scholarly journals An Exploratory Study On The Possibility Of Replacing Tawarruq Based Islamic Banking Products Using Other Alternatives

2020 ◽  
Vol 7 (2) ◽  
pp. 147-164
Author(s):  
Zaki Ahmad ◽  
Faathih Zahir ◽  
Ahmed Mohamud Usman ◽  
Aishath Muneeza ◽  
Zakariya Mustapha
Keyword(s):  
Exploratory Study ◽  
Banking Industry ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Different Types ◽  
Per Se

Tawarruq which is also known as commodity Murabahah in Islamic banking is widely practiced in Malaysia to structure different types of Islamic banking products. The widespread use of tawarruq has made Islamic banks to be re-named as “tawarruq banks” and some even call tawarruq as the “magic lamp” of the industry. Shariah scholars have criticised this frequent usage of tawarruq in Islamic banking industry of Malaysia, while the practitioners have replied by saying that if tawarruq is a shariah approved concept, then what is wrong with the usage of it? However, from the shariah perspective, the issue here is not about the shariah compliance of tawarruq transactions per se. It is about the shariah limitations imposed by the scholars on the use of it. This simply means that there is a reservation made by shariah scholars in allowing the usage of tawarruq contract in Islamic finance as tawarruq is a contract allowed to be used when one has to choose between a conventional loan and tawarruq. The purpose of this research is thus to show the alternative Islamic commercial contracts that could be used to structure Islamic banking products that have been structured in the market using tawarruq. It is anticipated that the outcome of this research will assist Islamic banking industry to understand why and how they can move away from tawarruq.

scholarly journals The Importance of Murabaha in Long-Term Finance Programs in the Islamic Banking Industry

1999 ◽  
Vol 16 (4) ◽  
pp. 87-102
Author(s):  
Yousif Ashour
Keyword(s):  
Banking Industry ◽  
The Other ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Two Sides

Since the start of the Islamic banking industry many questions have been raised about Islamic finance policies used by Islamic banks and lheir long-term finance programs. The most interesting questions on Islamic finance policies are lhose related to murabaha finance. The argumenl concerning murabaha has two sides, one for and the other against. The questions normally are concentrated on whether Islamic banks should use murabaha in their finance, and whether Islamic banks heavily depend on it in their finance. The aim of this article is to exam­ine the importance of murabaha compared to other Islamic finance policies in long-term finance programs in the Islamic banking industry. The article suggests that musharaka and mudaraba are as important as murabaha in financing long-term programs in the Islamic banking industry.

scholarly journals Debt Instruments in Islamic Finance: A Critique

2016 ◽  
Vol 30 (2) ◽  
pp. 185-198 ◽  
Author(s):  
Muhammed Shahid Ebrahim ◽  
Mustapha Sheikh
Keyword(s):  
Economic Efficiency ◽  
Financial Intermediation ◽  
Banking Industry ◽  
Muslim World ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Modern Age ◽  
The Future

This article assesses the employment of traditional Islamic debt instruments by contemporary Islamic banks from an economic efficiency perspective. We highlight the fact that the performance of the bulk of the instruments pales in front of the modern facility of participating preferred ijāra. Thus, the shortcomings of the traditional instruments illustrate that the future does not augur well for either the Islamic banking industry or the emerging Muslim economies. For the Muslim world to move beyond its current malaise, it is necessary to scientifically restructure its financial intermediation system in such a way as to meet the challenges of the modern age also conforming to the spirit of the Sharīʿa.

scholarly journals Ijtihad in Islamic Finance: A Methodology Approach

2020 ◽  
pp. 64-78
Author(s):  
Amir Shaharuddin
Keyword(s):  
Banking Industry ◽  
Methodological Approach ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Muslim Community ◽  
Financial Products ◽  
Banking Institutions ◽  
New Challenges ◽  
Muslim Scholars

