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Open Access
Article
Publication date: 31 August 2022

Riyad Moosa and Smita Kashiramka

This study aims to explore the relationship between the objectives of Islamic banking, customer satisfaction and customer loyalty in the South African context. Diving deep, this…

7991

Abstract

Purpose

This study aims to explore the relationship between the objectives of Islamic banking, customer satisfaction and customer loyalty in the South African context. Diving deep, this study also explores the relationship between customer satisfaction and customer loyalty.

Design/methodology/approach

Purposive and snowball sampling techniques were used, resulting in 163 respondents participating in this study. The data was collected using an online survey and analysed using a structural equation model based on the partial least squares method.

Findings

The results indicate that the construct related to the objectives of Islamic banking influences both customer satisfaction and customer loyalty. In addition, customer satisfaction is also found to influence a customer’s loyalty to the Islamic bank.

Originality/value

In South Africa, to the best of the authors’ knowledge, this study is the first of its kind; thus, the results provide context-specific insights into the extant literature on Islamic banking for Muslims residing in a non-Muslim majority country.

Details

Journal of Islamic Marketing, vol. 14 no. 9
Type: Research Article
ISSN: 1759-0833

Keywords

Open Access
Article
Publication date: 25 March 2019

Mohamed Hamour, Mohammad Hassan Shakil, Ishaq Mustapha Akinlaso and Mashiyat Tasnia

This paper aims to analyse the concept of form over substance and introduces the term substance gap to the literature. The substance gap is defined as the difference between the…

6639

Abstract

Purpose

This paper aims to analyse the concept of form over substance and introduces the term substance gap to the literature. The substance gap is defined as the difference between the way a concept is expressed and its intended result. Besides, the study investigates the issue from both classical and contemporary viewpoints.

Design/methodology/approach

The methodology adopted in this paper is descriptive research.

Findings

This paper has depicted the substance gap in contemporary contracts and found that form is equally important as substance in Islamic finance contracts. This paper offers a fresh outlook on form and substance to highlight the importance of the issue and its significance. The findings of the study will help researchers address the issue at its roots and help them to bridge the gap between the form and substance of Islamic finance contracts.

Originality/value

This paper investigates the substance gap in contemporary contracts that exists between the fiqh rules and conditions of an Islamic contract, and their development and construction. Further, the gap could also be attributed to the pressure to cope with a complicated modern finance environment.

Details

ISRA International Journal of Islamic Finance, vol. 11 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 28 December 2020

Ahmed Tahiri Jouti

This paper aims to understand the issue of interest rate benchmarking in Islamic financial institutions (IFIs) from a macro-economic perspective and assessing the relevance of…

2622

Abstract

Purpose

This paper aims to understand the issue of interest rate benchmarking in Islamic financial institutions (IFIs) from a macro-economic perspective and assessing the relevance of creating a Sharīʿah-compliant profit rate benchmark to solve this issue. This paper also aims at suggesting an Islamic alternative that will handle both the negative economic impact on IFIs as well as on their financial performance.

Design/methodology/approach

The paper is based on literature review of conventional finance and Islamic finance theories to construct a theoretical model to assess the impact of interest rate benchmarking on the ability of IFIs to achieve the objectives of the Islamic economy.

Findings

The macro-economic perspective concludes that conceiving a profit rate benchmark for the Islamic finance industry is not relevant to raising the Sharīʿah credibility of the industry. Indeed, several adjustments need to be introduced in terms of the business model.

Research limitations/implications

The recommendations of this paper require the involvement of financial authorities and governments for their implementation. Indeed, the adjustments require a macro-economic review.

Practical implications

The paper considers a profit rate benchmark irrelevant and inefficient. Instead, it suggests the necessary adjustments in terms of business model and economic approach for IFIs to achieve their objectives.

Social implications

The paper considers zakat implementation and the adjustment of IFIs as the real path to implement a fair wealth distribution in the society.

Originality/value

The creation of a profit rate benchmark has always been the only solution for the pricing issue in IFIs. This paper challenges this idea and tries to give a deeper understanding of the situation.

