Table of contents(15 chapters)
Part I: Social Finance
Purpose – Entrepreneurship development has become a goal of many countries to achieve economic development. Islamic economics is concerned with marketing, trading, business and entrepreneurship activities. This chapter examines the role of entrepreneurship development in Islamic economics.
Methodology/approach – This chapter is purely theoretical in nature. Thus, the Glorious Qur’an, Hadith and other related documents are its major sources.
Findings – The discussion reveals that entrepreneurship development has the potential to promote economic growth and development, employment, self-reliance and national growth. The discussion identifies a lack of capital and financial support as a principal obstacle to the development of entrepreneurship and entrepreneurs. This chapter further reveals that the success of entrepreneurship development and other commercial activities requires organisation in terms of coordination, networking and sharing of resources, as well as cooperation between government, public sector, private sector and enterprise.
Originality/value –The chapter is original in its form and arrangement having emerged as a novel attempt and the first of its kind. The chapter has a pearl of value to the Islamic economists, entrepreneurs, academic circle, and all those who may consider it relevant for application in their desirable business and cherish the value of its standing.
Purpose – This chapter examines the application of the concept of maslahah in household debt management.
Methodology/approach – A combination of quantitative and qualitative approaches is employed. Questionnaires were used for data collection.
Findings – Malaysian Muslims become indebted for four main purposes: buying their first car, their first home, helping family members, and financing their studies. Thus, Muslims principally borrow funds to fulfil their dharuriyyat (essentials) and hajiyyat (complementary) needs, and in some cases, they borrow for tahsiniyyat (luxury) purposes.
Research limitation/implications – The respondents of this research are working Muslims in the Klang Valley, Kuala Lumpur, Malaysia.
Practical implication – This study helps Islamic finance institutions to develop better products to offer customers. Its results can also give a real picture about borrowing activities to the Credit Counselling and Debt Management Agency.
Originality/value – Prior studies have mainly examined household debt management. This study surveys local Muslims’ household borrowing pattern to understand the nature of personal debt management and then analyses these data against the concept of maslahah. This will enrich the currently available literature.
Purpose – The purpose of this chapter is to study the concept of infaq in Islam, investigate its practice in Malaysia, analyse its role in public universities (PUs), investigate the issues and constraints of infaq for financing of higher education in Malaysia and suggest recommendations for improvement.
Methodology/approach – This study used a qualitative methodology and was conducted to obtain information on the practice of infaq in financing tertiary-level education in Malaysia, to learn about the recommended practice of infaq in Islam, to analyse its implementation and to explore the constraints faced in the financing of higher education in Malaysia.
Findings – This study indicated that the practice of infaq helps to ease the burden of rising fees and the cost of living for university students.
Research limitations/implications – The study only focused on the role of infaq in financing higher education in Malaysia. The sample for this study involved four PUs in the Klang Valley.
Originality/value – This study provides new contributions to the field of education infaq in Malaysia.
Part II: WAQF
Waqf From the Perspective of Majelis Ulama Indonesia (MUI) and the Scholars of Aceh: An Analysis
Purpose – Differing opinions about the status of cash waqf are not new among jurists. Several studies have been conducted relating to this issue. This chapter discusses cash waqf from the perspective of certain scholars in Indonesia, the Majelis Ulama Indonesia (MUI, Indonesian Scholars Council) and the scholars of Aceh, and the fatwa (opinion) on cash waqf.
Methodology/approach – Data for this study were collected from interviews and academic literature to reach general and specific conclusions. The study was conducted in Aceh, Indonesia.
Findings – Different views exist on the validity of cash waqf between the MUI and the scholars of Aceh. The MUI has declared that the practice of cash waqf is allowable and valid, while some scholars of Aceh reject it except when the cash is exchanged (istibdal) for permanent assets.
Originality/value – MPU scholars and pondok scholars are not in agreement as to the legality of cash waqf. Pondok scholars reject the practice of cash waqf except if the money is substituted (istibdal) into a fixed asset. This is so even when many other scholars of Aceh ruled that cash waqf is still valid even if it is not converted into a fixed asset.
The Potential of Cash
Waqf in the Socio-economic Development of Society in Kelantan: A Stakeholder’s Perspective
Purpose – This study analyses the potential of cash waqf for the socio-economic development of Kelantan state. A cash waqf scheme was established by the Kelantan Islamic Religious Council (Majlis Agama Islam Kelantan or MAIK) in an effort to contribute to the socio-economic development of the Muslim community in that state.