Islamic classical contracts have been revitalized in creating various financial products in Islamic banking institutions. However, their application in the current banking industry is not without argument. It is viewed that the classical contracts are not practiced as propounded in the classical fiqh doctrines. The article discusses the issue by proposing a different methodological approach for Shariah advisors in guiding Islamic banks. Shariah advisors in Islamic banking institutions are encouraged to unbind themselves from nominated Islamic classical contracts (uqud al-musamma’). They need to unveil new contracts that suit with modern practices and authentically able to solve problems and limitations faced by Islamic banks. Based on examination of twelve main classical texts of the four Sunni schools, it is found that Islamic classical commercial contracts evolved over times especially in the Hanafis, Shafi’is and Hanbalis schools. Past Muslim scholars expanded the classical contracts in response to new challenges and problems encountered by Muslim community in their commercial dealings. The evolution of Islamic commercial contracts can be further enhanced by adhering to the principles of transparency, honesty, mutual consent and humanitarian goals.

scholarly journals Examining Technological and Productivity Change in the Islamic Banking Industry

2020 ◽  
Vol 28 (4) ◽  
Author(s):  
Rindang Nuri Isnaini Nugrohowati ◽  
Faaza Fakhrunnas ◽  
Razali Haron
Keyword(s):  
Technological Innovation ◽  
Banking Industry ◽  
Malmquist Index ◽  
Islamic Finance ◽  
High Tech ◽  
Productivity Change ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Country Level ◽  
Index Analysis

Islamic banking dominates the largest market share of global Islamic finance assets. Thus, the performance of Islamic banks is crucial in shaping the future development of Islamic finance. This study aims to examine the performance of Islamic banks in the perspective of technological and productivity change based on the country level assessment. By adopting the Malmquist Index analysis, this study selected 44 Islamic banks from the top ten countries that had the largest Islamic banking asset for the period from 2015 to 2018. The findings reveal that the average productivity of Islamic banks has increased during the study period. Productivity improvements were supported by technological innovation, which significantly increased the level of productivity. Nevertheless, the high-tech expansion was not followed by an improvement in the efficiency level. This finding explains that the development of banking technology is not able to fully support the development of products and services.

Potential of Islamic finance: A survey of Tunisian Northwest companies

2017 ◽  
Vol 5 (2) ◽  
pp. 28
Author(s):  
Rym Ammar Ayachi ◽  
Dhafer Saidane ◽  
Fayçal Mansouric
Keyword(s):  
Financial Institution ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Finance Development ◽  
Negative Effect ◽  
Survey Results ◽  
Potential Demand ◽  
Northwest Region ◽  
Do So

The present paper aims to assess the Islamic products potential demand for entrepreneurs in the Tunisian Northwest region. In order to do so, we developed a questionnaire which was sent to these entrepreneurs. The survey results show that the latter perceive Islamic Finance as a seductive phenomenon. However, its development appears to be difficult. Indeed, according to the survey results, the lack of knowledge may impede the expansion of Islamic banking in Tunisia. Moreover, the following factors: cost, religious conviction, proximity, flexibility and satisfaction of the needs, may affect the entrepreneurs' choice to deal with Islamic financial institution. In addition, the lack of entrepreneurs' confidence with regard to the compliance of Islamic banking with the Shariah principles has a negative effect on Islamic finance development in the Tunisian Northwest region. For this reason, Tunisian Islamic banks should put more effort to reinforce their competitiveness.

Determinants of Islamic Bank Profitability: Evidence from Indonesia

2020 ◽  
Vol 5 (1) ◽  
pp. 1-13
Author(s):  
Puji Sucia Sukmaningrum ◽  
Kashan Pirzada ◽  
Sylva Alif Rusmita ◽  
Fatin Fadhilah Hasib ◽  
Tika Widiastuti ◽  
...  
Keyword(s):  
Interest Rate ◽  
Quality Management ◽  
Banking Industry ◽  
External Factors ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Return On Assets ◽  
Internal Factors ◽  
Bank Profitability ◽  
Islamic Bank

