Layers of misconceptions about Islamic banking

2019 ◽  
Vol 10 (3) ◽  
pp. 874-892 ◽  
Author(s):  
Malik Shahzad Shabbir ◽  
Awais Rehman
Keyword(s):  
Data Analysis ◽  
Financial Institutions ◽  
Design Methodology ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Significant Difference ◽  
Challenges And Opportunities ◽  
Islamic Financial Institutions

Purpose This paper aims to identify some important misconceptions about Islamic banks, which impact investor’s portfolio in term of threats, challenges and opportunities. This paper is trying to attempt to present five different layers of misconceptions regarding investor portfolio. Design/methodology/approach This paper distributed 132 questionnaires among investors of Islamic financial institutions and multiple regression of least significant difference (LSD) method implied for data analysis. Findings The results of this paper show that two variables, such as opportunity and challenge, out of three are positively significant and the remaining one variable, threat, is insignificant regarding investor portfolio. Originality/value This paper is the first ever attempt in its nature to identify the different misconceptions about Islamic banking system and its impact on investor portfolio.

The possibility of application of salam in Malaysian Islamic banking system

Humanomics ◽  
2011 ◽  
Vol 27 (2) ◽  
pp. 138-147 ◽  
Author(s):  
Aishath Muneeza ◽  
Nik Nurul Atiqah Nik Yusuf ◽  
Rusni Hassan
Keyword(s):  
Design Methodology ◽  
Banking System ◽  
Future Application ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Knowledge Based ◽  
Library Research ◽  
Islamic Financial Institutions ◽  
Pros And Cons

PurposeThis research aims to explore the theoretical nature of salam contract in depth, the extent of its use in the banking arena of Malaysia and to test the theoretical feasibility of its future application by the Islamic banks in Malaysia by suggesting an Islamic banking product structure based on salam contract.Design/methodology/approachThis is a legal exploratory study primarily focused on library research.FindingsSalam contract is more susceptible to risks than the rest of the Islamic commercial contracts used by the Islamic banks in Malaysia and none of the Islamic banks in the country utilize this type of contract as a mode of financing. However, the research indicates that a feasible banking product based on salam contract could be formulated to help poor farmers in the country. To prove this a new model product based on salam contract to help farmers is created by the authors and the pros and cons of the product with the risk mitigating ways are explored. It is found that theoretically, this product is workable.Originality/valueThis research will complement the knowledge based on practical applicability of salam and is targeted to the Islamic financial Institutions in Malaysia, who are the prospective beneficiaries.

Comparative study between IFRS and AAOIFI disclosure compliance

2017 ◽  
Vol 15 (3) ◽  
pp. 269-292 ◽  
Author(s):  
Hana Ajili ◽  
Abdelfettah Bouri
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Design Methodology ◽  
Islamic Banks ◽  
Accounting Disclosure ◽  
Content Type ◽  
Factors Associated ◽  
Financial Reporting Standards ◽  
Disclosure Requirements ◽  
Islamic Financial Institutions

Purpose This study measures and compares the level of compliance with the disclosure requirements provided by the International Financial Reporting Standards (IFRS) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). This study also aims to investigate the factors associated with this compliance in a sample of Islamic banks (IBs) in Gulf Cooperation Council member states. Design/methodology/approach The sample consists of 39 IBs between 2010 and 2014. Among the selected IBs, 23 banks were complying with the AAOIFI standards and 16 banks were complying with the IFRS standards. An unweighted disclosure index was used to measure the level of compliance with IFRS/AAOIFI disclosure requirements. Findings It was found that the level of compliance with IFRS is higher than that of compliance with AAOIFI. In addition, the results reveal that compliance with IFRS/AAOIFI disclosure requirements is higher for larger and older IBs. Finally, it was observed that compliance was more noticeable for IBs having a higher leverage and multinational subsidiaries. Originality value These findings would be of great help to regulators and policymakers to better understand the accounting disclosure practices of IBs.

