Accounting for Waqf Institutions: Business, Not-for-Profit or Hybrid Entities?

Despite the tremendous religious and socio-economic contributions of waqf institutions to Muslim communities across the globe, there was no universal accounting standard to adopt by such institutions until 15 Rabi’II (equivalent to 30th November 2020) when the Accounting Standard for waqf institutions (FAS No. 37) was approved by the Board of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) for adoption with effect from 01 January, 2022. Hence, the objective of this study is to analyze the nature of waqf institutions with a view to establishing whether their appropriate financial accounting and reporting practices should be for business, not-for-profit or both. The documentary research method was applied to achieve the aim of this study through a systematic analysis of relevant accounting and Shariáh standards. Findings and views of earlier studies were also used. The study reveals that though waqf institutions operate like charitable organizations, they are mandated to undertake or attach to commercial activities in order to generate income for the sustainability of their activities. This signified that they are hybrid and as such, they are supposed to report both waqf and commercial activities in their annual reports and accounts. Hence, the study calls on Islamic countries to provide regulations, guidelines and more importantly accounting standards that will compel or motivate waqf institutions to prepare annual reports and accounts showing both their charitable and commercial activities.

Integration of Knowledge (IoK) Methodological Reasoning of Islamic Economics (IE) as the Wisdom of Humanity: A Heterodox Economic Approach

The world increasingly needs an alternative approach to economic development. This paper endorses the Integration of Knowledge (IoK) approach as the wisdom of humanity through Islamic Economics (IE). A review of relevant literature through qualitative methodologies of library research, discourse and critical content analysis highlights the civilisational practices of integration, how development of economics diverged from such practices and how heterodox approaches reacted to such divergence. A section on learning the wisdom of humanity from each other emphasizes the inevitable historical civilizational integration (IoK) and exchange of knowledge. It follows with a literature review of the development of mainstream economics, how it abandoned such historical civilizational practice and its sound foundations, namely ontology, epistemology, axiology and methodology. A highlight of heterodox economics (HE) responses reveals the alternatives to the mainstream-focused positivistic approach to economics. The inadequacy of those alternatives led us to demonstrate Muslim responses and the centrality of IE as a comprehensive alternative heterodox economic approach. The analysis shows how IE grew along Islamisation of Knowledge (IOK) as two parallel and major intellectual iṣlaḥ (reform) and tajdīd (renewal) movements. A brief review of the development of each shows the potential of IE’s IoK methodological reasoning to revive the IoK approach in economics as the wisdom of humanity. The sound IE philosophical foundations, namely ontology, epistemology, axiology and methodology, have a major impact in that process. Thus, utilising the core IoK objective within IOK together with IE contributions shape the process of overcoming problems and issues of mainstream economics. Actionable recommendations to practitioners and academics depict how the IE approach to economics could be implemented and sustained along SDGs agenda.

Inflationary Dynamics of Consumer and Producer Financing – A case of Islamic and Conventional Banking in Pakistan

One of the objectives of macroeconomics is to stabilise purchasing power for the masses, which remains a leading economic problem in Pakistan for years. Economists are convinced about the existence of some degree of inflation in the economy to mobilize economic resources, with the condition to keep it to a minimum. Currently, Islamic finance is setting its firm footing in Pakistan and competing with the conventional financial system. Both of these financial systems provide their services to consumers and producers, which implicates inflation differently. Under this scenario, this study sets to compare the Shari’ah compliant financing provided by Islamic financial institutes and human made standards of conventional financial institutions. This study explores the effect of consumer financing and producer financing of Islamic and conventional banks on the inflation of Pakistan. Quarterly secondary data extracted from the State Bank of Pakistan (SBP) reports and International Financial Statistic (IFS). Empirical results displayed that Islamic consumer financing, as expected in theory, helps to control inflation. The preaching of moderation in Islamic finance makes Islamic consumer financing less inflationary and asset-based Islamic producer financing will perform better in reducing inflation. Islamic consumer financing is well participating in the management of inflation. However, Islamic producer financing lacks inflation curtailing ability. The small share in the financial market, and lack of long term investment plans, are the few reasons why Islamic producer financing is not managing inflation.

