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1 – 10 of 48Salman Ahmed Shaikh, Abdul Ghafar Ismail and Muhammad Hakimi Mohd Shafiai
This paper aims to discuss the application of waqf (endowment) in the social finance sector for funding social and development projects and services.
Abstract
Purpose
This paper aims to discuss the application of waqf (endowment) in the social finance sector for funding social and development projects and services.
Design/methodology/approach
The study is qualitative. It reviews literature and provides descriptive data to present its main idea.
Findings
Most Muslim-majority countries are generally income-poor, and the governments are generally weak in their tax collection, effective governance and capacity for development spending. Private sector financial institutions are scarce and mostly cater to the people who can meet the income-based lending criteria. Thus, the institution of waqf can fill the gap as a social finance institution by providing intermediation services for effectively utilising perpetual social savings. Flexibility in the rules of waqf enables it to serve beneficiaries directly or through financial institutions and to provide a wide range of social services.
Research limitations/implications
This conceptual research highlights the need and potential of waqf without discussing the regulatory and operational details of how to effectively institutionalize it in different regions.
Practical implications
The institution of waqf can harness the potential of selfless charitable giving in an effective way for better economic impact in the targeted social segments of society.
Originality value
The paper suggests the establishment of waqf-based training and vocational centres which will increase opportunities of self-employment and contribute in upward social mobility of beneficiaries.
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Nurul Syazwani Mohd Noor, Muhammad Hakimi Mohd. Shafiai and Abdul Ghafar Ismail
This paper aims to propose a derivation of Shariah risk from both the Islamic finance theory and theory of contracts in Islamic law. Specifically, it deliberates the derivation of…
Abstract
Purpose
This paper aims to propose a derivation of Shariah risk from both the Islamic finance theory and theory of contracts in Islamic law. Specifically, it deliberates the derivation of Shariah risk following the contracts validity and apprises the readers of the Shariah risk issues currently under debate.
Design/methodology/approach
This study reviews the relevant literature and presents an analysis of contract rulings through evidence derived from the Qur’an, Hadith and other secondary sources of Islamic law. Various theories of Islamic finance and Islamic law of contracts are identified, to examine the general principles and essential elements and conditions of a valid contract.
Findings
This analysis asserts that any circumstances that may render invalidity of the contract will trigger Shariah risk. More importantly, this paper highlights the implications of invalid contracts, based on the opinion of Hanafi jurists, who concluded that Shariah risk may be derived from any void or voidable contracts due to the failure of the contractual parties to comply with Shariah contractual obligations.
Research limitations/implications
This paper emphasises the derivation of Shariah risk over theoretical approaches. It does not include an explanation in the form of any empirical model.
Originality/value
This is the first study that contributes to the field of derivation of Shariah risk, based on the theory from the Islamic law of contracts.
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Abdul Ghafar Ismail, Nik Abdul Rahim Nik Abdul Ghani and Mat Nor Mat Zain
This paper aims to make an attempt to analyze the adoption of wakalah in the tawarruq deposit that may trigger new issue.
Abstract
Purpose
This paper aims to make an attempt to analyze the adoption of wakalah in the tawarruq deposit that may trigger new issue.
Design/methodology/approach
This paper provides a review on the underlying contracts for deposit-taking activities.
Findings
There are two mains findings from this paper – first, the current deposit taking activities are characterized by principal guaranteed, it deems contrary to the nature of mudarabah. Second, we suggest the presence of wakalah in tawarruq term deposits and we argue that the application of the concept of bay al-wakillinafsihi would not affect the validity of wakalah.
Originality/value
This paper is considered to have its own originality in the sense that the introduction of tawarruq-based deposit product by Islamic banks could be the best alternative to the current deposit products.
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Salman Ahmed Shaikh, Mohd Adib Ismail, Abdul Ghafar Ismail, Shahida Shahimi and Muhammad Hakimi Mohd. Shafiai
This paper aims to integrate Islamic and mainstream economics framework towards a more realistic understanding of Muslim consumption behaviour.
Abstract
Purpose
This paper aims to integrate Islamic and mainstream economics framework towards a more realistic understanding of Muslim consumption behaviour.
Design/methodology/approach
The model incorporates some of the Islamic institutions like period-wise deduction of Zakat from endowments. It also includes bequests which could be significant given the Islamic injunctions on inheritance distribution and the significance placed on the institution of family. Furthermore, the model integrates the assumption that consumption opportunity set will axiomatically filter out the prohibited consumption goods from the consumption set in both contemporaneous and inter-temporal consumption.
