scholarly journals Managing the Agricultural Sector Through Muzara’ah: Implementing an Islamic Economic Participatory Mode of Financing

2020 ◽  
Vol 4 (1) ◽  
pp. 27-42
Author(s):  
Amjad Ullah Jan Bangash
Keyword(s):  
Mixed Methods Research ◽  
Agricultural Sector ◽  
Islamic Law ◽  
Banking Industry ◽  
End Users ◽  
Economic Effects ◽  
The Other ◽  
Islamic Banking ◽  
Islamic Banks ◽  
The World

The tremendous growth of Islamic banking has transformed a relatively new industry into a robust and widespread reality on the ground. Several Islamic financial institutions (IFIs) operate in different countries of the world and several Islamic modes of financing have been developed; however, most cater to the needs of commercial businesses, and personal finance. Few IFI products have been made available to support the agricultural sector. One rarely used product is Salam (a kind of sale in which farmers sell their product in advance, before the season’s harvest, to get funding for farming inputs as well as for their livelihood expenses), which, however, is of limited use due to a range of limitations. Hence, there remains a need for a product which is shari’a compliant and acceptable to IFIs as well as the end users, that is, the farmers.  This paper proposes an Islamic model suitable for entrepreneurs, farmers and IFIs. A mixed-methods research methodology is applied: while the study is mainly qualitative, a quantitative approach was applied to the data obtained through questionnaires. The general finding of this paper is that there is a need to have a shari’a-compliant financing model to be based on a participatory basis, in place of the debt-based modes which are currently in extensive use by IFIs. Therefore, I selected the Muzara’ah (sharecropping) concept as the basis of a model to help the agricultural economy and the Islamic banking industry. The reason for choosing the participatory over the debt-based mode is that the latter cannot bring about any real change, as I shall demonstrate from the particular perspective of Pakistan. Research into the demography of the Pakistani agricultural sector, on the other hand, demonstrates that the Muzara’ah model can be used anywhere in the world. The paper also aims to understand the effects on this sector of the use of financing by both commercial and Islamic banks, the strengths and weaknesses of financial intermediation, and the challenges faced by Islamic banks as concerns financing the agricultural sector. This research paper is divided into four sections. The first introduces and debates the position of agriculture in Pakistan; the ways in which commercial banks extend loans to this sector, and the socio-economic effects of such loans; and the different existing financing models being used for this sector and their respective drawbacks. The section also presents a brief discussion of Islamic banking and its advantages; different Islamic modes of financing; and how Islamic banks are supporting the agricultural sector in Pakistan. Furthermore, it argues that there is a global need for an alternative Islamic model to finance the agricultural sector, and that this need is particularly pressing in Pakistan. The second section discusses the Muzara’ah model, through an extensive review of the extant Islamic literature, encompassing, but not limited to, the definition of Muzara’ah, the Islamic basis for the practice and Islamic juristic views, as well as how Muzara’ah worked in a previous age. Moreover, this section discusses the similarities and differences in opinion among Islamic jurists (experts in Islamic law) about the validity of Muzara’ah. The focus of this section is on finding a consensus as to the most common and viable mode of Muzara’ah which is acceptable to a majority of jurists.The third section surveys agriculture in Pakistan, as well as the opinions and perspectives of farmers, bankers and other stakeholders to inform the proper development of an Islamic Muzara’ah sharecropping model. Practical research was carried out in Kohat, one of the cities of Pakistan, which is famous for its guava, wheat and maize production. A description of the fieldwork is also presented in this section.The fourth section draws on all the above information to develop a model based on the concept of Muzara’ah which can be feasibly implemented in the Islamic banking industry. Moreover, it presents a discussion of the strengths and weaknesses of the model and provides suggestions and recommendations about how it should be rolled out. The needs of end users, such as farmers and growers, are addressed, and a discussion is presented of how the product better meets their needs than the other products which are currently available to them.  

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.

Sharia’h practice at Islamic banks in Pakistan

2018 ◽  
Vol 9 (3) ◽  
pp. 274-289
Author(s):  
Muhammad Tariq Majeed ◽  
Abida Zainab
Keyword(s):  
Risk Sharing ◽  
Banking Sector ◽  
Islamic Law ◽  
Banking Industry ◽  
Supervisory Board ◽  
Primary Data ◽  
Equation Modeling ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type