Towards the Implementation of Monetary Management in Islamic Economic System Based on Recent Developments

Monetary management is an essential part of the objectives of Shari’ah under the umbrella of the preservation of wealth (Ma’al). Our primary sources: Qur’an and Sunn’ah, provide divine legislation on the prohibition of Riba to manage bases of monetary transaction. Further, the juristic tools facilitate scholars to propose solutions to meet the emerging issues on diversified aspects of society. Muslim scholars have always adapted and contributed to the Islamic finance system and regulation, theoretically and practically. In recent decades, Islamic banking and finance has seen strong momentum with double digit growth, fulfilling the monetary requirement of depositors on the liability side along with industry on the asset side. We seek to review the theoretical and empirical literature on Islamic monetary mangement. Monetary management in the Islamic economic context is still an area that needs more research. This paper examines how literature has been developed over time up until modern Islamic economic and banking practices. The findings suggest that Islamic monetary management has been gradually developed in recent years and such development is remarkable steps forward in pursuing Islamic monetary policy independently. In addition, Islamic monetary policy is proved to be relatively more effective compared to interest based conventional monetary policy. The implications of such findings have established new milestones for the central banks of all the countries, including the muslim majority countries for pursuing interest free Islamic monetary policy with full confidence. Furthermore, there are four major views on Islamic monetary policy and the central banks of the world should choose one of the best methods and views for the greater effectiveness of monetary policy because conventional monetary policy has been less effective in bringing full employment and price stability in recent years and financial crisis has crippled the interest based conventional economic systems quite badly.

Assessment of the Service Performance of Zakah Institutions in Gombe Metropolis, Nigeria

Zakah is an important tool in Islamic economic system, it plays a crucial role in reducing some social and economic problems such as poverty, unemployment, indebtedness and inequitable redistribution of income in the Muslim communities. The Zakah institutions in Gombe metropolis are said to practice favouritism and unfair service quality and distribution of Zakah funds among recipients. The main objective of this study is to empirically examine perception of the Zakah recipients towards the services provided by the institutions. This study adopted descriptive survey design approach. PLS-SEM is employed to test the hypothesized model of the study. The result reveals that reliability, responsiveness and assurance significantly affect performance of Zakah institutions but tangibility and empathy were found to be insignificant. The study recommends the need for Zakah institutions in Gombe metropolis to consider improving the tangibles and empathy dimensions of service quality. The study also recommends the need to concentrate on the antecedents of service quality as it will assist Zakah institutions to improve performance. Lastly, the study suggests the establishment of Zakah board that will serve as regulatory body in charge of supervising the activities of private Zakah institutions in Gombe state.

The Role of Religiosity in Explaining the Intention to use Islamic FinTech Among MSME Actors

Islamic FinTech is growing rapidly and has become a new alternative of financing for micro, small, and medium enterprises (MSME) which are the backbone of the national economy. This study aims to examine the role of religiosity level of MSMEs actors on the intention to use Islamic FinTech. This research employed Partial Least Square - Structural Equation Modeling (PLS-SEM) method. The data collected using an online questionnaire adapted from previous research, then distributed to 100 Indonesian MSME actors and analyzed using smart PLS. The main result indicated religiosity plays a positively significant role in explaining the intention to use Islamic FinTech. In addition, Perceived Usefulness (PU), Perceived Ease of Use (PEOU), and Subjective Norm (SN) were also found to be influential, while both, Attitude Toward Behavior (ATB) and Perceived Behavioral Control (PBC), have no significant effect on behavioral intention. This research implicates the need for collaboration between the Financial Services Authority (OJK) as the regulator with Islamic FinTech institutions to improve literacy, providing incentives, strengthening consumer data protection, as well as integrating the values from the religious angle in the concept and practice of FinTech product and services that are based on Islamic guideline in order to attract the users from MSME actors.

Zakat Intermediaries and Its Impact to Industry Growth: Growth Accelerators or Cost Center?

