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1 – 10 of 419Zainab Belal Lawhaishy and Anwar Hasan Abdullah Othman
This study aims to propose and verify the suitability and applicability of Islamic equity-based microfinance models for financing micro, small and medium enterprises (MSMEs) in…
Abstract
Purpose
This study aims to propose and verify the suitability and applicability of Islamic equity-based microfinance models for financing micro, small and medium enterprises (MSMEs) in the State of Libya. The proposed models combine the unique features of social solidarity, cooperation “Ta’awan,” meeting religious requirements and providing financing more fairly and equitably.
Design/methodology/approach
A qualitative approach is applied in this study through semi-structured interviews with several Libyan experts, including Islamic bankers, Shariah scholars, MSMEs experts, Islamic microfinance experts and academicians. The data collected from 2019 to 2021 and thematic analysis by computer-based software NVivo is used to analyze the data.
Findings
The results indicate that the proposed Islamic equity-based microfinance models are suitable and applicable in Libya. This study also reveals that the proposed models have numerous potential benefits not only in meeting the financial needs of MSMEs but also in meeting the government objectives in economic divarication and socioeconomic development.
Research limitations/implications
First, the study proposes the applicability and suitability of Islamic equity-based models in financing MSMEs only, while large firms are excluded from the study. Second, the study only proposes and tests the applicability of Islamic equity-modes of financing contracts, namely, Musharakah and Mudarabah, while Islamic debt-based financing models are not included. Finally, as there is no practical evidence of using those models for financing MSMEs in Libya, this study lacks empirical evaluations of equity models’ real benefits on income, employment generation, living standards improvement and business growth and sustainability.
Practical implications
Given the importance of the MSMEs sector for the State of Libya’s economic growth, it is expected that the findings of this study can be of assistance in formulating guidelines and implementing Islamic equity-based microfinance programs. Besides, it can be a valuable source of information for policymakers for improving the functions of the current microfinance programs in the country. Additionally, as studies concerning Islamic alternative models for financing MSMEs are scarce, the current study can also be a reference point for researchers, academicians, practitioners and other stakeholders.
Social implications
Providing capital support for the underfunded economy segment, attracting small savings, increasing investments and developing entrepreneurial skills could lead to improved economic productivity and growth.
Originality/value
The present study proposes the structure of Islamic equity-based microfinance models for MSMEs in Libya and verifies the suitability of those proposed models among Libyan experts. To the best of the authors’ knowledge, no study has been conducted on uncovering and exploring the potentials of Islamic equity-based microfinance models for financing MSMEs in Libya.
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Muhammad Shahrul Ifwat Ishak and Md. Habibur Rahman
This paper aims to explore the potential application of mudharabah (silent partnership) as an investment instrument through an Islamic crowdfunding platform.
Abstract
Purpose
This paper aims to explore the potential application of mudharabah (silent partnership) as an investment instrument through an Islamic crowdfunding platform.
Design/methodology/approach
This is a qualitative study in which semi-structured interviews were carried out with several experts regarding the application of mudharabah in Islamic crowdfunding. To achieve the purpose of this study, the data is analysed based on thematic analysis.
Findings
The findings reveal that even though Islamic crowdfunding could be an efficient platform through financial technology (Fintech), mudharabah is not an entirely ideal instrument, particularly for equity-based Islamic crowdfunding because of its high risk. These include fraudulent projects, insufficient regulations to protect investors’ money and the structure of mudharabah itself in which it is in the form of profit-sharing contract. However, the risk can be mitigated by using Fintech as a way to closely monitor the project, enhancing regulatory aspects to protect investment funds, enhancing mudharabah practice and creating awareness among all involving parties in terms of mudharabah philosophy.
Research limitations/implications
This study is limited because it focuses on the current practice of Islamic crowdfunding in Malaysia, given that it is still a new industry. Currently, there is only one Islamic registered equity crowdfunding platform. Also, as the number of interviewees in this study is limited because of purposive sampling, the findings may be considered the result of an exploratory study.
Practical implications
An equity Islamic crowdfunding platform based on mudharabah can be proposed, particularly to support micro enterprises in which they involve small capital. Also, this model can be considered for less risky ventures such as investment in food industries or technology sectors.
Social implications
Mudharabah Islamic crowdfunding model could potentially support local businesses, especially for start-ups. By channelling money among society, it is not only creating a wealth circulation among society, which is one of the Sharīʿah objectives in finance, but it also promotes mutual cooperation and kindness among society members.
Originality/value
While Islamic crowdfunding is not a new topic in research, it lacks empirical studies, particularly qualitative analysis. As this study engages with experts in Sharīʿah and crowdfunding regarding the potential application of mudharabah, it highlights a fresh discussion both in theory and practice.
