Towards A Digitalized Collaborative Zakat Management System for Accelerating Good Governance Practices in the New Normal

Many countries around the world are slowly beginning to move from managing the COVID-19 crisis to recovery and reopening of economies. In Malaysia, the government has launched various initiatives with the main aim to empower people, propel business and stimulate the economy. However, the socio-economic shock brought by COVID-19 pandemic is of the magnitude that the world has not experienced in decades. Hence, government alone cannot address the enormous challenge without collaborating with the diverse and inclusive stakeholders. As one of the collaborators, zakat institution is well positioned to play a significant role in this transformation. However, in meeting the demand for this role, zakat institutions need to adapt to the major shifts in many aspects of the pre pandemic way of doing things. One significant shift started at the beginning of the pandemic in Malaysia where many industries experience sharp increase in the adoption of digital channels. This is expected to accelerate and moving forward the government is providing help in moving towards more comprehensive adoption of digitalization. Given the current scenario, this paper proposes a model based on digitalization of collaborative zakat management for Pusat Pungutan Zakat, Wilayah Persekutuan (PPZ-MAIWP). The model provides a starting point in understanding the capability required to move towards more comprehensive digitalization of services provided by PPZ-MAIWP. The digitalization model is based on a collaborative effort between PPZ-MAIWP and other organisations in distributing zakat for empowerment initiatives. Using a developed impact assessment prototype system, this paper will provide a simulation results where PPZ-MAWIP will be able to short list organisations based on accumulated highest score received for the following components: governance structures, capability to deliver initiatives effectively and clarity of targeted socio-economic impact. Once the organisations are short listed, PPZ will then call for an online meeting with the selected organisations before making the final decision. The use of the digital model allows PPZ-MAIWP to make decisions faster, more objective and adapt to remote workplace. In addition, the selection criteria can also be used subsequently by PPZ-MAIWP to monitor the progress of the initiatives and also for the selected organisations to report on their progress. This forms part of the risk management process and in turn enhances effective delivery of sustainable empowerment initiatives funded by zakat fund. It is also an important mechanism to facilitate timely reporting on the social economic impact delivered that is crucial in enhancing stakeholders’ engagement and trust. Hence, this system accelerates good governance practices throughout the zakat distribution ecosystem. The model and the simulation presented can also act as a starting point in operationalisation of more comprehensive digitalization by PPZ in the new normal. Overall, the new normal provides substantial opportunities for PPZ to accelerate adoption of digitalization and good governance practices throughout the zakat ecosystem.

Qualitative Study in Identifying Factors Affecting the Behavior of Muslim Generation Y Towards Islamic Home Financing Products in Malaysia

House is the most important basic need for the human survival, however many individuals especially those who are categorised in the category of generation Y still do not acquire a house due to various factors. It is quite a normal practice for most of home-buyers in Malaysia to purchase a house through banking institutions. However, as a Muslim, it is an obligation to purchase and acquire a house through Islamic financial institutions (IFIs) as it is accordance to the Shariah principle. The objective of the study is to qualitatively identify factors affecting the behavior of Muslims generation Y in Malaysia towards Islamic home financing products. Apparently, it is found that religious belief, profit rate, offer and promotion, and fast service (loan approval) are factors in affecting Muslims generation Y in choosing Islamic home financing products. Afterwards, the study proposed to integrate the findings (identified factors) with the theory of Attitude-Behavior-Context (ABC). The study findings are expected to contribute significantly to the theory, methodology, and empirical practices.

Board, Shariah Committee and Senior Management: Updates on the BNM Shariah Governance Policy Document

The paper aims to examine the relevant provisions of the newly released BNM Shariah Governance Policy Document relating to the board of directors, Shariah Committee and senior management of the Islamic Financial Institutions (IFIs) in Malaysia. The study is qualitative-based research. It reviews two documents, i.e. BNM Shariah Governance Framework 2010, and BNM Shariah Governance policy 2019. It uses a content analysis approach to understand and compare the two frameworks from the perspective of the board, the Shariah Committee and senior management. The study finds that SGP 2019 enhanced features of the preceding SGF 2010 revolving around enhanced board oversight and roles over Shariah governance, strengthened Shariah Committee (SC) requirements in providing independent and sound advice to IFIs, as well as a greater expectation for the board and senior management in promoting Shariah compliance culture. This paper examines the areas which have been addressed by the new framework to improve several issues which have been highlighted during the implementation of the previous framework, SGF 2010.

