Search results
1 – 10 of 23Ehsanullah Agha Syed and Mustafa Omar
This paper aims to develop a Sharīʿah framework for using ḥiyal in Islamic finance. Ḥīlah (singular of ḥiyal) is an Islamic juristic term which refers to the application of acumen…
Abstract
Purpose
This paper aims to develop a Sharīʿah framework for using ḥiyal in Islamic finance. Ḥīlah (singular of ḥiyal) is an Islamic juristic term which refers to the application of acumen and ingenuity to avoid hardship in one’s commitment to Islamic rulings. It has been used as a legal device in Islamic jurisprudence to actualize a legitimate objective. Particularly, it plays a significant role in financial engineering, as it alleviates financial predicaments with remedies.
Design/methodology/approach
The study adopted qualitative method of research by using content analysis approach. Inductive reasoning is applied to drive legal provisions from Sharīʿah sources that would be used as basic principles to develop an objective measure for using ḥiyal in Islamic banking and finance.
Findings
This study attempted to identify the distinctive features of legitimate ḥiyal for the purpose of developing a Sharīʿah framework. It is observed that a ḥīlah would be considered permissible in Islamic finance if it meets the prescribed criteria of (1) Sharīʿah objectives, (2) user’s motivation, (3) means, (4) benefit and (5) concessionary rules. This proposed framework may serve as an ‘objective measure’ that will determine whether a ḥīlah based financial engineering aims to actualize a genuine economic need or to circumvent the prohibition of ribā.
Practical implications
The proposed standard of ḥiyal will enable Sharīʿah advisors, economists, financial engineer, legal experts and policy makers to develop comprehensive guidelines for using ḥiyal in Islamic financial engineering.
Originality/value
Islamic financial institutions rely heavily on ḥiyal to operate in a predominant conventional financial system. The application of these legal stratagems in Islamic finance has been the center of an intense debate between Islamic economists and jurists. The former argues that over-reliance on ḥiyal not only divorces morality from technicality but also defeats the noble purposes of Islamic economics. This paper provides a synthesis of the diverse views on the subject to facilitate a minimum level of convergence among scholars on the permissibility of ḥiyal.
Details
Keywords
Muhammad Izzul Syahmi, Mohammad Taqiuddin Mohamad and Mohd Anuar Ramli
There are two purposes to this study: first, to identify the status of ḥiyal (legal devices) in the offering of deposit products based on the tawarruq contract in the Malaysian…
Abstract
Purpose
There are two purposes to this study: first, to identify the status of ḥiyal (legal devices) in the offering of deposit products based on the tawarruq contract in the Malaysian Islamic banking industry and second, to identify the reasons for the widespread offering of tawarruq-based deposit products by Malaysian Islamic banks (IBs).
Design/methodology/approach
The study uses the qualitative method that involved interviews with Malaysian Sharī‘ah experts and Islamic banking operations experts.
Findings
The findings show that Malaysian IBs resolved to use the tawarruq munaẓẓam contract in deposit products due to several constraints in the existing banking system and in view of customer preferences.
Research limitations/implications
This study solely focuses on tawarruq-based deposit products due to its extensive application in the Malaysian Islamic banking industry.
Practical implications
The implication of the study is that more stringent procedures are required in the offering of tawarruq-based deposit products as they are extensively utilised and have sparked controversy among Sharī‘ah scholars. Moreover, to retain Malaysia's Islamic banking reputation and trustworthiness, new and less controversial contracts must be developed.
Originality/value
This paper discusses the extensive usage of ḥiyal-based contracts such as tawarruq in Islamic banking institutions' deposit products, with justifications from Malaysian Islamic banking experts. The widespread use of the tawarruq munaẓẓam contract in deposit-based product offerings is based on a reasonable view considering the constraints that Malaysian Islamic banking is currently facing, with strict operation procedures by Bank Negara Malaysia to ensure real operations and to avoid fictitious elements. This paper reveals the use of tawarruq munaẓẓam in deposit products which allows the Islamic banking industry to operate effectively under Malaysia's dominant conventional banking system.
