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1 – 10 of 16Abdulbari Mashal, Amer Hajal, Om Kalthoum Majoul and Mir Riaz Ansary
This paper aims to investigate sale with the temporary exclusion of usufruct, a format debated in classical Islamic jurisprudence. More specifically, it examines the application…
Abstract
Purpose
This paper aims to investigate sale with the temporary exclusion of usufruct, a format debated in classical Islamic jurisprudence. More specifically, it examines the application of this sale format in the diminishing partnership arrangement used by American Finance House LARIBA to finance house purchases. It analyzes the Sharīʿah issues and assesses the risks involved.
Design/methodology/approach
The research is qualitative, surveying and critically analyzing classical fiqh literature and contemporary juristic resolutions, as well as LARIBA’s financing documents. Finally, it systematically surveys the associated risk factors, first qualitatively, and then by quantifying them.
Findings
The research concludes that sale with the temporary exclusion of usufruct is a valid contract in Islamic law. When the usufruct is priced at market rate, the financing arrangement is genuinely Islamic and brings added value. Moreover, it is very effective in addressing risks for Islamic banks, particularly in countries with legal systems not designed to accommodate Islamic finance.
Originality/value
This study systematically examines all aspects of a contract that has not received sufficient academic attention, that has been underutilized by the Islamic finance industry and that is more fitting for implementation than many of the contracts currently being used.
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Daniel Hummel and Ayesha Tahir Hashmi
The purpose of this paper is to explore the application of a profit and loss sharing approach to tax increment financing (TIF) districts in the USA.
Abstract
Purpose
The purpose of this paper is to explore the application of a profit and loss sharing approach to tax increment financing (TIF) districts in the USA.
Design/methodology/approach
A survey based on this approach was distributed to representatives of community redevelopment authorities (CRAs) in the State of Florida to ascertain practitioner feedback.
Findings
Although a majority of the respondents did not feel it was possible for political, economic and legal reasons, some did feel that it was a practical, reasonable and sustainable approach to financing projects for economic development. Some responses were correlated, with others indicating that certain beliefs framed their answers to the questions.
Research limitations/implications
The surveys were only distributed to CRAs in the State of Florida. Future research will need to include other CRAs in other states to make the findings more generalizable. In addition, the results are merely descriptive and are not an assessment of a successful application.
Practical implications
The need for more development in blighted areas of many cities across the USA will put emphasis on innovative approaches in financing this. The growth of Islamic finance in the USA and the regulatory framework for it might open a doorway for its application in this area.
Originality/value
This is the first attempt to apply an Islamic financing methodology to local economic development in the USA, with practitioner feedback.
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Edib Smolo and M. Kabir Hassan
The main purpose of this paper is to provide a comprehensive review of mushārakah mutanāqisah (MM; diminishing partnership) technique and its potentials for Islamic financial…
Abstract
Purpose
The main purpose of this paper is to provide a comprehensive review of mushārakah mutanāqisah (MM; diminishing partnership) technique and its potentials for Islamic financial institutions.
Design/methodology/approach
Based on an extensive literature review, this paper aims to highlight, explain and discuss the basic principles underlying implementation of MM and its distinctive features when compared to other modes of finance.
Findings
Islamic banks, throughout the years, developed several modes of finance which are more or less similar to their conventional counterparts. In fact, al‐Bayc bithaman al‐ājil (BBA) and murābahah are the two instruments most commonly used by Islamic banks and financial institutions. Investment and financing through the profit and loss sharing instruments is almost nonexistent within the Islamic financial system. MM technique is an alternative financial instrument available for Islamic banks. It is a relatively new and very little used product available for Islamic banks. The paper claims that MM is more in line with Shari'ah teachings and as such should be used more by Islamic financial institutions. The study indicates that MM possibly has a comparative advantage for both financier and the customer when compared with conventional loans and BBA.
Research limitations/implications
As a relatively new and untested mode of finance, the paper offers a theoretical overview only. Further studies should discuss more practical issues that keep banks away from utilizing MM more efficiently.
Originality/value
The comprehensive overview of the MM and underlying issue discussed in this paper is a very good foundation for further studies on the topic. It gives a clear theoretical base for practical implementation of MM.
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Mohd Zaidi Md Zabri and Razali Haron
This study aims to compare and contrast the financial affordability of Islamic home financing instruments such as bay’ bithaman ajil and musharakah mutanaqisah (MM) offered by…
Abstract
Purpose
This study aims to compare and contrast the financial affordability of Islamic home financing instruments such as bay’ bithaman ajil and musharakah mutanaqisah (MM) offered by various home financing institutions in Malaysia.
Design/methodology/approach
Mathematical simulations were carried out in examining the financial affordability (or lack thereof) of various Islamic home financing by both Islamic commercial banks (ICB) and financial cooperatives (FC).
Findings
This study has shown that MM by FC is a workable, more financially affordable option to potential homeowners. Unlike ICB, MM by FC uses rental rates as a benchmarking tool because of its inherent nature of flexibility.