Methodology/approach – A qualitative method of data acquisition through interviews. Among the informants interviewed were persons well versed with waqf and Islamic affairs, and several relevant public persons in Kelantan.
Findings – The results indicate that the people of Kelantan are optimistic about the success of cash waqf, although the implementation of this instrument is still in its infancy there. The socio-economic development factors of the economy, education, well-being, agriculture, health and religious affairs can be improved with the implementation of cash waqf.
Originality/value – This chapter is the first attempt to discuss the potential of cash waqf in Kelantan.
Purpose – This chapter analyses the socio-economic development of the Muslim community in Kelantan through the establishment of the Bazar Wakaf Rakyat (People’s Waqf Bazar).
Methodology/approach – A qualitative method of data acquisition through interviews. Among the informants interviewed were the authority of waqf matter, the tenants of Bazar Wakaf Rakyat X, the tenants of Bazar Wakaf Y, the committee members of mosque X and local people in Kelantan.
Findings – The research indicates that the Bazar Wakaf Rakyat plays a role in enhancing the economic and spiritual development of the Kelantanese people. Economic development occurs through affordable rental rates, job opportunities, the construction of Bazar Wakaf Rakyat in strategic locations and the types of products being sold. The Bazar Wakaf Rakyat built inside the mosque compound also plays a part in spiritual development.
Originality/value – This chapter is the first to discuss issues relating to Bazar Wakaf Rakyat in Kelantan.
Part III: Takaful
Purpose – The purpose of this study is to review the responses of low-income earners to micro-takaful and its implementation in Banda Aceh.
Methodology/approach – The data for the study were obtained by interviewing three parties. These parties were practitioners, academic experts and low-income earners selected by purposive sampling in each zone of Banda Aceh.
Findings – The study found that there is a potential for micro-takaful to be offered in Banda Aceh due to the needs of low-income groups for it; however, there are many challenges which need to be overcome for successful implementation.
Research limitations – The study is limited to the potential implementation of micro-takaful in Banda Aceh. Therefore, the study involves only its residents.
Originality/value – This study makes a positive contribution to stakeholders by ensuring that they can provide micro-takaful schemes for the benefit of low-income earners. The study also adds to the literature on the concept of micro-takaful.
Purpose – Women are more susceptible to specific health risks such as breast cancer, cervical cancer, and risk during pregnancy and childbirth. These can affect women’s well-being and also need to be managed to avoid financial loss. Takaful operators in Malaysia have been offering special takaful products for women. Women can mitigate exposure to these risks through insurance. This study examines the risks faced by Malaysian women and the coverage they are offered by Islamic insurance.
Methodology/approach – The study used a qualitative methodology involving documentary evidence and interviews with four Islamic insurance agents and four product development officers from four Islamic insurance providers in Malaysia.
Findings – Among the risks faced by women are female-specific illnesses, the cost of expensive treatments, crime-related accidents or loss, social or career risks and privatisation policy. Due to these risks, women are in need of female-specific takaful products to reduce risk and protect themselves.
Originality/value – Specific takaful products for women are crucial to protect them from risks, improving their well-being and increasing their participation in the nation’s economic and social development.
The Islamic Perspective on the Underwriting of Health
Takaful Products: A Study of Selected Takaful Operators in Malaysia
Purpose – This chapter examines whether the underwriting processes of takaful operators for health takaful products conform to shariah.
Methodology/approach – A qualitative research method has been used for this study. Data have been collected from primary sources through interviews and from secondary sources by examining relevant documentation. Interviews were conducted with underwriters from takaful operators A, B, C and D. Interviews were also conducted with the shariah executives of these takaful operators and with shariah experts from two institutions – University A and Research Institute B – for their opinions on the underwriting process. This selection of respondents from those responsible for the underwriting process and from experts in shariah has assisted us in locating data for our research, based on their experience and the practices in which they are involved.
Findings – The study found that the underwriting process used by takaful operators was in accordance with Islamic principles.
Research limitations/implications – The study is limited to four takaful operators in Malaysia who have received awards for best operators; this study focuses on health takaful products.
Originality/value – This study provides a view about the process of risk selection which determines the contribution rate and whether a risk will be acceptable or not to the company.
Purpose – The objective of this study is to assess the level of understanding of family takaful among the Muslim community of southern Thailand.
Methodology/approach – This study used a questionnaire as the data collection tool. It sampled 400 respondents who were selected in a simple way, regardless of whether they owned protection policies or not. The methods used to analyse the data are descriptive statistics and means, and independent samples T-testing.