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This paper aims to achieve scale, efficiency and mitigate high monitoring costs, and explores the efficacy of micro equity finance at the enterprise level. The study compares the…
Abstract
Purpose
This paper aims to achieve scale, efficiency and mitigate high monitoring costs, and explores the efficacy of micro equity finance at the enterprise level. The study compares the economic features of the proposed framework with interest-based debt finance.
Design/methodology/approach
This study uses a mathematical model to highlight the problem of agency costs including adverse selection and moral hazard.
Findings
Debt finance requires frequent repayments and indebtedness for financial inclusion. Conversely, the Islamic equity modes of financing in their current baseline structure suffer from high agency costs. By using enterprise level finance and distinct entry criterion for availing Islamic debt-based and micro equity finance, Islamic microfinance institutions (IMFIs) can reach the right targets and effectively mitigate the problem of adverse selection and high monitoring costs. The study suggests a framework in which equity financing could be used to fund microenterprises that will employ poor people with related skills.
Research limitations/implications
As the preferable modes of Islamic finance, i.e. Musharakah and Mudarabah, are not used by Islamic financial institutions (IFIs), empirical analysis of performance is not possible as they are rarely used.
Practical implications
The study suggests a workable model that can use Islamic equity-based modes of financing to improve microfinance outreach and achieve scale. The use of equity financing will help the Islamic finance industry to move toward its egalitarian vision, and the practical implementation of the model will help in reducing poverty in the Muslim majority countries.
Social implications
Muslim countries host half of global poverty, even though their share in global population is only one-fourth. Hence, there is need for solutions in achieving scale in poverty alleviation efforts.
Originality/value
Using a mathematical model, the paper presents agency problems in Islamic microfinance and proposes a solution through distinct entry criterion and enterprise level micro equity finance.
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Muhammad Shahrul Ifwat Ishak and Nur Syahirah Mohammad Nasir
The purpose of this study is to analyse potential models of Islamic crowdfunding as an alternative financing option for micro-entrepreneurs in Malaysia. While crowdfunding has…
Abstract
Purpose
The purpose of this study is to analyse potential models of Islamic crowdfunding as an alternative financing option for micro-entrepreneurs in Malaysia. While crowdfunding has gained traction as an alternative funding source for businesses, it is unclear how far this concept can benefit a group of micro-entrepreneurs in Malaysia.
Design/methodology/approach
This study uses a qualitative research approach by using data collected through semi-structured interviews with several experts and practitioners in crowdfunding, Shariah and entrepreneurship. Prior to discussing the facets of the findings, the data were analysed based on a thematic approach.
Findings
The findings reveal that while previous works of related literature suggest crowdfunding as a viable alternative financing option for entrepreneurs and their businesses, in reality, its practical implementation presents challenges. Numerous micro-entrepreneurs need more training in the areas of management and marketing. Such concerns raise questions about their ability to attract potential project backers. With the proper selection of Shariah contracts and several approaches to risk management, Islamic crowdfunding can potentially become an alternative funding source for microbusinesses.
Research limitations/implications
Given the exploratory nature of this study regarding the applicability of Islamic crowdfunding as an alternative fund for micro-entrepreneurs, its findings may not fully encompass Malaysia’s context because of the limited number of participants involved.
Practical implications
The findings of this study offer guidelines on how to implement Islamic crowdfunding for micro-entrepreneurs. Consequently, Islamic crowdfunding has the potential to alleviate the government’s burden of providing funds for micro-enterprises and enhance their skills and mentality to be more independent, creative and able to promote their products.
Social implications
While Islamic crowdfunding can be an alternative opportunity for business enterprises and community-based projects, it promotes the spirit of cooperation and collaboration within society.
Originality/value
Although Islamic crowdfunding is a topic that has been discussed previously, empirical investigations in this area remain scarce, mainly through qualitative approaches. Distinguishing from prior literature, this study analyses several potential models of Islamic crowdfunding from the perspectives of experts, practitioners and related agencies for micro-entrepreneurs. Moreover, this study bridges insights from related literature so that they offer practical applications to support micro-entrepreneurs in Malaysia.
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The paper attempts to analyze the volatility of returns and expected losses of Islamic bank financing. In particular, it takes the case of Indonesian Islamic banking industry.
Abstract
Purpose
The paper attempts to analyze the volatility of returns and expected losses of Islamic bank financing. In particular, it takes the case of Indonesian Islamic banking industry.
Design/methodology/approach
The paper uses Value at Risk (VaR) approach to compute the volatility (risk) of returns and expected losses of Islamic bank financing. In particular, it uses variance‐covariance method to calculate VaR of multi‐asset portfolios (groups of equity‐, debt‐ and service‐based financing).
Findings
First of all, equity and debt‐based financing produce sustainable returns of bank financing. Moreover, they are also very resilient during unfavorable economic conditions. Second, the performance of service‐based financing is very sensitive to the economic conditions. Lastly, VaR computation on the volatility of returns and expected losses of bank financing finds that risk of investment and expected losses are well managed.