Objective – Islamic Banks have a distinct advantage that is not only conduct a commercial operation, but to also conduct social operations. Therefore, Islamic Banks plays an important role in developing the Indonesian economy. The aim of this study is to investigate the impact of internal and external factors that affect the profitability of Islamic Banks in Indonesia. Methodology/Technique – The methodology of this research is multiple regression. The object of this research is the Islamic banking industry in Indonesia. Internal factors include size, liquidity, asset quality, management, and efficiency ratio. External factors include interest rate and inflation. Return on Assets is used to measure profitability. The monthly data is collected from the financial reports of Islamic Banks between 2011 to 2016. Findings – The findings show that size, liquidity, assets quality, management ratio, interest rate and inflation lead to a greater Return on Assets (profitability) in Islamic Banks in Indonesia. Efficiency however does not have a significant effect on profitability of Islamic Banks in Indonesia. Novelty – Based on the results of this research, it can be concluded that the Islamic banking industry can use those variables to improve the profitability of Islamic banks in the future. In addition, there are two variables that affect the profitability of Islamic banking industry. For the Islamic banking industry should anticipate the movement of inflation and interest to improve the profitability of Islamic banks. Type of Paper: Empirical paper. Keywords: Islamic Banks; Profitability; Internal Factors; External Factors; Indonesia. Reference to this paper should be made as follows: Sukmaningrum, P.S; Pirzada, K; Rusmita, S.A; Hasib, F.F; Widiastuti, T; Hendratmi, A. 2020. Determinants of Islamic Bank Profitability: Evidence from Indonesia, J. Fin. Bank. Review, 5 (1): pp. 01 – 13 https://doi.org/10.35609/jfbr.2020.5.1(1) JEL Classification: G21, G24.

Drawing ethical mentation in Islamic banks; addressing operational lines heterogeneity with special reference to Al-Ghazali’s ethical philosophy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shinaj Valangattil Shamsudheen ◽  
Saiful Azhar Rosly ◽  
Syed Abdul Hamid Aljunid
Keyword(s):  
Decision Making ◽  
Special Reference ◽  
United Arab Emirates ◽  
Partial Least Square ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Ethical Philosophy ◽  
Divine Knowledge

Purpose This study aims to examine the decision-making behaviour of Islamic banking practitioners of the United Arab Emirates with special reference to the operational line heterogeneity by employing factors that are religious in nature such as intellect, satanic force and divine knowledge as encapsulated in al-Ghazali’s ethical philosophy. Design/methodology/approach A total of 337 samples were collected from the Islamic banking practitioners in the United Arab Emirates using a purposive sampling technique, and the empirical analysis was conducted with the measures of model fit and bootstrapping technique using Partial least square Structural equation modelling and multi-group analysis. Findings The empirical findings reveal that the dedicated use of intellect in making decisions related to ethical issues where desires and emotions tend to overwhelm reason and human choices. While divine knowledge is found ineffective guidance of the intellect, the element of satanic force is found significantly impacting decision-making. As the lack of religious consciousness is evident among respondents, higher exposure to operational risk is expected. These findings were found identical across the Islamic banking practitioners in different lines of operations. Research limitations/implications The span of the study is limited to a single country. Future studies are recommended to replicate the study to more markets where the share of Islamic finance is significant. Practical implications Findings of the study highly suggest respective authorities of Islamic financial institutions to intensify the capacity-building programs on the foundation of faith which includes Islamic thought and worldview, to enhance the corporate ethical decision-making. Moreover, equal importance should be given to all the banking practitioners regardless of line of business operations. Originality/value With undue emphasis is given to the juristic (fiqh) aspects of Shariah compliance in the Islamic banking and finance industry, less has been attempted to explore its ethical dimension (akhlaq) in the compliance parameters that leave a relatively large gap to address prevailing unethical practices in Islamic finance institutions. Findings from this study can be useful as a warning to the Islamic banking firms to enhance the sense of God-fearing and improve existing measures in the organisation in mitigating operational risks that may arise from people or system and consequently ensure the smooth governance of the Islamic banks.

scholarly journals نظرية المضاربة في الشريعة الاسلامية وتطبيقها في البنوك الاسلامية وتنمية الاقتصاد الإسلامي في إندونيسيا

2018 ◽  
Vol 6 (2) ◽  
pp. 124
Author(s):  
Abdurrohman Kasdi
Keyword(s):  
Islamic Law ◽  
Stock Exchange ◽  
Field Research ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Economic Literature ◽  
Economic Concept ◽  
Price Differentials

