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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

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Article
Publication date: 14 May 2019

Muhammad Shahrul Ifwat Ishak

This paper aims to investigate the current regulation of ibrā’ (rebate) set by the Central Bank for the Islamic banks in Malaysia and how far its original concept has been…

Abstract

Purpose

This paper aims to investigate the current regulation of ibrā’ (rebate) set by the Central Bank for the Islamic banks in Malaysia and how far its original concept has been compromised to make it adaptable to the modern financial system.

Design/methodology/approach

This study, with regard to practising ibrā’ in Islamic banking in Malaysia, is qualitative in nature, using semi-structured interviews carried out with two types of informant: members of either the National Sharīʿah Advisory Council (NSAC) or the Internal Sharīʿah Committee (SC). All data are analysed based on the content analysis method.

Findings

The findings reveal that while stipulating an ibrā’ clause makes practising ibrā’ stray from its original concept, it has successfully tackled the current problem. However, the long-term consequences should be a concern, particularly Islamic banking products, which have been significantly influenced by the conventional system, including interest rates and the debt structure, neither of which should be identified with Islamic banking.

Research limitations/implications

This study is limited because it focusses on the practice of ibrā’ in Malaysian Islamic banking. Moreover, data are collected from nine interviewees from NSAC and SC from different Islamic banks. Thus, the results cannot be generalised to other countries.

Originality/value

This paper provides a fresh discussion of ibrā’ from the perspective of regulators and the experience of practitioners in Malaysia, particularly in respect of aspects of Sharīʿah and current actual practice.

Details

Qualitative Research in Financial Markets, vol. 11 no. 1
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 2 June 2021

Muhammad Shahrul Ifwat Ishak, Muhammad Huzaifah Kamaruddin and Abdulmajeed Muhammad Raji Aderemi

This paper aims to explore the applicability of mudharabah (partnership) based crowdfunding as an alternative fund to support the book publishing industry, particularly…

Abstract

Purpose

This paper aims to explore the applicability of mudharabah (partnership) based crowdfunding as an alternative fund to support the book publishing industry, particularly for self-publishers and small publishers.

Design/methodology/approach

This is an exploratory qualitative study whereby the data are obtained from library research and empirical studies. As for empirical data, it is sourced from semi-structured interviews with three types of groups: the book industry, the crowdfunding platform and Shari’ah experts.

Findings

The study found that mudharabah crowdfunding could overcome the book publishing industry’s financial problems. However, this requires special requirements for applicants (writers or publishers) to avoid fraudulent cases, as well as committed management in running the platform and a substantial crowd of loyal funders to maintain the platform. Simultaneously, even though mudharabah is a risky instrument, the risk can be mitigated by closely monitoring the progress of the project. As a result, this study proposes a special framework for mudharabah based crowdfunding to fund self-publishers and small publishers in Malaysia.

Research limitations/implications

This is an exploratory study, in which its findings may not be generalised due to the limited number of participants.

Practical implications

A special model for mudharabah based crowdfunding can be established through an online platform to support book publishing in Malaysia.

Social implications

As this mudharabah crowdfunding model has the potential to support the book industry financially, it could also nurture talented young writers while also preserving knowledge.

Originality/value

This study highlights a fresh and in-depth discussion both in theory and practice in proposing a special Islamic crowdfunding framework based on mudharabah as an alternative fund for the book industry, particularly to support self- and small publishers.

Details

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

Keywords

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Article
Publication date: 10 November 2020

Muhammad Shahrul Ifwat Ishak and Fathullah Asni

This paper aims to explore the practical role of maqasid al-Shari’ah in applying fiqh muamalat to the reality of modern banking practices. As the modern financial…

Abstract

Purpose

This paper aims to explore the practical role of maqasid al-Shari’ah in applying fiqh muamalat to the reality of modern banking practices. As the modern financial environment is complicated and not too conducive for Islamic banking operations, a special approach based on maqasid al-Shari’ah is needed to harmonize between revelation and reality.