This study aims to determine the effect of Islamic bank’s activity as a zakat intermediator on profitability, efficiency, market share, and growth of Islamic banks in Indonesia. This research also analyses from the literature the possibility of zakat as the funding or financing product. The method used is the panel data method and granger causality. The Independent variable external zakat collection while the dependent variables are ROA, BOPO, Market Share, and Growth. The samples of the research are five Islamic Bank who has done the external zakat collection. The data used are quarterly data with a period from 2013 to 2020. The results of this study indicate that this divine role increase the cost of operation and in the same time decreasing the profitability. The result also stated that the intermediating activities of zakat collection is not significant to push the bank market share, profitability as well as the Bank Growth. However, although in terms of regulation bank cannot be the Amil, in the future, there is potential of zakat can push the Islamic market share and bank growth since the zakat collection, Islamic bank can offer third party funding product as the intermediation between the zakat payer and the Amil zakat whose eligible to collect zakat according to the government regulation.

Comparison of Islamic and Conventional Banking Financial Performance during the Covid-19 Period

The COVID-19 pandemic that is spreading in Indonesia has affected economic growth, likewise banks sector. This study aims to determine the financial performance factors that are affected by the COVID-19 pandemic, both in Islamic and conventional banking which are included in the CBGB 2 category so that banks in Indonesia can anticipate it. This study uses the Artificial Neural Network (ANN) method with 6 financial performance variables in the period of January 2020 - September 2020, namely Capital Adequacy Ratio (%), Operating Expenses / Operating Income (%), Net Operation Margin (%), Landing on Deposits. Ratio (%), Short Term Mismatch (%) which are used as the independent variable, as well as Return on Assets which is used as the dependent variable. The results showed that the COVID-19 pandemic affected financial performance factors in the form of a Funding to Deposit Ratio of 35.21%; Short Term Mismatch of 26.92% and Net Operation Margin of 26.92% in Islamic banking. Whereas in conventional banking, Operating Expenses to Operating Income was 72.87% and the Capital Adequacy Ratio was 17.31%. This result is also in line with previous research where Islamic banking is more vulnerable than conventional banking in facing financial crises.

Dispute Resolution for Islamic Banks in Indonesia

The rapid growth of Islamic banking and finance industry demanded an improvement in term of standards, frameworks, policy, technologies, resources, and guidelines in order to go beyond without compromising the core values of Islam itself. In the context of legal framework of Islamic banking and finance, it is most likely this industry needs to be highly regulated in order to avoid manipulation and abuse by the irresponsible parties. One of the crucial issue in the area of Islamic Banks in Indonesia is regarding about the dispute resolution mechanism for Islamic Banks. Based on Indonesian positive law, there are two alternative dispute resolution mechanisms that can be exercised by parties to settle disputes in cases involving Islamic Financial Institutions (IFIs) namely through litigation or non-litigation. Litigation comes under the jurisdiction of the Religious Court. Researcher in this study are look deeper into the dispute resolution mechanism for Islamic Banks in Indonesia, as well as going through some decided cases. And based on the study done, it was found that alternative dispute resolution mechanism is more effective to resolve Islamic Banks dispute rather than litigation. In the future, researchers may conduct more research to examine deeper about the dispute resolution mechanism for the whole Islamic Economics and Finance in Indonesia. Moreover, researchers need to look at the regulators' and legislators’ perception towards dispute resolution and legal environment.

An Empirical Analysis of Islamic Banking (IBs) Contribution to Indonesia’s Inclusive Growth

The research is aim to attest and assess empirically the contribution of Islamic banking (IBs) on the inclusive growth in Indonesia. By taking a trial-stage method i.e. descriptive analysis to elaborate a statistical data, autoregressive distributed lag (ARDL) model to assess empirically the contribution in a long-term, and error correction model (ECM) to assess the contribution in a short-term empirically. The findings are, total deposits and total financing only contribute positively significant into GDP and gini ratio in a long-term, that similiar with the previous study. Then, a total financing contribute negatively to all indicators of inclusive growth in a long-term, but, its only significance on GDP and gini ratio. Means, it was contribute significantly to all indicators in a short-term.