<p><em>This article aims at explaining the theory of mudharabah in Islamic Sharia and its application in Islamic banking and the development of the Islamic economy in Indonesia. This study is based on field research. The method of analysis of the data used is the analysis of the content on the messages received from mudharabah in Islamic law and its application in Islamic banks and the development of the Islamic economy. The result of this research is that mudharabah is one of the most important and oldest forms of investment of funds in the Islamic Sharia. The fuqaha have agreed on the legality of mudharabah, and the evidence of legality, from the al-Qur’an, Sunnah, Ijma’, and Qiyas. The mudharabah formula in Islamic banks came as a legitimate alternative to traditional financing operations. It is one of the most important forms of Islamic finance and is thought to have been the cause of Islamic banks, which are said to be the Islamic financing formula. In Islamic banks, mudharabah is divided into absolute mudharabah and restricted mudharabah. The economic concept of mudharabah in the economic literature goes to the stock exchange and its predictions of market fluctuations. The investor may have to pay the price differentials in the case of lower prices. </em></p>

scholarly journals Analisis Rasch Pada Atribut Perbankan Syariah: Studi pada Generasi Milenial

2019 ◽  
Vol 5 (3) ◽  
pp. 145
Author(s):  
Anggiya Rossana ◽  
Egi Arvian Firmansyah
Keyword(s):  
University Students ◽  
Market Share ◽  
Rasch Analysis ◽  
Primary Data ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Banking Services ◽  
Finance Industry ◽  
Potential Customers

The presence of Islamic banking in Indonesia is one form of progress and development of the Islamic finance industry in Indonesia. However, for more than 20 years, Islamic banking has apparently not been able to grow optimally and experienced a slowdown in its growth. Islamic banks need to increase their market share and also need to identify which attributes are most considered by the potential customers, especially the millennials whose number is large. This study aims to find out which attributes are most considered in using Islamic banking services. This study uses primary data by distributing online questionnaires to 180 university students in Bandung, namely Unpad, ITB and UPI students. To analyze the data, Rasch analysis was used. The results of Rasch analysis show that cleanliness, friendliness, and Islamic principles turned out to be the most considered attributes in selecting Islamic banking in Indonesia. Given that these three attributes are the most considered, it is expected that Islamic banking strengthen these three aspects in order to increase the market of Islamic finance industry markets.

Farmers' perception and preference of Islamic Banking in Turkey

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mehmet Bulut ◽  
Harun Celik
Keyword(s):  
Logistic Regression ◽  
Agricultural Sector ◽  
Income Level ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Knowledge Level ◽  
Islamic Banks ◽  
Agricultural Finance ◽  
Content Type ◽  
Islamic Bank

PurposeThe purpose of this paper is to examine the factors that influence farmers' preference for the use of Islamic banks in Turkey and to investigate their knowledge level and perception about Islamic finance.Design/methodology/approachSurvey data used in this study is obtained by drawing a sample of 1902 farmers who are members of the Agricultural Credit Cooperatives Union (ACCU) from 37 provinces of Turkey. Pearson's Chi-square test is used to analyze the association between the demographic features of farmers, conventional bank usage and Islamic bank usage. Binary logistic regression model is used to estimate the factors influencing the preference for Islamic banks. Explanatory variables include knowledge on Islamic banking and finance, perception of compliance to religion, saving ability and cost concern along with the control variables of Islamic bank branch number in the region and age of respondent. Robustness check is conducted via alternative models using ordinary least squares (OLS) and logistic regression.FindingsLess than 10% of the participant farmers use Islamic banks and 59% declare they know nothing about Islamic banking. Age, education level, income level, nonagricultural income level, saving ability, duration of working in agriculture, land size and region are significantly related to farmers' preference of using Islamic banks. Knowledge level, perception of religious compliance, saving ability and cost concern are statistically significant factors that influence the probability of using Islamic banks.Research limitations/implicationsThis study does not include the analysis of the relationship between being religious and using Islamic banks because questions related to the assessment of religious practice were excluded due to the ACCU's sensitivity to investigate personal beliefs. Therefore, future studies can expand the scope of this research by investigating religiousness. The sample is chosen from the ACCU members who are already benefiting from a formal source of credit; therefore, the results should not be attributed to all farmers.Practical implicationsIslamic banks and microfinance institutions' further engagement in the agricultural sector and ACCU's implementation of Islamic finance instruments.Social implicationsIslamic banks' further diversification in the agricultural sector and ACCU's implementation of Islamic finance instruments.Originality/valueTo the best of the authors' knowledge, this paper is the first to investigate the farmers' perception and preference of Islamic banking in Turkey. The sample size of 1902 is much larger and geographically diversified compared to studies in agricultural finance. This study will be valuable for the agricultural finance empirical studies in Turkey as well as an important addition to the emerging literature on Islamic finance.

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