Details
Keywords
Muhammad Shahrul Ifwat Ishak and Fathullah Asni
This paper aims to explore the practical role of maqasid al-Shari’ah in applying fiqh muamalat to the reality of modern banking practices. As the modern financial environment is…
Abstract
Purpose
This paper aims to explore the practical role of maqasid al-Shari’ah in applying fiqh muamalat to the reality of modern banking practices. As the modern financial environment is complicated and not too conducive for Islamic banking operations, a special approach based on maqasid al-Shari’ah is needed to harmonize between revelation and reality.
Design/methodology/approach
The data of this study are obtained through literature and empirical data. As for the empirical, the exploratory qualitative approach is applied in which three members of the Shari’ah Advisory Council (SAC) of Bank Negara Malaysia (BNM) as well as three Shari’ah committees (SC) of Islamic Finance Institutions are selected as interviewees. As a result, several themes are defined from the interview data before they are analyzed based on the concept of maqasid al-Shari’ah.
Findings
The findings reveal that several practices are prevalent in developing Islamic banking products, including replicating conventional products to be Islamic ones, imposing wa’ad (unilateral promise) to strengthen the combination of different contracts into one product, and adopting floating rate with ibra’ (rebate) for financing price, which are needed to sustain this industry in modern financial system. In this regard, maqasid al-Shari’ah is applied to reconcile between rulings in fiqh muamalat and banking environments, so that these rulings can be adopted pragmatically without compromising Shari’ah principles.
Research limitations/implications
This study has its limitations, as it focuses on the extent of the role of the maqasid al-Shari’ah in Islamic banking operations, excluding other segments of Islamic finance such as Islamic capital markets and Islamic insurance. Moreover, as data are collected from only six interviewees from SAC and SC of Malaysia, the results cannot be represented for the whole Islamic banking practices of this country.
Practical implications
This study provides several policy recommendations regarding the practice of the maqasid al-Shari’ah in Islamic banking. These may be useful for all Islamic finance players, including regulators and bankers in introducing policies and products in this area.
Social implications
This study has the potential to enhance the confidence of the Muslim community, particularly in Islamic banking to support its existence and practices. The impact of such optimism will lead to an increase in demand for Islamic banking products, hence encouraging Islamic banking to sustain and update its activities in line with maqasid al-Shari’ah.
Originality/value
This paper offers a practical approach as regards to how the maqasid al-Shari’ah can play a significant role in sustaining the Islamic banking industry, particularly in circumstances that are not favorable to its progress. It is indispensable to prevent the Islamic rulings from being diverted in the name of human well-being and to avoid basing them on a literal textual approach. Moreover, as it provides empirical studies on the issue of replication, wa’ad, floating rate and ibra’, the discussion on this subject becomes more practical.
Details
Keywords
Hiyal Biyagamage and Chandana (Chandi) Jayawardena
– This paper aims to document the views of a Sri Lankan hotelier/tourism educator on the essential ingredients needed to ensure the future success of tourism in Sri Lanka.
Abstract
Purpose
This paper aims to document the views of a Sri Lankan hotelier/tourism educator on the essential ingredients needed to ensure the future success of tourism in Sri Lanka.
Design/methodology/approach
The paper is based on an interview covering eight questions in the context of a strategic overall question: “how might post-war Sri Lanka develop inbound tourism?”
Findings
Sri Lanka celebrates two milestones in 2012 – reaching one million tourists and US$ one billion annual income level from tourism. However, it is evident that the key to the future success of tourism in Sri Lanka is simply a “balancing act”. Various important aspects and initiatives should be carefully and strategically balanced now and in the long run so as to ensure that future tourism targets can be attained in a sustainable manner. In conclusion, 12 suggestions are made to reflect where balancing is most needed.
Practical implications
Tourism in Sri Lanka has the potential to emerge as a major export income earner. To further develop tourism, Sri Lanka must balance identified and important aspects and then find innovative and practical solutions.