Research limitations/implications
MM by FC has the potential to reduce the cost of home acquisition (purchase affordability) and the amount of monthly installments (repayment affordability) of homeowners in Malaysia.
Originality/value
This study shows the financial implication of unaffordable Islamic home financing instruments may have on the Malaysian households, which were derived from using official data from various government agencies.
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Rosylin Mohd Yusof, Salina H. Kassim, M. Shabri A. Majid and Zarinah Hamid
The purpose of this paper is to analyze the possibility of relying on the rental rate to price Islamic home financing product.
Abstract
Purpose
The purpose of this paper is to analyze the possibility of relying on the rental rate to price Islamic home financing product.
Design/methodology/approach
By comparing two models consisting of either rental rate or lending rate (LR) and selected macroeconomic variables that could influence property value, the study focuses on the Malaysian data covering the period from 1990 to 2006. The study adopts several econometric time‐series analysis, such as the autoregressive distributed lag estimates, bi‐variate Granger causality, and multivariate causality based on the vector error‐correction model.
Findings
The study finds consistent evidence that the rental price (RP) is a better alternative than the LR to price Islamic home financing product. In particular, the rental rate is found to be resilient to short‐term economic volatility, while in the long run, it is truly reflective of the economic fundamentals.
Practical implications
This feature of the RP renders it as a fair pricing mechanism for the Islamic home financing product. Results of this study contribute towards finding an alternative benchmark for the Islamic home financing product which is currently using the conventional interest rate as its benchmark.
Originality/value
To the best of the authors' knowledge, the current study is the first of its kind which provides empirical evidence for the possibility of relying on the rental rate to price Islamic home financing product.
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Hanudin Amin, Abdul Rahim Abdul Rahman and Dzuljastri Abdul Razak
This study aims to examine the factors influencing the consumer acceptance on Islamic home financing products amongst clients of Islamic banks. For the purpose, the study extends…
Abstract
Purpose
This study aims to examine the factors influencing the consumer acceptance on Islamic home financing products amongst clients of Islamic banks. For the purpose, the study extends the theory of planned behaviour (TPB) in explaining the Islamic home financing adoption along. Further, the study also intends to analyze the effects of “Islamicity of product” and seven demographic factors on the consumer acceptance of Islamic home financing products.
Design/methodology/approach
Using the TPB model as a baseline theory, data are collected from bank customers in East Malaysia involving two cities, namely, Kota Kinabalu and Labuan, using self-administered questionnaires. A total of 300 questionnaires are distributed; however, only 278 are found usable. We use ordered probit model to analyze the effects of attitude, subjective norm, perceived behavioural control, Islamicity of product and demographic factors.
Findings
Using the ordered probit model, this study finds that attitude, subjective norm, perceived control and Islamicity of product are instrumental in determining the consumer acceptance of Islamic home financing products. Concerned with demographic items, the study finds that marital status, ethnic, occupation and religion are influential. It is also discovered, however, that gender, academic qualification and monthly income have little effects on the consumer acceptance.
Research limitations/implications
Three limitations are available for future studies. First, the current work does not include the experienced users who patronize Islamic home financing products. Second, the contribution of the present study is confined to the analyzed explanatory variables. Third, this study also has geographical constraint in which it is conducted in East Malaysia whilst samples from West-Malaysia are overlooked. These limitations, however, provide directions for further future research.
Practical implications
Essentially, this study is a pioneering effort in applying the TPB model to the new context of Islamic home financing products in Malaysia. The study integrates the effects of Islamicity of product and demographic factors on the consumer acceptance on Islamic home financing products. The TPB model is proven valid and is reliable in predicting the consumer acceptance on Islamic home financing products.
Originality/value
This study introduces Islamicity of product and demographic factors in explaining the consumer acceptance on Islamic home financing products. Most fundamentally, this study proposes a modified theoretical framework that is of paramount importance to predict the demand of Islamic home financing products in the future.
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Mohd Zaidi Md Zabri and Mustafa Omar Mohammed
This study aims to validate a potential synergistic venture between cash waqf (Islamic endowment) institutions (CWIs) and financial cooperatives (FCs) in the provision of…
Abstract
Purpose
This study aims to validate a potential synergistic venture between cash waqf (Islamic endowment) institutions (CWIs) and financial cooperatives (FCs) in the provision of affordable Islamic home financing (IHF) in Malaysia.
Design/methodology/approach
The study adopted semi-structured interviews with ten experts to validate the cash waqf-financial-cooperative-mushārakah mutanāqiṣah (CWFCMM) model. Thematic analysis technique was used to analyse the verbatim texts.
Findings
The findings show that the majority of the informants have positive perceptions of the potential of the CWFCMM model to provide financially affordable IHF products in Malaysia. Nevertheless, this study sheds light on the varying degrees of latent issues and challenges that might arise in the implementation of this model. For example, FCs need to practice the correct business model, implement good governance structures and employ the right people. Meanwhile, CWIs need to work on their accountability issues by publishing their audited accounts in mainstream newspapers, much like what is being done by non-governmental organisations such as the widely recognised Malaysian Medical Relief Society (MERCY Malaysia).