Practical implications
The paper demands Islamic banks to keep intensifying equity‐based financing rather than only debt‐based financing and improve the banking services to support the performance of service‐based financing.
Originality/value
To the best of the author's knowledge, this is the first paper to assist the volatility of returns and expected losses of the Islamic banking financing in Indonesian.
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The purpose of this study is to understand and analyze the key topics on which scholars have engaged in relation to crowdfunding and its starring role in the Gulf Cooperation…
Abstract
Purpose
The purpose of this study is to understand and analyze the key topics on which scholars have engaged in relation to crowdfunding and its starring role in the Gulf Cooperation Council (GCC) countries from an Islamic perspective. A Structured Literature Review (SLR) is used in this study to assess how scholars carried out their studies in order to better understand future research directions.
Design/methodology/approach
The study adopted a SLR methodology and considered 89 peer-reviewed studies published between 1981 and 2021 in GCC countries.
Findings
The study identified the starring role of crowdfunding from the Islamic perspective, its role in economic development and its role as a source of finance for new business startups in GCC countries.
Research limitations/implications
Because the research was conducted by a single person, his subjective interpretation might have an impact on the results. Furthermore, only journal papers limited to GCC and published between 1981 and 2021 were examined.
Practical implications
Countries in GCC might recognize the starring role of crowdfunding for their SMEs and economic development.
Originality/value
The authors draw avenues for future research by considering the starring role of crowdfunding using SLR from the Islamic perspective. This helps future researchers to identify the starring role of crowdfunding to contextualize in GCC countries.
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Masudul Alam Choudhury, Mohammad Shahadat Hossain and Mohammad Taqiuddin Mohammad
The purpose of this study of this methodological abstraction is erected the nature of the well-being function as evaluative criterion. The well-being function (maslaha) evaluates…
Abstract
Purpose
The purpose of this study of this methodological abstraction is erected the nature of the well-being function as evaluative criterion. The well-being function (maslaha) evaluates the interrelationships between long-run investment (real sector), the corresponding financial instruments (financial sector) and the embedded socioeconomic variables and ethical values conveyed by extensive complementarities and participation in a systemic approach of unity of knowledge. Among the financing variables to be selected will be the transformation of debt-instruments into equity instruments. All financial instruments are to be transformed into a holistic participatory pooled portfolio.
Design/methodology/approach
The paper establishes the point that, the idea of long-run is appropriately that of a juncture of Islamic change during which the objective of well-being (maslaha) is evaluated (estimation leading to simulation) with long-run investment and Islamic financing instruments on the basis of the Islamic methodological worldview. This methodological worldview is premised on the ontological foundation of the episteme of organic unity of knowledge and the resulting world-system. The Qur’an refers to this foundation of knowledge as Tawhid. Tawhid is used in this paper to mean the Primal Ontological Law of Unity of Knowledge.
Findings
The most critical long-run investment program focused on is poverty alleviation and its equity-based financing instruments that reduce debt progressively to attain sustainable grassroots development with the ability to own, and the social capability to distribute resources and enable the grassroots. The corresponding interaction, integration and evolutionary dynamics of learning that emanate from the interrelationship of poverty alleviation as the focus of long-run investments and their attenuating financing instruments, along with the implications of inter-causal socioeconomic variables and the embedded episteme of unity of knowledge in the well-being function (maslaha). This paper is thus an abstracto-empirical contribution to the literature of Islamic finance, long-run investment and socioeconomic development with global significance.
Research limitations/implications
The choice of long-run investment for poverty alleviation and the corresponding Islamic financing instruments are summarized by the following Tawhidi epistemic schema (an extractive picture). Upon this epistemic methodological worldview, the entire structure of well-being and sustainability of socioeconomic development lies.
Practical implications
The paper brings out many of the properties that ought to be the truly moral/ethical and thereby the conformable analytical nature of the model of financing and investment in a combination of short-, medium- and long-term mobilization of resources to attain levels of social well-being as the objective criterion. Empirical work is done to bring the objective criterion to an applied level and to critically examine the work in the same field being carried out by many other ones, including authors and institutions. The empirical work done here can be widely extended to the case of estimating of the maslaha function (well-being).
Social implications
This paper carries an essentially moral and social perspective in its methodological orientation that is derived from the Islamic epistemological foundations of unity of knowledge (Tawhid) and applied to Islamic finance and investment theory with the well-being objective criterion.
Originality/value
This is an original paper that combines methodological abstraction with applied financing and investment perspectives. Such an abstracto-empirical approach has not been done in Islamic research writings.