Findings
Zakat ensures contemporaneous redistribution from endowment surplus households (those having Zakatable endowments above Nisab) to endowment-deficient households (those having Zakatable endowments below Nisab). The lifetime resources are scaled down for endowment surplus households because of the payment of Zakat in both periods and leaving bequests in old-age period, while the lifetime resources are scaled up for endowment deficient households because of the receipt of Zakat in both periods and receiving the bequests in youth.
Originality/value
The authors show how some of the Islamic principles and institutions can be integrated in the mainstream economics framework, especially in research studies where the objective is to understand and describe reality rather than persuasion and idealization.
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Salman Ahmed Shaikh, Mohd Adib Ismail, Abdul Ghafar Ismail, Shahida Shahimi and Muhammad Hakimi Mohd Shafiai
This study aims to examine the consumption behaviour in Organization of Islamic Cooperation countries.
Abstract
Purpose
This study aims to examine the consumption behaviour in Organization of Islamic Cooperation countries.
Design/methodology/approach
Using time series and panel data, this study estimates rational expectations permanent income hypothesis model and the intertemporal elasticity of substitution, and examines the response in consumption to expected and unexpected changes in income.
Findings
The evidence supports the phenomenon of loss aversion. The response of consumption to unexpected income changes is statistically significant in only one-third of the countries in the sample. Conversely, the response of consumption to expected income changes is statistically as well as economically significant in one-fourth of the countries in the sample. The intertemporal elasticity of substitution is also statistically insignificant in majority of OIC countries in the sample.
Practical implications
The evidence in support of loss aversion in preferences could help in explaining the low penetration of equity-based risk sharing instruments in Islamic finance.
Social implications
The excess sensitivity of consumption to income suggests that redistribution efforts to enhance incomes of poor households could help in enhancing their consumption levels.
Originality/value
The study takes a comprehensive sample across time and space for OIC countries as compared to previous studies and also adjusts the budget constraint for Zakat.
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Salman Ahmed Shaikh, Mohd Adib Ismail, Abdul Ghafar Ismail, Shahida Shahimi and Muhammad Hakimi Mohd. Shafiai
This study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods.
Abstract
Purpose
This study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods.
Design/methodology/approach
The authors comparatively analyze the performance of mutual funds using measures, such as tracking error, Sharpe ratio (1966), Treynor ratio (1965), M-square measure by Modigliani and Modigliani (1997) and information ratio. The authors also use market timing and selection measures, such as Treynor and Mazuy model (1966), Henriksson and Merton (1981) model and Fama’s decomposition approach (1973).
Findings
The authors find that Islamic equity funds are as much competitive as conventional equity funds. All Islamic equity funds have positive Sharpe ratio, Treynor ratio and net selectivity measure. Islamic equity funds are slightly less risky in general. Islamic equity and income funds generally have positive Jensen's Alpha and a positive market timing ability. However, the authors find that Islamic income funds generally underperform the market due to less Shari’ah-compliant investment class assets in the market.
Practical implications
It will help the industry players to assess their strategic positioning with regard to the commercial competitiveness of Islamic investments.
Originality/value
The authors take considerably large sample of 60 funds in Pakistan as compared to previous studies and also cover recent period (2006-16). For income funds, the authors construct an original benchmark index based on price and dividend data and use that in performance assessment.
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Salman Ahmed Shaikh, Mohd Adib Ismail, Abdul Ghafar Ismail, Shahida Shahimi and Muhammad Hakimi Mohd. Shafiai
This paper aims to study the cross section of expected returns on Shari’ah-compliant stocks in Pakistan by using single- and multi-factor asset pricing models.
Abstract
Purpose
This paper aims to study the cross section of expected returns on Shari’ah-compliant stocks in Pakistan by using single- and multi-factor asset pricing models.
Design/methodology/approach
To estimate cross section of expected returns of Shari’ah-compliant stocks, the study uses capital asset pricing model (CAPM), Fama-French three-factor model and Fama-French five-factor model. Data for the period 2001-2015 on 217 companies are used. For the market portfolio, PSX-100 and Dow Jones Islamic Index for Pakistan are used.
Findings
The study could not find empirical support for CAPM using Lintner (1965), Black et al. (1972) and Fama and Macbeth (1973) approach. Nonetheless, the relation between beta and returns is positive in up-market and negative in down-market. The results of Fama-French three-factor and five-factor models suggest that size premium is positive and significant for explaining the cross section of stock returns of small size stocks, whereas value premium is positive and significant for explaining the cross section of returns of high value stocks.