Details

ISRA International Journal of Islamic Finance, vol. 13 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 26 July 2021

Unggul Priyadi, Kurnia Dwi Sari Utami, Rifqi Muhammad and Peni Nugraheni

This study aims to examine the influence of internal and external factors on the credit risk (represented by nonperforming financing [NPF]) of Indonesian Sharīʿah rural banks…

6755

Abstract

Purpose

This study aims to examine the influence of internal and external factors on the credit risk (represented by nonperforming financing [NPF]) of Indonesian Sharīʿah rural banks (SRBs) – a type of Islamic bank that provides Islamic financial services especially to small and medium businesses in Indonesia. Internal variables comprise capital adequacy ratio (CAR), financing to deposit ratio (FDR), return on assets (ROA), operating expense ratio (OER), financing to value (FTV) and profit and loss sharing (PLS) financing ratio. External variables comprise inflation, economic growth and interest rate.

Design/methodology/approach

The study uses the annual reports of SRBs in Indonesia as secondary data for the years 2010–2019. Auto regressive distributed lag (ARDL) is used as the analysis method to examine the short-run and long-run relationships between the variables.

Findings

The findings indicate that four variables experienced a lag in the short run, namely, NPF, inflation, CAR and PLS, with different results recorded for each of the variables. Furthermore, the long-run results show that CAR and ROA influence the NPF of SRBs positively, whereas inflation and PLS have a negative influence on NPF. The rest of the variables – notably economic growth, interest rate, FDR, FTV and OER – do not have an influence on NPF in SRBs.

Research limitations/implications

The level of NPF in SRBs exceeds the provision of the Central Bank of Indonesia. The findings are expected to have implications for SRBs and the regulator to consider and to manage the factors related to NPF properly due to the important role of SRBs in small and medium businesses’ development.

Originality/value

This study measures the determinants of NPF using internal and external variables, including the addition of a dummy variable, notably FTV. This study also uses ARDL to analyze the financial policies involving data at the present time and lagged time.

Details

ISRA International Journal of Islamic Finance, vol. 13 no. 3
Type: Research Article
ISSN: 0128-1976

Keywords

Content available
Book part
Publication date: 20 May 2019

Abstract

Details

Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice
Type: Book
ISBN: 978-1-78973-007-4

Open Access
Article
Publication date: 21 November 2018

Munawwaruzzaman Mahmud, Muhammad Hisyam Hassan and Nur Fathin Khairul Anuar

The purpose of this paper is to analyze the issue of bayʿ wa salaf (the combination of sale and loan contracts in a single arrangement) from the Sharīʿah perspective. Based on the…

2884

Abstract

Purpose

The purpose of this paper is to analyze the issue of bayʿ wa salaf (the combination of sale and loan contracts in a single arrangement) from the Sharīʿah perspective. Based on the Sharīʿah findings on the issue, the paper examines the existing Islamic banking products and services that use these two specific contracts to determine whether the current practice is in line with Sharīʿah.

Design/methodology/approach

The paper uses the qualitative method by reviewing and analyzing relevant literature and operational structures to comprehend the issues pertaining to bayʿ (sale) and salaf (loan). It then provides Sharīʿah parameters for bayʿ wa salaf before applying them in assessing some existing Islamic banking products and practices. Subsequently, the compliance status of the banking operations that use these contracts in a specific product structure can be ascertained.

Findings

The paper finds that the bayʿ wa salaf arrangement in the existing Islamic banking products and services, as elaborated in the paper, does not fall under the prohibited category. This deduction is made in accordance with the parameters derived from jurists’ discussion on the issue of bayʿ wa salaf. It also takes into consideration other factors influencing the existence of such arrangements.

Research limitations/implications

This conceptual research highlights the jurists’ discussion on the issue of bayʿ wa salaf and the compliance status of the current products and services that use the contracts in a single arrangement (specifically in the case of Malaysia) without discussing other possible structures that can be applied as an alternative to the bayʿ wa salaf arrangement.