Originality/value
An international hospitality and tourism educator and a Sri Lankan journalist collaborate in writing this question and answer style paper. The approach taken should be of interest and use to all stakeholders of tourism in Sri Lanka.
Details
Keywords
The purpose of this paper is to analyze the probability of Islamic credit card usage intention among Islamic banks' customers. Financial cost, knowledge of Islamic credit card…
Abstract
Purpose
The purpose of this paper is to analyze the probability of Islamic credit card usage intention among Islamic banks' customers. Financial cost, knowledge of Islamic credit card, attitude, financial recommendation and demographic items were examined in order to determine whether these factors are influencing the Islamic credit card usage intention or not.
Design/methodology/approach
Drawing upon the theory of reasoned action (TRA), this study proposes a conceptual model to examine the factors determining the Islamic credit card usage intention. The research model is evaluated using survey data from 354 respondents with the help of a questionnaire.
Findings
The results reveal that “financial recommendation”, “knowledge on Islamic credit card”, “age (young)”, “marital status”, “religion” and “education level” are significantly affecting the Islamic credit card usage intention. The research also concludes that “attitude on Islamic credit card” appears to have no effect on the Islamic credit card usage intention.
Research limitations/implications
The research has two limitations. The limitations however provide support for future researches in the area of Islamic credit card. Despite the limitations, the study contributes to the body of academic knowledge by shedding more light onto the factors affecting Islamic credit card usage intention.
Practical implications
Insights reported from this study are of particular importance to bank managers, providing them with an improved understanding pertaining to the Malaysian bank customers' usage intentions for Islamic credit cards. The research helps them to better plan for Islamic credit card facilities, in order to cater for the financial needs of Malaysia bank customers.
Originality/value
The contribution of the research lies in achieving a more profound understanding of Malaysia bank customers' usage intentions for Islamic credit cards. The research manages to discover the factors which particularly determine the use of Islamic credit cards. It also expands the literature on Islamic credit cards.
Details
Keywords
Raja Madihah Raja Alias, Norhashimah Mohd Yasin, Badruddin Hj Ibrahim and Mohd Yazid Zul Kepli
Money laundering and terrorism financing are financial crimes which affect the economic stability and integrity of the country. In this respect, the relevant regulator has a duty…
Abstract
Money laundering and terrorism financing are financial crimes which affect the economic stability and integrity of the country. In this respect, the relevant regulator has a duty to preserve and protect the financial stability of the country. This duty is in line with the concept of the protection of wealth (hifz al-mal) under the maqāsid al-Sharīʿah or higher objectives of Islamic law framework. The objective of this chapter is to examine the protection of wealth vis-á-vis money laundering and terrorism financing from the maqāsid al-Sharīʿah perspective. This study analyses the primary and secondary legal sources on the laws and regulations on anti-money laundering and counter financing of terrorism while also considering the primary and secondary sources of Islamic law. This study is significant as it makes an exploration of the maqāsid al-Sharīʿah perspectives and discusses the position of unlawful wealth that is acquired from the illicit gain of property from the abuse of money laundering and the financing of terrorist activities. This chapter suggests that Islamic law emphasises on the lawful ownership of wealth and prohibits a person from acquiring illicit wealth. This study will contribute towards the study on the deployment of maqāsid al-Sharīʿah, which is beneficial in safeguarding an individual action as well as the country’s commitment against abuse and misuse of wealth for financial crimes.
Details
Keywords
This paper aims to discuss the views of scholarship in South Asia regarding Riba and Riba-free finance, including the conservative and realist schools in mainstream thought and…
Abstract
Purpose
This paper aims to discuss the views of scholarship in South Asia regarding Riba and Riba-free finance, including the conservative and realist schools in mainstream thought and the assimilative and interpretive schools in liberal thought.
Design/methodology/approach
The paper uses textual analysis to critically review the writings of scholars in South Asia on contemporary issues regarding Riba and Riba-free finance. It provides a critical review in the light of Islamic jurisprudence and extant Islamic economics literature.
Findings
There are several characteristics in conventional banking and finance products that do not comply with Islamic teachings. In this scenario, Islamic banking is comparatively a better alternative to conventional banking and finance products to achieve Shari’ah compliance and avoid indulging in Riba.
