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Article
Publication date: 26 March 2019

Muhammad Shahrul Ifwat Ishak

This paper aims to investigate the extent to which maṣlaḥah (public interest) is taken into consideration in Islamic banking operations in Malaysia, particularly in bay

Abstract

Purpose

This paper aims to investigate the extent to which maṣlaḥah (public interest) is taken into consideration in Islamic banking operations in Malaysia, particularly in bayʿ al-ʿīnah (sale and buyback), taʿwiḍ (compensation) and ibrāʾ (rebate).

Design/methodology/approach

This study applies deductive and inductive methods to analyze the application of maṣlaḥah in Islamic financial transactions. Three issues in Malaysia are selected as a case study, allowing bayʿ al-ʿīnah, standardizing the rate of taʿwiḍ and stipulating the ibrāʾ clause in financial agreements. As this study is qualitative in nature, all data are analyzed based on the content analysis method.

Findings

Both the maṣlaḥah of Islamic banks and their customers were found to be considered by the Central Bank of Malaysia in the implementation of contracts and principles of Islamic banking. The first maṣlaḥah represents the viability of Islamic banks, while the second maṣlaḥah promotes fairness and transparency between Islamic banks and their customers.

Research limitations/implications

This study only focuses on the contracts and principles of Islamic banking operations in Malaysia with regard to three selected issues.

Practical implications

This paper clarifies the practical application of maṣlaḥah in the Islamic banking industry, particularly with regard to implementing its contracts and principles.

Originality/value

This paper analyzes the argument of maṣlaḥah on the issues of bayʿ al-ʿīnah , taʿwiḍ and ibrāʾ in Malaysia, which are considered among scholars to be debatable issues. While many discussions focus on the legal aspect of Sharīʿah on those issues, this study emphasizes how the application of maṣlaḥah aims to solve the current problems and harmonize between Sharīʿah and reality.

Details

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

Keywords

Content available
Article
Publication date: 29 July 2021

Islam Kamal

This paper aims to compare the rebate computation in Islamic sale-based financing contracts as proposed by Bank Negara Malaysia (BNM) in its guidelines on ibrāʾ (rebate) …

Abstract

Purpose

This paper aims to compare the rebate computation in Islamic sale-based financing contracts as proposed by Bank Negara Malaysia (BNM) in its guidelines on ibrāʾ (rebate) – with the rebate computation in conventional finance that is applicable to conventional loans, thus examining if there is a significant difference between the two approaches.

Design/methodology/approach

The paper employs the qualitative analysis method, involving review and discussion of relevant literature. Subsequently, a quantitative analysis is utilized to compare both rebate computations: the one proposed by BNM for Islamic sale-based financing contracts and the conventional finance computation that is utilized in conventional loans.

Findings

BNM's rebate computation for debts resulting from sale-based financing contracts does not differ from the conventional finance rebate computation applied to conventional loans; such similarity may raise the usury concerns that the conventional finance rebate computation raises.

Research limitations/implications

The paper focused only on the fixed profit rate rebate computation proposed by BNM guidelines.

Practical implications

The results highlight the need for seeking another rebate computation to be applied in Islamic financial institutions in the case of mandatory bilateral rebate for sale-based financing contracts – a computation that differs from the practice utilized in conventional loans in order to avoid any usury implications associated with conventional finance computation.

Originality/value

The paper examines the rebate practice proposed by BNM for sale-based financing contracts. Forcing a predetermined rebate computation in sale-based financing contracts could be plausible as BNM requires; however, the suggested computation might be questionable because it resembles conventional finance computation.

Details

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

Keywords

Content available
Article
Publication date: 2 December 2019

Suheyib Eldersevi and Razali Haron

This study aims to examine the resolutions issued by the Sharīʿah Advisory Council of Bank Negara Malaysia (SAC-BNM), which have recognized maṣlaḥah (public interest) as…

Abstract

Purpose

This study aims to examine the resolutions issued by the Sharīʿah Advisory Council of Bank Negara Malaysia (SAC-BNM), which have recognized maṣlaḥah (public interest) as the basis of ruling to see the extent of its usefulness to the public and the extent of its adherence to the maṣlaḥah parameters. The study will also look into the opposing opinion to identify the basis of rejection and overall implication on Islamic finance based on opposing opinions of SAC-BNM and other bodies of collective ijtihād (juristic interpretation).

Design/methodology/approach

The study uses a qualitative approach by analyzing the SAC-BNM resolutions, which have been resolved based on maṣlaḥah. The study also applies the comparative approach by comparing the fatwa (Sharīʿah pronouncement) issuing bodies of Malaysia and the Gulf Cooperation Council countries. Furthermore, the secondary data is obtained from sources such as uṣūl al-fiqh (theory of Islamic jurisprudence) books, papers and relevant internet sources.

Findings

The study found that SAC-BNM’s resolutions are in line with some of the major maṣlaḥah parameters mentioned in the uṣūl al-fiqh sources i.e. must not contradict with the Qurʾān and the Sunnah. While looking at the other two criteria of being in line with ijmāʿ (consensus) and having a general impact, such resolutions might not fulfill the criteria of valid maṣlaḥah considering, respectively, the stand of collective ijtihād or the impact on the group of customers and institutions.

Originality/value

Most available shari’ah (Islamic law) research considers the perspective of fiqh (Islamic jurisprudence) while analyzing the issue of maṣlaḥah. This study aims to conduct analysis based on uṣūl al-fiqh. Moreover, maṣlaḥah itself is a broad concept, which can be abused. Hence, this study discusses the parameters of maṣlaḥah to understand the validity of an important juristic tool in Sharīʿah.