Development of Integrated Islamic Finance-Based Index of Financial Inclusion Using Zakat and Cash Waqf: A Preliminary Study in Malaysia

Financial inclusion is a priority agenda in many countries. While the importance of financial inclusion index is widely recognized, the literature lacks a constructive discussion on its measurement in the light of Islamic finance since it is believed that only by the incorporation of the Shariah-based instruments, the level of access to finance can be improved. The study aims to develop a methodology for the computation of an integrated Islamic finance-based index of financial inclusion in Malaysia. Based on the current measurement of financial inclusion index (IFI) in Malaysia, this study employs a self-administered questionnaire and secondary data from Jabatan Waqaf, Zakat dan Haji (JAWHAR) and Yayasan Waqaf Malaysia (YWM), to measure the integrated Islamic finance based financial inclusion index for year 2011 and 2015. Zakat and cash waqf indicators are added in the index computation to represent Islamic finance components. Depending on the value of the index, a country is classified into four categories; high, above average, moderate or low integrated Islamic finance-based of financial inclusion. It is found that the level of financial inclusion using Islamic finance indicator in Malaysia is above average. The overall index level is increased from 0.49 in year 2011 to 0.55 in year 2015. Interestingly, most of the level of zakat and cash waqf indicator indexes are low which indicate that these channels require specific attention to tackle financial inclusion in Malaysia. It is hoped that the findings would be useful for the development of financial inclusion index using Islamic finance approach and monitoring the impact of zakat and waqf to the society.

Moratorium in Islamic Hire Purchase Financing: A Shariah Perspective

This study examined the implementation of moratorium in the Islamic hire purchase financing based on Al-Ijarah Thumma Al-Bay’ (AITAB) from the Shariah perspective. The implementation of moratorium by Bank Negara Malaysia (BNM) is a new practice in the banking and finance industry in Malaysia. Implementing the moratorium causes several changes to the AITAB contract such as the extension in contract tenure and the increase in the total payment obligation due to the profit charged on the outstanding principal. This study analysed these changes from the Shariah perspective by using the al-takyif al-fiqhi methodology. The results of the analysis confirm the practice of moratorium by IFIs is in line with the Shariah requirements as long as it is agreed by the parties to the contract - which are the bank and the customer. Needless to say, both Ijarah Policy Document and Hire Purchase Act 1967 allow any forms of amendments including profit compounding when the AITAB contract is restructured, provided that such amendments are agreed between the contracting parties. Despite this permissibility, IFIs are still required to comply with the new ruling issued by SAC BNM that prohibits the practice of profit compounding during the COVID-19 crisis. Although, in principle, the ruling is based on the concept of ihsan (beneficence) which is not compulsory (wajib) but rather recommendation (istihbab) from the Shariah perspective; however, from the regulatory perspective the ruling is compulsory for IFIs to comply pursuant to section 28(1) and 28(2) of Islamic Financial Services Act 2013 (IFSA) that stated compliance with Shariah means compliance with any ruling of the Shariah Advisory Council. The moratorium is seen as a manifestation of the concept of ihsan (beneficence) towards the customers affected financially due to the COVID-19 pandemic. This commendable effort should be encouraged and continued by the Islamic financial institutions in upholding the Shariah principle of maslahah and lifting of difficulties (raf al-haraj), particularly in the current outbreak of COVID-19 and the impact of MCO.

Pencapaian Maqasid Syariah Melalui Pelaksanaan Sistem Pengurusan Kualiti Berasaskan Syariah MS1900: Kajian Kes di Pusat Zakat Melaka

Sistem Pengurusan Kualiti Berasaskan Syariah MS 1900 dilaksanakan di pelbagai sektor di Malaysia termasuklah sektor perkhidmatan awam, korporat, perkilangan, perhotelan, penjagaan kesihatan, pengajian tinggi, agensi pentadbiran Islam dan pusat zakat. Objektif penyelidikan ini adalah untuk mengkaji pencapaian Maqasid Syariah melalui pelaksanaan Sistem Pengurusan Kualiti Berasaskan Syariah MS 1900. Institusi yang dipilih untuk kajian ini ialah Pusat Zakat Melaka. Kajian ini menggunakan pendekatan kualitatif dengan melibatkan informan yang terdiri daripada pihak pengurusan dan para pegawai yang terlibat dengan pelaksanaan MS 1900. Hasil kajian menunjukkan pelaksanaan MS 1900 telah membantu pencapaian Maqasid Syariah iaitu memelihara kepentingan masyarakat melalui pemeliharaan iman, nyawa, akal, keturunan dan harta. Hasil kajian ini telah menyumbang kepada pembangunan ilmu berkenaan dengan pelaksanaan Sistem Kualiti Berasaskan Syariah dalam membantu pencapaian Maqasid Syariah di Malaysia.

Investigating Tendencies of Malaysian Muslims in Islamic Estate Planning: Insight into Its Determinants