Compliance with AAOIFI guidelines in general presentation and disclosure by Libyan Islamic banks

2015 ◽  
Vol 11 (2) ◽  
pp. 90-99 ◽  
Author(s):  
Nassr Saleh Mohamad Ahmad ◽  
Abdu Samia Daw Ben Daw
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Financial Statements ◽  
Future Research ◽  
Two Dimensional ◽  
Islamic Banks ◽  
Policy Makers ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Training Programmes

Purpose – The purpose of this paper is to reveal the level of compliance with Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) guidelines in general presentation and disclosure in the financial statements of Fashlowm Islamic branch of the Gumhouria Bank as the biggest bank in Libya. Design/methodology/approach – The study used two-dimensional analysis, which combines a questionnaire with content analysis. It allowed a better understanding of the picture than would have been provided by the questionnaire alone. Findings – The results of this study indicate that the level of compliance with AAOIFI guidelines regarding general presentation and disclosure in the financial statements is low. Many reasons were identified as being behind such a low level. The lack of training programmes on AAOIFI standards was at the forefront of these reasons. Research limitations/implications – The sample is limited to the Fashlowm Islamic branch of Gumhouria Bank. This is may not be true for other branches and banks. Further research is needed in this area. Originality/value – The AAOIFI has existed for over 20 years, but little empirical research has been conducted into compliance with the standards developed by this body in the Libyan context. This paper helps to address this gap and provide a foundation for future research and development in this area. Moreover, the findings of this study may be useful to policy makers and legislators.

scholarly journals Studi Efisiensi Perbankan Syariah di Kota Lhokseumawe dan Aceh Utara

2012 ◽  
Vol 12 (1) ◽  
pp. 63
Author(s):  
Iskandar Iskandar
Keyword(s):  
Financial Institutions ◽  
Annual Report ◽  
Low Cost ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Main Difficulty ◽  
Islamic Financial Institutions ◽  
Banking Institutions ◽  
National Banking System

<p><em>The development of Islamic banking in Aceh should have </em><em>get more attention because its existence is not only as complement of the</em></p><em>national banking system, but also as an attempt to fill the Islamic Shari ’a with the Islamic financial institutions. The issue becomes important to investigate since the efficiency of banking institutions urgently need to this performance. Thus, in this study, the efficiency of Islamic banking will be viewed from two aspects: Firstly, the ability of the bank in generating output, in this case the low cost of financing. Secondly, efficiency can also be observed by looking at the bank’s performance in minimizing the risk of financing. This study concluded that the main difficulty of Aceh Islamic banks is not the lack of cheap enough money so that the efficiency becomes less when it is compared with the required cost. However, the annual report shows that the assets of Islamic banks have developed positively and good. Likewise, the ratio of Non Performing Ratio (NPF) of Islamic banks is efficient. The study recommends enhancing the cheap fundraising (al-wadi </em><sup>&lt;</sup><em>’ah) to increase the economic growth in the northern coastal area of Aceh.</em>

The harmonization of audit reports of Islamic banks

2017 ◽  
Vol 8 (2) ◽  
pp. 203-228 ◽  
Author(s):  
Mondher Fakhfakh
Keyword(s):  
Empirical Evidence ◽  
Financial Institutions ◽  
Design Methodology ◽  
International Federation ◽  
Islamic Banks ◽  
Content Type ◽  
Auditing Standards ◽  
Islamic Financial Institutions ◽  
Independent Auditors ◽  
Audit Reports

Purpose The purpose of this paper is to examine the level of harmonization of auditors’ reports issued by independent auditors of Islamic banks. Design/methodology/approach The homogenization of the auditors’ reports of Islamic banks has been statistically measured. Supranational auditing standards on auditors’ reports (ISA 700 and AAOIFI standard) are used as the control. Findings The results show lack of harmonization in several elements related to the form of the auditor’s report and in all elements related to the content of the auditor’s report among the Islamic banks. Originality/value This paper provides new empirical evidence about the measurement of harmonization in the form and content of the auditors’ reports of Islamic banks. It discusses the level of compliance with the elements enumerated by the standards issued by the International Federation of Accountants and the Accounting and Auditing Organization for Islamic Financial Institutions.