Details

ISRA International Journal of Islamic Finance, vol. 12 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

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Article
Publication date: 7 May 2019

Syarah Syahira Mohd Yusoff and Umar A. Oseni

This paper aims to provide an analytical literature survey of selective studies on legal documentation in Islamic home financing with particular reference to Malaysia.

Abstract

Purpose

This paper aims to provide an analytical literature survey of selective studies on legal documentation in Islamic home financing with particular reference to Malaysia.

Design/methodology/approach

This study adopts the legal positivist methodology, with particular reference to inclusive legal positivism which takes into consideration the possibility of moral values challenging positive law. Within the context of this study, though positive law provides for rules that govern contractual matters in Islamic home financing, standardisation is a functionality of maslahah (or public interest) which transcends the mandatory provisions of positive law but helps to protect the interest of all stakeholders. This is analysed through a systematic literature review which aims to provide practical insights into industry practices relating to Islamic home financing in Malaysia.

Findings

This paper provides information on the standard documentation used by conventional banks and existing practices of diverse models of legal documentation in the home financing sector within the Islamic financial services industry in Malaysia. It also recognises the need for standard documentation that is not only Sharīʿah-compliant but also consumer-friendly, as the terms of any standard financing agreement ought to ensure consumer protection. There is also the need for a Shari’ah-compliant Sales and Purchase Agreement, as it forms part of the complete set of legal documentation for Islamic home financing.

Research limitations/implications

It is not an exhaustive study, as it did not consider practices in other jurisdictions offering Islamic financial services and products but only focusses on Malaysia. Though one may not generalise the findings of this study, Malaysia remains a leading model and a global hub for Islamic financial services and products.

Practical implications

A very useful source of information on the current state of legal documentation in Islamic home financing in Malaysia and the prevailing practices in the industry, which may serve as a guide for policymakers such as the Association of Islamic Banks in Malaysia (AIBIM) to embark on a full scale project of standardisation of all the legal documentation used in Islamic home financing.

Originality/value

This study fulfils an identified need of standardisation of legal documentation used in Islamic home financing in Malaysia and offers practical help to policymakers and future researchers starting out on systemic reforms.

Details

Journal of Islamic Accounting and Business Research, vol. 10 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Content available
Article
Publication date: 10 June 2019

Beebee Salma Sairally

Abstract

Details

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

Content available
Article
Publication date: 19 June 2018

Sa’id Adekunle Mikail, Noor Suhaida Kasri, Saba Radwan Elatrash and Abideen Adeyemi Adewale

This paper aims to examine the existing practices and pertinent issues affecting Islamic banks and their customers in abandoned housing projects (AHPs) to ensure…

Abstract

Purpose

This paper aims to examine the existing practices and pertinent issues affecting Islamic banks and their customers in abandoned housing projects (AHPs) to ensure compliance with Sharīʿah and statutory requirements.

Design/methodology/approach

This study employs the qualitative research method using the inductive approach to analyze both primary and secondary data and sources. Data collection involved a series of semi-structured interviews with five volunteering Islamic banks and a representative of Abandoned Property Owners Association Malaysia (Victims). Statutory acts, regulatory policies, guidelines, directives and standards were also analyzed.

Findings

The result indicates developer’s default, underlying contracts, regulatory arbitrage and bureaucracy, attitudinal disposition of customers and sell-then-build approach as major factors of AHP’s conundrum.

Practical implications

This study has suggested both short- and long-term solutions based on the principles of justice, public interests and removal of hardship to resolve and effectively manage financial hardship indebtedness arising from housing abandonment. Further, part of the proposed solutions would also reshape housing development policies and home financing transactions.

Originality/value

The quest for this research demonstrated Islamic banking industry’s initiatives to find lasting solutions to perennial issues of AHPs.

Details

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

Keywords

Content available
Article
Publication date: 18 October 2018

Nik Hadiyan Nik Azman, Salina Kassim and Adewalee Abideen Adeyemi

This study aims to offer a new area of discourse by investigating the factors determining the usage of the Islamic non-bank financing product ar-rahnu (Islamic…

Abstract

Purpose

This study aims to offer a new area of discourse by investigating the factors determining the usage of the Islamic non-bank financing product ar-rahnu (Islamic pawnbroking) among women micro-entrepreneurs in Malaysia within the framework of the informal credit market theory.

Design/methodology/approach

The study is based on primary data obtained by using self-administered questionnaires distributed in three states in Malaysia: Kedah, Kelantan and Terengganu. The questionnaires were distributed to a total of 750 participants, with each state contributing 250 respondents. Total number of respondents valid for data analysis was however 600.

Findings

Based on descriptive and inferential statistics by using the IBM statistical package for the social sciences and structural equation modelling analysis of moment structures, the results show that the main factor influencing women micro-entrepreneurs to use ar-rahnu is the service charge.

Research limitations/implications

This study only covers three states in Malaysia and is limited to examining the use of ar-rahnu by women micro-entrepreneurs in those states.

Practical implications

As micro-entrepreneur s often face constraints to obtaining financial access in the formal credit market, ar-rahnu provides an alternative mode of obtaining business financing to female micro-entrepreneurs, so they can sustain their operations and even expand their businesses. The significance of such factors like service fee, as revealed in this study, indicates that managers should focus on this element when offering Islamic financial products, especially to women micro-entrepreneurs.

Originality/value

The informal credit market theory is frequently used in conventional studies. This paper adds Sharīʿah compliance in the context of this theory as a new area to be considered when discussing Islamic financial products.

Details

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

Keywords

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