Practical implications
Voluntary financial exclusion to avoid Riba is significant in Muslim-majority countries. Increased penetration of Islamic finance requires clarity on what is Riba and confidence in Riba-free alternatives. Outreach efforts of Islamic financial institutions use conventional banking as a frame of reference to provide a critique of interest-based banking. However, the apprehensions within the Islamic finance literature also need to be answered to change perception and enhance people’s willingness to use Islamic banking. Doing this can expedite the process of financial inclusion as well as help in the transformation of the economy on Riba-free foundations in a reasonably quick timeframe.
Originality/value
This is the first study to critically evaluate the financial proposals presented and propagated by the contemporary interpretive school in South Asia.
Details
Keywords
The purpose of this paper is to provide a critical appraisal of the theme of zulm (injustice/exploitation) in light of the Islamic finance literature and the general attitude and…
Abstract
Purpose
The purpose of this paper is to provide a critical appraisal of the theme of zulm (injustice/exploitation) in light of the Islamic finance literature and the general attitude and approach of the Islamic finance industry and its advocates.
Design/methodology/approach
Based on an expanding theoretical and empirical knowledge base about Islamic finance and banking movement, and the emerging understanding about the role of profit and corporate behavior, a critical analysis of the role of riba, interest and profit in widespread injustice and exploitation is presented.
Findings
On the basis of the behavior of the Islamic finance industry, it seems that the industry's current practices are either neutral to the issue of injustice/exploitation or mirrors the tendencies of the conventional finance. Furthermore, when comparing the exploitative role of interest and profit, the latter seems to be more consequential than generally understood and acknowledged.
Research limitations/implications
Islamic economics/finance literature should have more empirical research in identifying and understanding the nature of exploitation in the contemporary world and in how the current practices or tendencies are minimizing or abetting the challenge of exploitation.
Practical implications
The larger goal of the Islamic finance and banking movement should be to be in harmony with the maqasid of Islam to minimize zulm (injustice/exploitation) in the society.
Social implications
The larger goal of the Islamic finance and banking movement should be to be in harmony with the maqasid of Islam to minimize zulm (injustice/exploitation) in the society.
Originality/value
While the literature of Islamic economics and finance is rather robust, this might be the first work that critically examines the riba‐interest reductionism, especially to focus on its implication for attention of the industry being away from exploitation in general and the relationship between profit and exploitation in particular.
Details
Keywords
Othman Ibrahim Altwijry, Mustafa Omar Mohammed, M. Kabir Hassan and Mohammad Selim
The purpose of this study is to develop and thereafter validate a Sharīʿah-based FinTech Money Creation Free [SFMCF] model for Islamic banking.
Abstract
Purpose
The purpose of this study is to develop and thereafter validate a Sharīʿah-based FinTech Money Creation Free [SFMCF] model for Islamic banking.
Design/methodology/approach
The study has adopted a qualitative research methodology, using three approaches, namely, a survey of the literature to identify the research gap and the variables needed for developing the model, content analysis to construct the variables into a model and semi-structured interview with 10 experts in banking, Sharīʿah and Financial Technology (FinTech) to validate the SFMCF model.
Findings
The major findings of the study lie in developing the SFMCF model for Islamic banking, empirical validation of the model’s viability and acceptability and the implications for the main stakeholders of Islamic banks.
Research limitations/implications
The SFMCF model is specific to Islamic banking and its validation is based on the views of 10 experts.
Practical implications
The SFMCF would necessitate changes to the central bank regulatory framework, convince Islamic banks to forego their powers and advantages of creating money and enhance their abilities to fully adopt Sharīʿah-compliant FinTech.
Social implications
The proposed model if implemented would change positively the perception of the society particularly the stakeholders of Islamic banks and restore their trust and confidence about the direction of the institution toward achieving the Sharīʿah objectives.
Originality/value
The novelty of this work lies in developing and validating the viability and acceptability of the SFMCF model for Islamic banking.
Details