PurposeIslamic banks provide an alternative financial system based on Sharia’h (Islamic law). However, critics argue that operation at Islamic banks is violating Sharia’h particularly in terms of provision of interest free services, risk sharing and legal contract. The purpose of this paper is to empirically evaluate the Sharia’h practice at Islamic banks in Pakistan by considering some basic principles of Sharia’h. Design/methodology/approachPrimary data are collected from 63 branches of Islamic banks in Pakistan. Questionnaire is used as an instrument. The study uses structural equation modeling that includes confirmatory factor analysis and regression analysis. Data are codified and analyzed using SPSS and Amos. FindingsThis study finds that Islamic banks are providing interest free services, ensuring that transactions and contracts offered by Islamic banks are legal and offering conflict-free environment to customers. In contrast, estimated results expose that Islamic banks are not sharing risk and Sharia’h supervisory board is not performing its role perfectly. Similarly, it is found that organization and distribution of zakat and qard-ul-hassan are weak at Islamic banks. Research limitations/implicationsData are collected from Islamabad federal capital of Pakistan that hold just 5 per cent share of Islamic banking industry. This small share may not provide true picture of Islamic banking sector. Practical implicationsTo ensure risk sharing, Islamic banking industry must consider the development of new modes of financing and innovation of more products based on Sharia’h. State Bank of Pakistan should ensure separate regulatory framework that enable Islamic banks to provide qard-ul-hassan, organize and allocate zakat. Originality/valueThis paper discusses the perception of bankers, who are actually the executors, about Shariah’s practices at Islamic banks in Pakistan. There are not many discussions on this topic that could be found, and hence this could be considered as a significant contribution by this paper to the existing literature of Islamic finance.

Tawarruq: Controversial or Acceptable?

2019 ◽  
Vol 33 (4) ◽  
pp. 307-333 ◽  
Author(s):  
Ahmed Mansoor Alkhan ◽  
Mohammad Kabir Hassan
Keyword(s):  
General Practice ◽  
Empirical Data ◽  
Islamic Law ◽  
Banking Industry ◽  
Empirical Work ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Research Article

Abstract The debate about tawarruq (monetisation) has been ongoing, especially with regard to the permissibility of organised tawarruq. The majority of contemporary Sharīʿah scholars, including the Organization of Islamic Cooperation in 2009, ruled that organised tawarruq is impermissible according to Sharīʿah (Islamic law). Nevertheless, organised tawarruq remains a widely-used product in the international Islamic banking industry. Having reviewed the literature and reasons pertaining to the prohibition of organised tawarruq, this research article argues that the prohibition ruling may have been based on certain wrongful practices that existed in the industry, rather than on evidence provided from the Sharīʿah. This research includes empirical work that qualitatively analyses organised tawarruq transactions executed by three Islamic banks in the Kingdom of Bahrain. Using empirical data and analysis provided, this article suggests that the general practice of organised tawarruq might be permissible according to Sharīʿah.

scholarly journals INNOVATION OF ISLAMIC BANKING INDUSTRY AS AN ALTERNATIVE ISLAMIC ECONOMIC DEVELOPMENT IN INDONESIA

2018 ◽  
Vol 7 (2) ◽  
pp. 132-141 ◽  
Author(s):  
NURHANI FITHRIAH
Keyword(s):  
Product Innovation ◽  
Islamic Law ◽  
Banking Industry ◽  
Banking Regulation ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Islamic Bank ◽  
The People ◽  
Innovative Products ◽  
Islamic Economic

One of potential exploration and manifestation of the community's contribution to the national economy, is the development of an economic system based on the value of Islamic (Sharia) by lifting its principles into the National Legal System. Shariah principles based on the values of fairness, expediency, balance, and universality (rahmatan lil 'alamin). Those values are applied in banking regulation that is based on the so-called Sharia Islamic Banking. Principles of Islamic Banking is part of Islamic teachings related to the economy. In addition, to provide assurance to the people who still doubt shariah Islamic Banking operations during this time also set of business activities that do not conflict with Sharia Principles include business activities that do not contain elements of riba, maisir gharar, haram, and zalim. A separate regulation for Islamic Banking is an urgent thing to do, to ensure compliance with Shariah principles, the principles of the Bank for Islamic Bank, and no less important is expected to mobilize funds from other countries that requires the regulation of the Islamic Bank. Problems faced, how the strategy and the constraints faced in Islamic Banking Industry Product Innovation in developing the economy in Indonesia by Islamic Banking Act. This study aims to look for and find in the practice of the ways and forms of Islamic banking product innovation, as well as the constraints that it faces.This research, analytical, descriptive and normative juridical approach, and aims to provide a complete picture of the facts and the systematic application of Sharing in Islamic banks. Furthermore, the data were analyzed through statutory provisions in force, which among one another should not be contradictory, pay attention to the hierarchy with the aim to achieve legal certainty, by searching and digging law who live in the community, whether it is written or unwritten (Islamic law).The results showed that the strategy which remove products of Islamic banking industry innovation, improve human resources SDI), and marketing of products strategically. Constraints faced in Islamic Banking Industry Product Innovation in developing the economy in Indonesia, it is very difficult to do because fixated on Islamic principles. Suggestions put forward, should disseminate innovative products to the public and the effectiveness of supervision of Islamic banks (Internal & ekstenal).

