implications ◽  
Over Time

Purpose Islamic banking was developed to serve two objectives: to replace interest-based loan system with profit and loss sharing investment modes and to promote equity in resource allocation. The first objective is called procedural whereas the second one is termed consequential. Scholars have been debating about the success of Islamic banking in achieving these objectives. This paper aims to develop an index for measuring the extent of convergence between theory and practice of Islamic banking. Design/methodology/approach For measuring the procedural and consequential convergence between objectives and practice of Islamic banking, the paper derives a set of indicators from the celebrated theory of Islamic banking and then develops the methodology of ranking all banks in terms of those indicators. Findings The paper provides ranking of Islamic banks in Pakistan in the light of this index. The results indicate that none of the Islamic banks in Pakistan has been doing good enough to achieve the convergence, instead they are moving in the opposite direction over time. Practical implications Using the methodology developed in this paper, universal ranking of Islamic banks may be issued every year. Originality/value Scholars have proposed some indices for measuring the performance of Islamic banking. There are two basic problems with these proposed measures: they do not directly compare the performance of Islamic banking against its stated objectives and they naively use an additive form of index without explaining the reason for this choice, i.e. as to what are the desirable characteristics which their preferred mathematical form of index serves. The index proposed in this paper attempts to overcome these shortcomings.

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

2020 ◽  
Vol 12 (2) ◽  
pp. 151-169
Author(s):  
Mohammad Mahbubi Ali ◽  
Rusni Hassan
Keyword(s):  
Design Methodology ◽  
Islamic Law ◽  
Islamic Banks ◽  
Content Type ◽  
Management Framework ◽  
Board Of Director ◽  
Risk Management Framework ◽  
Qualitative Research Methodology ◽  
Self Administered Questionnaire ◽  
Practical Implications

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.

Factors influencing the community behavioral intention for adoption of Islamic banking

2019 ◽  
Vol 12 (4) ◽  
pp. 586-600 ◽  
Author(s):  
Sayeda Zeenat Maryam ◽  
Mian Saqib Mehmood ◽  
Chaudhry Abdul Khaliq
Keyword(s):  
Behavioral Intention ◽  
Reasoned Action ◽  
Cost Benefit ◽  
Positive Influence ◽  
Government Support ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bottom Line ◽  
Content Type ◽  
Practical Implications

Purpose Islamic banking (IB) is growing rapidly not only in Islamic countries but also in all over the world. The purpose of this paper is to stumble on the features that have an impact on Islamic banking adoption (IBA) in case of Pakistan. Design/methodology/approach The identification of the factors that affect IBA has made by extending the theory of reasoned action (TRA). However, the conceptual model for this study includes knowledge (K), business support (BS), government support (GS), reputation (Rep), religious obligation (RO), cost-benefit (CB) and social influence (SI) as the independent variables. To test the conceptual framework data were collected through a survey by distributing the 400 questionnaires among users- and non-users of Islamic banks. Multiple regression analysis was applied to test the hypothesis of this study. Findings The findings of the study suggest that Rep, CB, RO and SI has a highly significant and positive influence on IBA. On the other hand, K, GS and BS have insignificant influence on IBA. The bottom line of this study suggests that more the ROs will be adopted by Islamic banks, more will be the tendency to adopt it by a bank customer in case of Pakistan. Research limitations/implications The generalizability of the findings of this research is limited to IB. Practical implications Findings of the study present worthy insight especially for the practitioners to develop significant strategies to bridge the gap between industry and academia in case of IB. Originality/value This study is an extension of TRA.

Banking for the poor: the role of Islamic banking in microfinance initiatives

Humanomics ◽  
2008 ◽  
Vol 24 (1) ◽  
pp. 49-66 ◽  
Author(s):  
Asyraf Wajdi Dusuki
Keyword(s):  
Islamic Banking ◽  
Financial Risks ◽  
Islamic Banks ◽  
Content Type ◽  
Special Purpose Vehicle ◽  
The Poor ◽  
Proposed Model ◽  
Intermediary Role ◽  
Institutional Viability

PurposeThe main purpose of this paper is to review the microfinance scheme and discuss how Islamic banks can participate in such an endeavour without actually compromising the issue of institutional viability and sustainability.Design/methodology/approachThe paper is based on an extensive review of microfinance with the objective of building a case for Islamic banking to participate in a microfinance initiative.FindingsAs reviewed in this paper, microfinance requires innovative approaches beyond the traditional financial intermediary role. Among others, building human capacity through social intermediation and designing group‐based lending programmes are proven to be among the effective tools to reduce transaction costs and lower exposure to numerous financial risks in relation to providing credit to the rural poor. This paper also suggests the use of a special purpose vehicle (SPV) as one of the possible alternatives for Islamic banks channelling funds to the poor.Research limitations/implicationsIslamic banks may benefit from the spectrum of Shariah‐compliant sources of funds and offer a wide array of financing instruments catering for different needs and demands of their clients. Furthermore, the use of a bankruptcy‐remote entity like SPV can protect Islamic banks from any adverse effect of microfinance activities.Originality/valueThe analysis here is valuable in drawing the attention of Islamic banking practitioners to the fact that they can actually practise microfinance without undermining their institutional viability, competitiveness and sustainability. This is evident from the proposed model to incorporate SPV into their microfinance initiatives.

scholarly journals The principle of maṣlaḥah and its application in Islamic banking operations in Malaysia

2019 ◽  
Vol 11 (1) ◽  
pp. 137-146 ◽  
Author(s):  
Muhammad Shahrul Ifwat Ishak
Keyword(s):  
Legal Aspect ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Content Analysis Method ◽  
Inductive Methods ◽  
Financial Transactions ◽  
Practical Implications ◽  
Banking Operations

Purpose This paper aims to investigate the extent to which maṣlaḥah (public interest) is taken into consideration in Islamic banking operations in Malaysia, particularly in bayʿ al-ʿīnah (sale and buyback), taʿwiḍ (compensation) and ibrāʾ (rebate). Design/methodology/approach This study applies deductive and inductive methods to analyze the application of maṣlaḥah in Islamic financial transactions. Three issues in Malaysia are selected as a case study, allowing bayʿ al-ʿīnah, standardizing the rate of taʿwiḍ and stipulating the ibrāʾ clause in financial agreements. As this study is qualitative in nature, all data are analyzed based on the content analysis method. Findings Both the maṣlaḥah of Islamic banks and their customers were found to be considered by the Central Bank of Malaysia in the implementation of contracts and principles of Islamic banking. The first maṣlaḥah represents the viability of Islamic banks, while the second maṣlaḥah promotes fairness and transparency between Islamic banks and their customers. Research limitations/implications This study only focuses on the contracts and principles of Islamic banking operations in Malaysia with regard to three selected issues. Practical implications This paper clarifies the practical application of maṣlaḥah in the Islamic banking industry, particularly with regard to implementing its contracts and principles. Originality/value This paper analyzes the argument of maṣlaḥah on the issues of bayʿ al-ʿīnah , taʿwiḍ and ibrāʾ in Malaysia, which are considered among scholars to be debatable issues. While many discussions focus on the legal aspect of Sharīʿah on those issues, this study emphasizes how the application of maṣlaḥah aims to solve the current problems and harmonize between Sharīʿah and reality.

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