Research limitations/implications
This study interviewed a small, industry-specific number of informants in generating its findings. Time and budget constraints are some of the limiting factors in carrying out the study. Because of these factors, the generalisation of the study’s findings will be limited.
Practical implications
First, the CWFCMM model offers an alternative, financially affordable IHF instrument to low- and middle-income households in Malaysia. Second, the involvement of third-sector institutions such as FCs and CWIs in the provision of IHF will reduce the burden of the government in its spending on home financing solutions for civil servants. Third, this model will harness the potential of waqf-based financing beyond the contemporary limited applications to mosques, graveyards and taḥfīẓ (Qurʾan memorization) schools.
Originality/value
This study presents an alternative IHF model that transcends the current institutional framework that is heavily dominated by Islamic commercial banks and government-owned home financing institutions. The study does not focus on a single third-sector institution but on an integration of at least two of them, CWIs and FCs, in implementing the IHF model.
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Nur Hasnida Abd Rahman, Mohd Zaidi Md Zabri and Mohammad Mahbubi Ali
This paper introduces the concept of manihah and develops a conceptual framework to address Malaysia's abandoned lands and food security issues.
Abstract
Purpose
This paper introduces the concept of manihah and develops a conceptual framework to address Malaysia's abandoned lands and food security issues.
Design/methodology/approach
This is a conceptual paper based on insights from the existing literature and secondary data on food security, abandoned lands and manihah. Based on the prevailing gaps, the study proposes a conceptual framework of the Manihah Agricultural Financing Model to address Malaysia's abandoned land and food security issues.
Findings
The proposed model can address abandoned lands and food security issues due to the new incorporation of manihah within Malaysia's agricultural and Islamic financial industries' milieu.
Research limitations/implications
This is a conceptual paper mainly intended to spark a discussion on the potentiality of manihah.
Practical implications
The paper contends that Islamic banks have a crucial role in furthering the socio-economic development agenda under the value-based intermediation (VBI). The paper will also be an excellent introduction to Islamic bank practitioners in understanding manihah's relevance to their daily operation.
Originality/value
This paper introduces manihah as the potential solution to food security issues by utilizing abandoned lands.
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M. Mansoor Khan and M. Ishaq Bhatti
The main objective of this paper is to highlight the unprecedented growth of Islamic banking and finance in the contemporary finance world. It captures the advancements of Islamic…
Abstract
Purpose
The main objective of this paper is to highlight the unprecedented growth of Islamic banking and finance in the contemporary finance world. It captures the advancements of Islamic banking and finance industry across the tools, systems, sectors, markets and over 75 countries from Africa, Asia, Europe and North America.
Design/methodology/approach
The paper deals with the paradigm of Islamic banking and finance. It constitutes a general review that bears special features, facts and figures over the recent developments of Islamic banking and finance across the globe. It takes stock of the growing institutional and infrastructure support for the Islamic banking and finance system in Muslim countries and Western financial markets.
Findings
The findings of the paper hold that Islamic banking and finance industry has been making breakthrough improvements to become a truly viable and competitive alternative to conventional systems at the global level. Islamic banking and finance institutions have acquired booming grounds in the Middle East, South East and South East Asia. These growing Islamic hubs have been acting as a launching pad to promote Islamic banking in Western business and financial markets. There are some core factors contributing to the recent success of Islamic banking and finance, such as spiraling oil prices worldwide, prolonged boom in the Middle Eastern economies, product innovation and sophistication, increasingly receptive attitude of conventional regulators and information technology advancements that have been acting as a catalyst for the Islamic banking and finance industry to go global. Given all growth patterns, Islamic banking may be able to win over the majority of customers from the Muslim world that constitutes almost 24 per cent of the world's population (over 1.3 billion), and other ethical groups across the globe in times ahead.
Research limitations/implications
The paper takes stock of on‐going developments in Islamic banking and finance industry worldwide. It deals with latest information, facts and figures, which however do not amount to a substantive volume to allow statistical testing and analysis to figure out the main factors and their actual contributions in making Islamic banking and finance emerge as the fastest growing industry of the global finance. This paper mostly bears a subjective outlook.
Originality/value
The paper aims to attract the global attention towards the fastest growing industry of the contemporary world of finance. It presents the case of the Islamic banking and finance industry in the most powerful, comprehensive and logical fashions to remove all misgivings about it in some circles, and let it be seen as an industry adding more ethical, competitive, flexible and diversified tools and systems to global financial markets. The paper highlights the increasing moral and material support that Islamic banking has been enjoying from Muslim governments and the public, and Western market players and regulators. It draws attention towards the growing number of products, systems, infrastructures and supporting institutions of Islamic banking over the recent years. The current trends of Islamic banking industry worldwide captured in this paper can tell all about its strength and weakness, future prospects and ambitions to become a truly innovative, competitive and integrated part of contemporary global finance.
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