scholarly journals Customer Satisfactions on Islamic Banking Services in Almadinah City, Saudi Arabia

2019 ◽  
pp. 1-8 ◽  
Author(s):  
Wesal M. Aldarabseh
Keyword(s):  
Saudi Arabia ◽  
Customer Satisfaction ◽  
Banking Sector ◽  
Islamic Law ◽  
Banking Industry ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Banking Services ◽  
The Past ◽  
Self Administered Questionnaire

Providing quality services is a key element to compete in the banking industry. Islamic banks showed significant expansion in the past decades worldwide.  In the current study, customer satisfaction towards services provided by Islamic banks in Almadinah city, Saudi Arabia was investigated. A total of 292 customers of full-fledged Islamic banks were recruited in the study. Customer satisfaction was measured using a self-administered questionnaire. The results showed acceptable levels of customer satisfaction toward Islamic banking services (85%). In addition, personnel, image, reliability, and compliance with Islamic law were the most important service dimensions that affect customer satisfaction. Finally, gender differences were noticed with respect to customer satisfaction with females seemed to be less satisfied than males. The present findings provide positive feedback to the Islamic banking sector in Almadinah city to improve customer satisfaction of their services.

scholarly journals Analisis Pendapatan Non Halal Perbankan Syariah Di Indonesia: Sumber Dan Penggunaannya

2019 ◽  
Vol 4 (2) ◽  
pp. 159
Author(s):  
Rudy Hartanto ◽  
Irena Paramita Pramono ◽  
Pupung Purnamasari
Keyword(s):  
Commercial Bank ◽  
Financial Institutions ◽  
Banking Industry ◽  
Total Sample ◽  
The Other ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Business Unit ◽  
Other Hand ◽  
Data Documentation

The existence of the regulation for Islamic banking causes it to conduct its activities by the guidance of Islamic principles which avoid some non-halal sources of income. On the other hand, the transactions between Islamic banking and conventional banking are unavoidable because conventional financial institutions still dominate all transactions in each country. This means that non-halal sources of income cannot be avoided, by the way of the transaction is done. This research aims to analyze on the sources of income and its distribution of the non-halal funds of Islamic Banks in Indonesia. This research is quantitative. The method of collecting data documentation uses data from 2015-2017 with a total sample of 102 Islamic banks. The results show that there were differences in the average non-halal funds of Islamic Commercial Banks with Islamic Business Unit Bank. In addition, this study shows that Islamic commercial bank tends to have non-halal funds bigger than Islamic Business Unit Bank. On the other hand, the result shows that non-halal funds sources in the banking industry are dominated by interest income from another conventional bank and the using of non-halal funds is dominated by social activities.

scholarly journals Banking Governance: Whats Special About Islamic Banks?

2015 ◽  
Vol 31 (4) ◽  
pp. 1621 ◽  
Author(s):  
Faten Ben Bouheni ◽  
Chantal Ammi
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Islamic Law ◽  
Banking Industry ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Implicit Contracts ◽  
Conventional Banks ◽  
The U.S ◽  
The Eu

Recent turmoil and financial institutions failures in the U.S and in the EU have led to a renewed interest in corporate governance. Thus, the ultimate decisions taken to out of the crisis were to review the mechanisms of banking governance. The Islamic banking may use the same governance mechanisms as a conventional bank, in addition to the Shariah boards, the Shariah review unit, the Islamic International Rating Agency (IIRA) and, the Islamic Financial Services Board (IFSB) like main bodies of monitoring the Islamic Banking industry. In contrast to the conventional banks, the Islamic banks are based on the active participation of public policy institutions, regulatory and supervisory authorities, and Shariah authorities. These institutions collectively monitor the performance of the firm and its faithfulness and commitment to explicit as well as implicit contracts. Islamic banking designates banking activities, which are conforming to Islamic law (Shariah) and guided by Islamic economics. In particular, Islamic law prohibits usury and payment of interest (Riba), it also prohibits investing in businesses that are considered unlawful. And the competitiveness of many of Islamic products and the PLS principle attract Muslim and non-Muslim investors.