Design/methodology/approach

The data of this study are obtained through literature and empirical data. As for the empirical, the exploratory qualitative approach is applied in which three members of the Shari’ah Advisory Council (SAC) of Bank Negara Malaysia (BNM) as well as three Shari’ah committees (SC) of Islamic Finance Institutions are selected as interviewees. As a result, several themes are defined from the interview data before they are analyzed based on the concept of maqasid al-Shari’ah.

Findings

The findings reveal that several practices are prevalent in developing Islamic banking products, including replicating conventional products to be Islamic ones, imposing wa’ad (unilateral promise) to strengthen the combination of different contracts into one product, and adopting floating rate with ibra’ (rebate) for financing price, which are needed to sustain this industry in modern financial system. In this regard, maqasid al-Shari’ah is applied to reconcile between rulings in fiqh muamalat and banking environments, so that these rulings can be adopted pragmatically without compromising Shari’ah principles.

Research limitations/implications

This study has its limitations, as it focuses on the extent of the role of the maqasid al-Shari’ah in Islamic banking operations, excluding other segments of Islamic finance such as Islamic capital markets and Islamic insurance. Moreover, as data are collected from only six interviewees from SAC and SC of Malaysia, the results cannot be represented for the whole Islamic banking practices of this country.

Practical implications

This study provides several policy recommendations regarding the practice of the maqasid al-Shari’ah in Islamic banking. These may be useful for all Islamic finance players, including regulators and bankers in introducing policies and products in this area.

Social implications

This study has the potential to enhance the confidence of the Muslim community, particularly in Islamic banking to support its existence and practices. The impact of such optimism will lead to an increase in demand for Islamic banking products, hence encouraging Islamic banking to sustain and update its activities in line with maqasid al-Shari’ah.

Originality/value

This paper offers a practical approach as regards to how the maqasid al-Shari’ah can play a significant role in sustaining the Islamic banking industry, particularly in circumstances that are not favorable to its progress. It is indispensable to prevent the Islamic rulings from being diverted in the name of human well-being and to avoid basing them on a literal textual approach. Moreover, as it provides empirical studies on the issue of replication, wa’ad, floating rate and ibra’, the discussion on this subject becomes more practical.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 9
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 3 February 2021

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.

Details

Qualitative Research in Financial Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 23 September 2019

Muhammad Shahrul Ifwat Ishak

This paper aims to investigate the current mechanism of taʿwidh (compensation) from the perspective of Shariīʿah, which is used by Islamic banking in Malaysia to deal with…

Abstract

Purpose

This paper aims to investigate the current mechanism of taʿwidh (compensation) from the perspective of Shariīʿah, which is used by Islamic banking in Malaysia to deal with the issue of late payment.

Design/methodology/approach

This study is qualitative in nature, using semi-structured interviews carried out with two types of informant – members of the National Sharīʿah Advisory Council (SAC) and the Internal Sharīʿah committee (SC) – with regard to practicing taʿwidh.

Findings

The findings reveal taʿwidh is an alternative to the interest-based late payment penalty, which is prohibited in Islam. While taʿwidh finds justification in the hadith and maʿlaʿah, in respect of sustaining the competitiveness of the Islamic banking operation, its practice is still debatable because it is determined by a special rate instead of the actual loss. This paper addresses this issue by suggesting that even though the central bank has allowed Islamic banks to regard 1 per cent as their income, they should review that amount, and claim only the actual loss. The remaining money could be used for charitable purposes, which can be conducted by Islamic banks themselves.

Research limitations/implications

This study is limited because it focusses on the extent to which the current practice of taʿwidh in Malaysia has complied with Shariīʿah principles. It does not focus on gharamah (penalty), which is considered to be the second late payment penalty mechanism. Moreover, data are collected from nine interviewees from SAC and SC from different Islamic banks. Thus, the results cannot be generalised to other countries.

Originality/value

This paper highlights Shariīʿah concerns regarding the current application of taʿwidh. Moreover, as it uses primary data, it provides a fresh discussion of taʿwidh, from both the perspective of regulators in Malaysia and the experience of practitioners, particularly in terms of Shariīʿah compliance.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 12 no. 4
Type: Research Article
ISSN: 1753-8394

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

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