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Marwan Abdeldayem and Saeed Aldulaimi
The purpose of this study is to investigate and discuss the viability of Islamic crowdfunding (ICF) as an alternative form of financing small and medium enterprises (SMEs) in the…
Abstract
Purpose
The purpose of this study is to investigate and discuss the viability of Islamic crowdfunding (ICF) as an alternative form of financing small and medium enterprises (SMEs) in the Middle Eastern and Islamic business environment. This study raised essential questions: what is the perception of ICF in the Middle East? Does the Middle East region really need an Islamic crowdfunding model to support SMEs? Is it possible to create a crowdfunding platform complaint with Sharia? What are the requirements for developing an Islamic crowdfunding model?
Design/methodology/approach
The methodology followed to answer these questions is a qualitative research design depends on in-depth interviews, literature review, historical analysis and critical discussion. Data analysis was conducted using NVivo to analyze 25 in-depth interviews with Islamic scholars, Sharia board members and Islamic finance experts from different Middle East countries such as Saudi Arabia, Kuwait, Egypt, Iraq, UAE and Bahrain. In addition, more than 115 transcriptions, memos and research articles were used.
Findings
The study provides a new Islamic Sharīʿah-compliant crowdfunding model as the main outcome of this study. In addition, the content analysis revealed four main themes to be the essential pillars to develop the ICF model. These provisions of Islamic Sharia are: Project Idea (Halal) (28.5%), Funding Goal (36%), Return and Risk (14%) and Funding Commitments (21.5%). The findings also revealed that the four types of crowdfunding (reward-based crowdfunding, donation-based crowdfunding, loan-based crowdfunding and equity-based crowdfunding) are legal and supported by evidence from Quran and Sunnah.
Originality/value
Despite the critical development in Islamic finance and the expanding number of young Muslims slanting digital Islamic services, empirical studies exploring this issue in the Middle East is still inadequate. Further, ICF has increased attention and there is an urgent need for financing new SMEs in the Middle East.
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Aisyah Abdul Rahman, Shifa Mohd Nor and Mohd Fadzli Salmat
This paper aims to explore the strategies used by venture capital (VC) firms in assisting entrepreneurs who have business potential but lack capital. The study also aims to…
Abstract
Purpose
This paper aims to explore the strategies used by venture capital (VC) firms in assisting entrepreneurs who have business potential but lack capital. The study also aims to investigate whether the VC strategy can be adopted by Islamic banks through musharakah financing.
Design/methodology/approach
Apart from content analysis, primary data were gathered from several interview sessions with the management of three VC firms and two Islamic banks.
Findings
Islamic banks in Malaysia have great potential to offer musharakah financing and mitigate risk by adopting the following five VC strategies: method of selection, channelling of funds, monitoring, non-capital assistance and period of investment. We propose the channelling of corporate social responsibility funds for musharakah financing as an initial step in applying VC strategy.
Research limitations/implications
Given the limited number of willing and eligible respondents in Malaysia, the scope of this study can be widened to a cross-country analysis where musharakah financing is widely adopted.
Practical implications
This study motivates regulatory bodies and Islamic banks to consider musharakah financing using the risk monitoring strategy adopted from the VC industry.
Originality/value
This study is the first to empirically explore the strategy adopted by VC companies and evaluate whether such a strategy is suitable for the concept of musharakah financing.
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Siti Zaleha Abdul Rasid, Abdul Rahim Abdul Rahman and Wan Khairuzzaman Wan Ismail
The purpose of this paper is to explore whether there is any difference in the management accounting systems (MAS) of conventional and Islamic Financial Institutions (IFIs) in…
Abstract
Purpose
The purpose of this paper is to explore whether there is any difference in the management accounting systems (MAS) of conventional and Islamic Financial Institutions (IFIs) in Malaysia.
Design/methodology/approach
The paper was based on a survey of 45 conventional and IFIs listed on the Malaysian Central Bank's web site. The respondents were the chief financial officers (CFO). Post‐survey semi‐structured interviews were also conducted with eight respondents to gain further insights into the survey findings.
Findings
The survey results indicate that IFIs use MAS information that is broader in scope, more timely, more integrated and more aggregated than conventional financial institutions. The post‐survey interviews provide deeper and contextualised insights into this issue. The interview findings illustrate that IFIs normally develop and adopt an integrated accounting and enterprise system. Within this comprehensive enterprise system, the management accounting function is integrated with other functions of the organization.
Research limitations/implications
Since this study was conducted in the context of Malaysian financial institutions, the results may not be generalizable to other organizations. The findings of this study highlight the importance for IFIs to have integrated enterprise systems. Besides assisting in complying with Shari'ah and regulatory requirements, the integrated systems also support better decision making.
Originality/value
The paper fills a gap in the literature, as very few studies have examined the issue of management accounting in financial institutions. The paper is also one of the limited studies that explore the issue of MAS in IFIs.
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