Exploring the “social failures” of Islamic banks: a historical dialectics analysis

2017 ◽  
Vol 8 (3) ◽  
pp. 250-271 ◽  
Author(s):  
Zayyad Abdul-Baki ◽  
Ahmad Bukola Uthman
Keyword(s):  
Design Methodology ◽  
Banking System ◽  
Profit Maximization ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Muslim Population ◽  
Content Type ◽  
The Social ◽  
Dialectical Analysis ◽  
Practical Implications

Purpose This paper aims to argue that the current environment in which the Islamic banking system is situated is not ideal for the system’s pursuance of its socioeconomic ideals, thus necessitating the system’s shift from pursuing falah to maximizing profits. Design/methodology/approach The paper theorizes and conceptualizes this shift from falah to profit maximization using two complementary theories – systems theory and institutional theory – to prove that such a shift is not unexpected. The paper further adopts a dialectical analysis that is somewhat historical to analyse the shift. Findings The measure of the Islamic banks’ performance in terms of their social ideals is misplaced, as the environment in which they currently operate does not support such goals. Thus, stemming from the theoretical base, the Islamic banks’ pursuance of profit maximization instead of falah should not be unexpected. The paper concludes that despite the unfavorable environment, the social ideals of the Islamic banking system may still be met, to an extent, through investment in microfinance and awqaf. Research limitations/implications The paper adopts document analysis for sourcing data majorly from prior studies. Hence, the authors do not conclude that the analysis herein is applicable to all Islamic banks. Secondly, as the authors could not get a complete historical account of the Islamic banking system’s development, some aspects of the dialectical analysis – contradiction and change – have been discussed in a general fashion. Practical implications The need for Islamic banks in the current environment, especially for the Muslim population, cannot be over emphasized; however, the achievement of falah given this current environment may be daunting. Originality/value The current analyses of the shift of Islamic banks from pursuing falah to pursuing profit maximization are not well-defined, as they lack a proper theorization of the challenges faced by Islamic banks. This paper fills this gap.

The Islamic harmonization of consolidated auditors’ reports

2020 ◽  
Vol 11 (3) ◽  
pp. 647-673 ◽  
Author(s):  
Mondher Fakhfakh
Keyword(s):  
Empirical Evidence ◽  
Financial Institutions ◽  
Design Methodology ◽  
International Federation ◽  
Islamic Banks ◽  
Content Type ◽  
Statistical Measurement ◽  
Auditing Standards ◽  
Islamic Financial Institutions ◽  
Independent Auditors

Purpose The purpose of this paper is to examine the level of harmonization of consolidated auditors’ reports issued by the independent auditors of Islamic banks. Design/methodology/approach A statistical measurement of the homogenization of the consolidated auditors’ reports of Islamic banks. International and Islamic auditing standards on consolidated auditors’ reports are used as the control (ISA 700 and AAOIFI standard-IAS2). Findings The results show a lack of harmonization among the Islamic bank’s groups in several elements related to the form of the consolidated auditor’s report and in all elements related to the independent auditor’s report. Originality/value This paper provides new empirical evidence about the measurement of harmonization in the form and content of the consolidated auditors’ reports of Islamic banks groups. It discusses the level of compliance with the consolidated elements enumerated by the standards issued by the International Federation of Accountants and the Accounting and Auditing Organization for Islamic Financial Institutions.