Findings – The study found that the Muslim community in southern Thailand had a generally low level of understanding of family takaful. However, the differences in the level of understanding between those who participated in family takaful and those who did not were examined. The research findings were then found to indicate that there was a distinction between the two groups: those who participated in family takaful had a clear and positive understanding of it, while those who did not had no clear understanding of it. These are significant differences which signify that participation in family takaful by Muslims in southern Thailand was influenced by their understanding of it.
Research limitations/implications – This study was conducted in the Muslim community in and around Muang District, Narathiwat Province, in southern Thailand.
Practical implications – This study clearly indicates, especially to those involved directly or indirectly in the takaful industry, that there are still many in the community who do not participate in family takaful because they lack understanding and have negative perceptions of it. Those who are involved must make the effort to communicate more in-depth insights to target communities, which could effectively enhance the uptake of family takaful.
Originality/value – This is the first empirical study of takaful in Thailand. It was conducted to determine the level of understanding of family takaful in the Muslim communities of southern Thailand and to compare the levels of understanding of family takaful between those who have participated in it and those who have not.
Part IV: Banking Institutions
The Application of
Bay’ Al-Tawarruq in Islamic Banking Institutions in Malaysia: A Study of Bank Muamalat Malaysia Berhad
Purpose – A study of Islamic banking products, especially bay’ al-tawarruq transactions, demonstrates that the purpose of these transactions is to provide liquidity to the customer, such as personal financing, working capital expenditure, cash lines and credit cards. However, as the industry expands, the industry is innovating to extend products to include an investment and deposit instrument that provides a fixed return to the customer. As the second fully-fledged Islamic bank in Malaysia, Bank Muamalat Malaysia Berhad (BMMB) offers products based on the bay’ al-tawarruq concept.
Methodology/approach – This study investigates the original principles of the bay’ al-tawarruq contract and its current applications in BMMB.
Findings – The study found that the bay’ al-tawarruq contract is being adopted as an alternative to the bay’ al-‘inah contract, especially for financing-based products offered by BMMB.
Originality/value – This is an attempt to study the application of Tawarruq contract in Bank Muamalat’s product offerings based on the process and mechanism of Bursa Suq al-Sila’ (BSAS).
Purpose – This study investigates the management of asset structures in Malaysia’s commercial banking sector.
Methodology/approach – The study uses unbalanced panel data from 17 Islamic banks in Malaysia, covering the period 1997 to 2012. All significant data have been taken into account in analysing whether there is a relationship between asset structure management and certain factors involving bank-specific financial conditions and macroeconomic features. These include financing, deposits, profits, money supply, gross domestic product (GDP) and composite indices.
Findings – The results reveal that asset management structure is significant for total financing, total deposits, money supply, GDP and composite indices. In conclusion, the management of asset structures acts to efficiently prevent any unexpected crises that may affect banking operations.
Originality/value – The structure of asset management in Islamic banking is influenced by internal and external factors which have the most impact on asset management by Islamic banks. Islamic banking also provides more financing to reduce their risk and at the same time they attempt to increase deposits and investment in due to interest rate volatility in conventional banking.
Islamic Versus Conventional Banking: Characteristics and Stability Analysis of the Malaysian Banking Sector
Purpose – This research analyses the stability of a number of banks operating in Malaysia by using descriptive statistical analysis based on internal variables. These include the characteristics of the bank, capital adequacy ratio, ratio of profitability, liquidity ratio and the ratio of bank operations.
Methodology/approach – Each bank’s stability is studied using z-score analysis. Data are sourced from the balance sheets and income statements of the banks from 2000 to 2011.
Findings – The results indicate that characteristics of a bank do influence a bank’s performance. There are significant differences in financial ratios between Islamic and conventional banking. Islamic banks provide a lower loan loss of capital to cover impaired loans than conventional banks. This provides high capital based on the mean value obtained. The capital ratio allows both sets of banks to meet the capital adequacy ratio set by the Central Bank of Malaysia. Meanwhile, in profitability ratios, conventional banks have higher returns on higher assets, whereas Islamic Banking has higher returns on higher equity. Only 8 Islamic banks and 11 conventional banks are highly stable banking institutions in Malaysia.
Originality/value – Islamic and conventional banking systems in Malaysia need further improvement to deal with unexpected economics crises and increased competition between the two. Hence, Islamic banking must be refined, especially for improving their stability to attract more investments for further development and performance.