Pendapatan Non Halal Perbankan Syariah di Indonesia: Analisis Sumber dan Penggunaannya

2019 ◽  
Vol 4 (2) ◽  
pp. 51
Author(s):  
Rudy Hartanto ◽  
Irena Paramita Pramono ◽  
Pupung Purnamasari
Keyword(s):  
Commercial Bank ◽  
Financial Institutions ◽  
Banking Industry ◽  
Total Sample ◽  
The Other ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Business Unit ◽  
Other Hand ◽  
Data Documentation

The existence of the regulation for Islamic banking causes it to conduct their activities by the guidance of Islamic principles which avoid some non-halal sources of income. On the other hand, the transactions between Islamic banking and conventional banking are unavoidable because conventional financial institutions still dominate all transactions in each country. Means that non-halal sources of income cannot be avoided, by the way of the transaction is done. This research aims to analyze the sources of income and its distribution of the non-halal funds of Islamic Banks in Indonesia. This research is quantitative. The method of collecting data documentation uses data from 2015-2017 with a total sample of 102 Islamic banks. The results show that there were differences in the average non-halal funds of Islamic Commercial Banks with Islamic Business Unit Bank. In addition, this study shows that Islamic commercial bank tends to have non-halal funds bigger than Islamic Business Unit Bank. On the other hand, the result shows that non-halal funds sources in the banking industry are dominated by interest income from another conventional bank and the using of non-halal funds is dominated by social activities.

scholarly journals Do Islamic Banks Act ‘Islamic’ During COVID-19 Pandemic?

2020 ◽  
pp. 3-12 ◽  
Author(s):  
Amir Shaharuddin
Keyword(s):  
Banking Industry ◽  
Theory And Practice ◽  
Economic Losses ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Health Crisis ◽  
Domestic Markets ◽  
Difficult Time ◽  
The World ◽  
Additional Charges

The world is currently experiencing the most unprecedented health crisis. As of June 2020, the Corona disease has infected more than 8 million people and caused 465,000 deaths worldwide. The world economy is also impacted by the Corona virus pandemic known as COVID-19. Malaysian government estimates that the economic losses since the enforcement of national lockdown amounts to RM63 billion. Subsequently, a huge stimulus package worth RM250 billion was distributed to sustain the domestic markets. In addition, individuals and businesses were offered moratorium which gives six months deferment of installment to cope with financial challenges during this difficult time. The implementation of moratorium however raises a polemic within the Islamic banking industry locally. Customers question the justification used by Islamic banks in imposing additional charges after the expiry of moratorium period. The criticism to certain extend has labelled Islamic banks similar with their conventional counterparts for prioritizing profit over social responsibility. Thus, the article analyzes the moratorium issue based on the framework of Shariah objectives (maqasid). The analysis will not only shed light on the current moratorium polemic but also provides a comprehensive view for the broader issue pertaining to the dichotomy between the theory and practice of Islamic banking industry.

The Values and Norms of Islam

2010 ◽  
Vol 1 (1) ◽  
pp. 1-19
Author(s):  
Ahmed Akgunduz
Keyword(s):  
Islamic Law ◽  
Legal Theory ◽  
The Other ◽  
Moral Norms ◽  
Simple Fact ◽  
Value System ◽  
Legal Norms ◽  
Islamic Legal Theory ◽  
The World ◽  
Over Time

AbstractIslamic Law is one of the broadest and most comprehensive systems of legislation in the world. It was applied, through various schools of thought, from one end of the Muslim world to the other. It also had a great impact on other nations and cultures. We will focus in this article on values and norms in Islamic law. The value system of Islam is immutable and does not tolerate change over time for the simple fact that human nature does not change. The basic values and needs (which can be called maṣlaḥa) are classified hierarchically into three levels: (1) necessities (Ḍarūriyyāt), (2) convenience (Ḥājiyyāt), and (3) refinements (Kamāliyyāt=Taḥsīniyyāt). In Islamic legal theory (Uṣūl al‐fiqh) the general aim of legislation is to realize values through protecting and guaranteeing their necessities (al-Ḍarūriyyāt) as well as stressing their importance (al‐ Ḥājiyyāt) and their refinements (taḥsīniyyāt).In the second part of this article we will draw attention to Islamic norms. Islam has paid great attention to norms that protect basic values. We cannot explain all the Islamic norms that relate to basic values, but we will classify them categorically. We will focus on four kinds of norms: 1) norms (rules) concerned with belief (I’tiqādiyyāt), 2) norms (rules) concerned with law (ʿAmaliyyāt); 3) general legal norms (Qawā‘id al‐ Kulliyya al‐Fiqhiyya); 4) norms (rules) concerned with ethics (Wijdāniyyāt = Aḵlāqiyyāt = Ādāb = social and moral norms).

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