Practical implications
The results suggest that fund managers can use Shari’ah-compliant stocks for portfolio diversification and for offering specialized investments given the positive market excess returns and the existence of size and value premium on Shari’ah-compliant stocks.
Originality/value
This is the first study on Fama-French (2015) five-factor model for Islamic capital markets in Pakistan.
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Noraina Mazuin Sapuan, Nur Azura Sanusi, Abdul Ghafar Ismail and Antoni Wibowo
The purposes of this study are twofold. First, to theoretically examine the profit-sharing (mudarabah) contract that produces an optimal distribution of return in the presence of…
Abstract
Purpose
The purposes of this study are twofold. First, to theoretically examine the profit-sharing (mudarabah) contract that produces an optimal distribution of return in the presence of social learning (shuratic process) within the environment of asymmetric information. Second, to empirically investigate the optimal condition of profit-sharing ratio (PSR) and social learning for profit-sharing (mudarabah) contract in Islamic banking.
Design/methodology/approach
Data from one of the biggest and earliest Islamic banks in Malaysia were taken as a proxy of an Islamic bank. The data are collected from the period of 2009 to 2013, and these will be used for the simulation process by using the genetic algorithm (GA) technique.
Findings
The empirical results discovered that Islamic banks had used social learning in their daily activities, especially in the asset side. The results also showed that the trend of social learning has a positive relationship with the trend of Islamic banks’ net profit. Additionally, the results also indicated that the Islamic banks’ net profit has a positive relationship with its PSR from the profit-sharing (mudarabah) financing and securities investment.
Originality/value
This study is the first of its kind that investigates the implementation of the social learning process in Islamic banking operation. This study also used the latest technique from artificial intelligence system, i.e. a GA, to attain an optimal value for PSR and social learning process.
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Aas Nurasyiah, Dhealika Syamputri, Rumaisah Azizah Al Adawiyah, A. Jajang Warya Mahri and Abdul Ghafar Ismail
This paper aims to get an overview and determine the effect of the level of application of Islamic wealth management (IWM) and the level of business continuity of Muslim owners in…
Abstract
Purpose
This paper aims to get an overview and determine the effect of the level of application of Islamic wealth management (IWM) and the level of business continuity of Muslim owners in influencing the level of household prosperity of Muslim micro, small and medium enterprise (MSME) owners during the Covid-19 pandemic.
Design/methodology/approach
The method of hypothesis testing is carried out through a quantitative approach. The type of analysis tool used is partial least square-structural equation modeling. The sample used is 212 Muslim MSME owners in Indonesia.
Findings
The results showed that the level of application of IWM, the level of business sustainability and the level of household prosperity of Muslim MSME owners were in the high category. All variables in this study showed positive and significant results.
Research limitations/implications
The research conducted is still limited to households that act as MSME actors, so the respondents who are in it are still not diverse. Also, limited research tools and pandemic conditions led to filling out questionnaires based on respondents’ subjective views and difficulty asking questions when questions were not understood.
Originality/value
This research provides new insights focusing on the relationship between the variable level of application of IWM in influencing the welfare level of Muslim households who have MSMEs, where there is a role for the level of business sustainability as a mediator variable.
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Rose Abdullah and Abdul Ghafar Ismail
The purpose of this paper is to explore two main aspects of waqf: the characteristics of waqf property and the management of waqf. This paper also discusses the governance of waqf…
Abstract
Purpose
The purpose of this paper is to explore two main aspects of waqf: the characteristics of waqf property and the management of waqf. This paper also discusses the governance of waqf management as a source of funds for Islamic microfinance institutions (MFIs).
Design/methodology/approach
This research uses content analysis method to examine various literatures that discuss the concept and management of waqf.
Findings
The characteristics of cash waqf such as permanence, irrevocability and perpetuity differentiate waqf from other type of donations. Therefore, cash waqf-based Islamic microfinance needs to be sustainable. Good corporate governance is vital to ensure the sustainability. As the donors of cash waqf do not aim to make financial profit, waqf-based Islamic MFIs will be able to provide low-cost capital to the poor entrepreneurs. Furthermore, to ensure the perpetuity of the waqf, it is suggested that only revenue from the waqf property should be used for microfinance fund.
Social implications
The cash waqf-based Islamic microfinance will help the micro entrepreneurs to get low-cost capital without collateral. At the same time, public can donate any amount they afford to contribute to cash waqf.
Originality/value
The creation of a cash waqf-based Islamic MFI must observe the issues of agency conflicts and the right of stakeholders to a transparent management. This paper emphasizes the importance of good governance in managing the waqf property as a source of fund for Islamic MFIs.
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