Estate planning is one of the crucial elements of managing property during a person’s lifetime. It involves both handling and managing property during one’s lifetime and after death. For Muslims, the objectives of Shariah, which are known as Maqasid Shariah, can be attained if their finances are planned in a wise and cost-effective manner. Unfortunately, it was reported that frozen inheritance assets have steadily increased from the day of Independence, amounting to RM70 billion in 2020 indicating the seriousness of the matter. The freezing of inheritance property is detrimental to the economy and thus opposes the spirit of Maqasid Shari’ah which recommends that it should be properly managed for the benefit of the public. This is where estate planning plays its role in ensuring quicker and easier distribution of assets and property. Hence, the objective of this research is to investigate Malaysian Muslims’ tendencies in estate management planning and its determinants. A total of 406 respondents throughout Peninsular Malaysia responded to the prepared survey, where the Partial Least Squares Structural Equation Modelling (PLS-SEM) approach was employed as the main data analysis for this study. The findings revealed that altruism, advantages and compliance were significant in influencing tendencies of Malaysian Muslims in Islamic estate planning. Surprisingly, service was found to be an insignificant factor in influencing the tendencies of Malaysian Muslims in Islamic estate planning. This study provides some insights on the role of policymakers and estate planning related industry in ensuring the compliance of estate planning product and increasing the awareness of Muslims to do estate planning by promoting the advantages and importance of doing so. Policymakers are also welcome to engage in this matter by providing earlier education on Islamic estate planning among Muslims in Malaysia.

Corporate Waqf: Discovering the Primary Challenges

This study aims to explore and understand the key challenges of corporate waqf management and its implementation, particularly in Malaysia. This study adopted a qualitative approach. Specifically, data obtained from three interviews that involved an academician, a Shariah scholar and a business practitioner have been examined thoroughly. Generally, this study discovers three primary challenges pertaining to corporate waqf and its possible implementation. Legal constraint based on current regulatory settings of waqf management, narrow mindset of key stakeholders and lack of awareness and understanding amongst the general public are the core reasons that impede the successful acceptance and implementation of corporate waqf. This study is expected to contribute to the improvement of the waqf management. It provides an initial understanding about the primary issues that would be confronted when implementing corporate waqf. Thus, it puts forward several insights about the future strategies for positioning corporate waqf into practice.

Tatacara Ijtihad oleh Majlis Penasihat Syariah Bank Negara Malaysia dalam Menyelesaikan Isu Kewangan Islam

Ijtihad adalah penentuan terhadap suatu hukum yang tidak ada dibincangkan dalam sumber perundangan Islam. Ia juga merupakan suatu mekanisma utama dalam ilmu usul fiqh. Isu ijtihad ini banyak dibincangkan oleh ulama terdahulu dan juga ulama kontemporari dalam menentukan sesuatu hukum yang sesuai dengan perkembangan semasa. Namun begitu, ijtihad ini hanya boleh dilakukan oleh orang yang berkelayakan sahaja. Dalam konteks kewangan Islam, Majlis Penasihat Syariah Bank Negara Malaysia (MPS BNM) adalah badan yang berautoriti untuk melakukan ijtihad terhadap isu-isu yang timbul berkaitan dengan muamalat. Tujuan kajian ini dilakukan adalah untuk mengenalpasti pendekatan yang digunakan oleh MPS BNM dalam menangani isu-isu kewangan Islam. Oleh itu, kajian perpustakaan telah digunakan untuk memperolehi segala maklumat seperti jurnal, buku, kertas persidangan, dan koleksi Resolusi Syariah dalam Kewangan Islam. Kajian lapangan juga turut dijalankan dengan menggunakan kaedah temu bual. Temu bual dijalankan bersama pegawai-pegawai yang terlibat dalam industri kewangan Islam. Hasil kajian mendapati MPS BNM melaksanakan tugasnya dengan mengeluarkan suatu hukum terhadap isu yang dibincangkan dengan menjalani proses ijtihad terlebih dahulu. Bertitik tolak daripada kenyataan ini, pendekatan ijtihad menjadi satu keperluan penting dalam memberikan jawapan hukum terhadap isu-isu semasa yang timbul terutamanya dalam kewangan Islam.

The Practice of Imposing Default Rate in Islamic Home Financing Product in Malaysia: Analysis from Regulatory and Shariah Perspective

In developing and structuring an Islamic banking product, one of the areas that should be addressed is to mitigate risk that includes default risk. Financial institutions will always be exposed to the risk of default by customers. This is faced by Islamic banks as well when granting financing facilities to customers irrespective of the underlying Shariah contracts that apply to the product structure. In order to mitigate such risk, bank normally will impose late payment charges if the instalment amount is not received by the payment due date. In addition to the normal late payment charges, banks may also impose default rate on customers who have defaulted within certain period. As such, this study analysed the practice of charging default rate in Islamic home financing product involving sale- and lease-based contracts. This qualitative study adopted the explanatory methodology as the main method of data collection from relevant documents, such as Shariah-related regulatory policies, Shariah resolution issued by Bank Negara Malaysia (BNM), decided court cases, and Islamic bank product documentation related to the practice of charging default rate. Next, secondary data from journal articles and other published sources, including Shariah literature relevant to this study, were deployed to analyse the said issue. Evidently, several Islamic banks in Malaysia seem to impose default rate in their product structure. Such practice may not be consistent with the spirit of Shariah and Islamic finance if the purpose is to gain more income while the customers face financial issues. This study prescribes Shariah scholars and regulator to re-evaluate the current regulatory policies and product structure to ensure that they embrace the spirit of Shariah, apart from protecting consumers from heightened financial burden.