Practical implications

Thorough understanding of the issue can strengthen the industry’s confidence in executing operations that conform to Sharīʿah principles.

Originality/value

The paper provides comprehensive deliberation on the ruling of bayʿ wa salaf from various schools of thought and exhaustive elaboration on existing Islamic banking products that apply bayʿ wa salaf in their structures. This contributes in reinforcing the stakeholders’ confidence in the operations of Islamic banking and finance.

Details

ISRA International Journal of Islamic Finance, vol. 10 no. 2
Type: Research Article
ISSN: 0128-1976

Keywords

Content available
Book part
Publication date: 19 June 2019

Abstract

Details

Asia-Pacific Contemporary Finance and Development
Type: Book
ISBN: 978-1-78973-273-3

Open Access
Article
Publication date: 29 July 2020

Yusuf Varli and Gokhan Ovenc

This paper aims to present the theoretical and conceptual framework of a new method in public finance called “participation based tax increment financing (P-TIF)” by combining…

Abstract

Purpose

This paper aims to present the theoretical and conceptual framework of a new method in public finance called “participation based tax increment financing (P-TIF)” by combining conventional tax increment financing (TIF) within the Sharīʿah-compliance structure.

Design/methodology/approach

This study develops a benchmark model for P-TIF, which offers a participative contract between both lender and borrower. With the help of this model, a financing schema in P-TIF is established by incorporating stochastic modelling. Possible implications and alternative options of application are also explored with a discussion of challenges.

Findings

The results mainly indicate that P-TIF promises lenders to be a part of increment from tax earnings, in return for a reduced interest rate. They show how a rise in participation of the lender in a given contract lowers the interest rate. Under the base case scenario, the interest rate is reduced to zero when the participation of the lender in tax increment is set at 50%.

Practical implications

With the feature of being interest-free, P-TIF can be implied also within the Sharīʿah-compliance framework, thanks to the model it is based on. Additionally, as the model in this paper is parametric, it can be applicable to various cases in Islamic finance.

Originality/value

To the best of our knowledge, this is the first paper in the literature in the sense that it provides a conceptual idea and respective model for TIF method within a Sharīʿah-compliance framework.

Details

ISRA International Journal of Islamic Finance, vol. 12 no. 2
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 29 July 2021

Muhammad Tariq Majeed and Abida Zainab

In recent years, the fast growth of Islamic banks (IBs) has generated debates among policymakers and economists about the sustainability and performance of these institutions…

10911

Abstract

Purpose

In recent years, the fast growth of Islamic banks (IBs) has generated debates among policymakers and economists about the sustainability and performance of these institutions. This paper aims to undertake a comparative analysis of the financial performance of IBs and conventional banks (CBs) in Pakistan over the period 2008–2019 to evaluate how IBs are faring compared to their conventional peers.

Design/methodology/approach

This paper considers Financial Ratio Analysis (FRA) to analyse and compare the performance of the top-10 IBs and CBs operating in Pakistan. The sample includes five full-fledged IBs and five CBs which offer Islamic windows in Pakistan. The top-five performing CBs offering Islamic windows have been selected in this study.

Findings

The results show that IBs are better capitalized, less risky and have higher liquidity as compared to CBs. In contrast, the profits of IBs are found to be lower than those of CBs.

Research limitations/implications

The study has provided an analysis of financial performance only for Pakistan. A cross-country analysis could be more representative of the performance of IBs.

Practical implications

The study infers that the size of the Islamic banking industry in Pakistan should be enhanced by opening new branches and promoting Islamic financial literacy.

Originality/value

The study assists investors, creditors, debtors and managers in making better decisions. It also provides the latest valuable information to regulators and policymakers that can be used to make rules and policies for the finance industry in Pakistan.

Details

ISRA International Journal of Islamic Finance, vol. 13 no. 3
Type: Research Article
ISSN: 2289-4365

Keywords

Open Access
Article
Publication date: 19 June 2018

Abdulbari 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…

3533

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.

Details

ISRA International Journal of Islamic Finance, vol. 10 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

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