Rebate in Islamic sale-based financing contracts: Bank Negara Malaysia guidelines on ibrāʾ versus conventional finance practice

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Islam Kamal
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Relevant Literature ◽  
Analysis Method ◽  
Profit Rate ◽  
Content Type ◽  
Significant Difference ◽  
Islamic Financial Institutions ◽  
The One ◽  
Practical Implications

PurposeThis paper aims to compare the rebate computation in Islamic sale-based financing contracts as proposed by Bank Negara Malaysia (BNM) in its guidelines on ibrāʾ (rebate) – with the rebate computation in conventional finance that is applicable to conventional loans, thus examining if there is a significant difference between the two approaches.Design/methodology/approachThe paper employs the qualitative analysis method, involving review and discussion of relevant literature. Subsequently, a quantitative analysis is utilized to compare both rebate computations: the one proposed by BNM for Islamic sale-based financing contracts and the conventional finance computation that is utilized in conventional loans.FindingsBNM's rebate computation for debts resulting from sale-based financing contracts does not differ from the conventional finance rebate computation applied to conventional loans; such similarity may raise the usury concerns that the conventional finance rebate computation raises.Research limitations/implicationsThe paper focused only on the fixed profit rate rebate computation proposed by BNM guidelines.Practical implicationsThe results highlight the need for seeking another rebate computation to be applied in Islamic financial institutions in the case of mandatory bilateral rebate for sale-based financing contracts – a computation that differs from the practice utilized in conventional loans in order to avoid any usury implications associated with conventional finance computation.Originality/valueThe paper examines the rebate practice proposed by BNM for sale-based financing contracts. Forcing a predetermined rebate computation in sale-based financing contracts could be plausible as BNM requires; however, the suggested computation might be questionable because it resembles conventional finance computation.

scholarly journals Incongruity in Contemporary and Shariah Compliant Current Accounts and Ijarah Operated by Islamic Banking

2020 ◽  
Vol 37 (- 2) ◽  
pp. 1-10
Author(s):  
Malik Saqib Ali ◽  
Abdul Wahab Jan Al-Azhari
Keyword(s):  
Financial Institutions ◽  
Financial Management ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Islamic Financial Institutions ◽  
Financial Losses

Current accounts and Ijarah has been foremost and important tools operated by the Islamic Financial Institutions. This study attempts to explore a few misgivings in the handling of current accounts by the Islamic banks in Pakistan. Financial management of Islamic banks is not under consideration which leads to the violation of Shariah’s fundamentals. Also in case of Ijarah, a bank’s client suffers from financial losses which must be borne in Islamic Banking system. Islamic Banks transfer the burden of some charges emerging form ownership of leased asset on their clientele which does not have any justification according to Shariah. This research has been carried out by taking unstructured interviews from some of the concerned staff of Islamic Banks. The results depict that current accounts and Ijarah is in operation and need to be revised and refined and must comply with Shariah.

Identifying the gaps between customer expectations and perceptions on service quality dimensions of Islamic banks in Malaysia

2015 ◽  
Vol 7 (4) ◽  
pp. 424-441 ◽  
Author(s):  
Rafikul Islam ◽  
Selim Ahmed ◽  
Dzuljastri Abdul Razak
Keyword(s):  
Service Quality ◽  
Age Groups ◽  
Educational Background ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Customer Expectations ◽  
Banking Service ◽  
Significant Difference

Purpose – This paper aims to identify the gaps and differences between customer expectations and perceptions on service quality of Islamic banks in Malaysia based on six dimensions of service quality, namely, reliability, responsiveness, assurance, empathy, tangibles and Islamic Shari’ah compliance. Design/methodology/approach – This study surveyed 179 customers who have first-hand experience with Islamic banking services in Malaysia. The research data were analysed using reliability analysis, independent samples t-test and one-way analysis of variance. Findings – The results indicated that customers’ perceptions failed to meet their expectations on the service quality of Islamic banks in Malaysia. The results also indicated that those customers (respondents) aged below 30 years have higher expectations on empathy from the Islamic banking service compared to other age groups. However, there is no significant difference between customer expectations and perceptions of Islamic banking service quality based on educational background and occupation. Research limitations/implications – This research focused solely on Islamic banks in Malaysia and thus the results might not be applicable for other conventional banks. Originality/value – The findings are expected to provide guidelines for enhancing the satisfaction level of clients of the Islamic banking system in Malaysia and other countries.

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