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Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

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Article

Syed Ahmed Salman and Rusni Hassan

The purpose of this study is to examine the perception and acceptability of insurance policyholders to introduce takāful in India. The primary focus of this research is…

Abstract

Purpose

The purpose of this study is to examine the perception and acceptability of insurance policyholders to introduce takāful in India. The primary focus of this research is insurance policyholders because they currently have insurance policies and it is believed that they are familiar with the concept of insurance, compared to the people who do not have any insurance policy.

Design/methodology/approach

New product diffusion theory is used in developing the hypothesis and a questionnaire. In this research, the population is unknown, and hence, the non-probability sample is used. Quota sampling and snowball sampling methods are used in this survey, with a sample size of 909 respondents, including Muslim and non-Muslim policyholders. The external factors that motivate potential policyholders to participate in takāful are the independent variable here; while the respondents’ actual willingness to participate in takāful is the dependent variable. Regression analysis is performed to analyse the data.

Findings

Based on 909 respondents, it is found that the factors such as cost vs benefits, marketing and promotion and social and religion play a significant role in a consumers’ decision-making at 1% significant level overall. The attribute of agents can influence the consumers at a 10% significant level overall. However, other factors, namely, accessibility, availability and service quality, product features and reputation of the company cannot pursue the consumers in India.

Research limitations/implications

The questionnaires are distributed in 10 cities from nine states out of 28 states in India. Thus, it covers only one-third of the states. Future research can expand the respondents from other states that have not been researched.

Practical implications

India is opening to foreign investments in the Indian insurance industry, and thus, the findings are useful for industrial players, investors, policymakers for the development of takāful in India.

Originality/value

Limited research has been done in previous studies and this research is the pinnacle within-depth survey regarding takāful in India.

Details

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

Keywords

Content available
Article

Mohammad Mahbubi Ali and Rusni Hassan

Tawarruq (Islamic commodity financing) has evolved as the most ubiquitous concept in Malaysia’s Islamic banking industry. Nevertheless, the extensive use of tawarruq has…

Abstract

Purpose

Tawarruq (Islamic commodity financing) has evolved as the most ubiquitous concept in Malaysia’s Islamic banking industry. Nevertheless, the extensive use of tawarruq has invoked a number of Sharīʿah (Islamic law) concerns in its practice. This study aims to investigate the Sharīʿah non-compliant (SNC) phenomena in the practice of tawarruq financing in Malaysia.

Design/methodology/approach

This study adopts qualitative research methodology, combining both descriptive and content analysis. A self-administered questionnaire was distributed to 16 Malaysian Islamic commercial banks to unveil the Sharīʿah non-compliance issues in the application of tawarruq in Islamic banks (IBs) in Malaysia.

Findings

The study found that some practices of tawarruq in Malaysia might not comply with the Sharīʿah, mainly due to the improper sequencing of contracts. The study also discovered that IBs adopt different approaches in dealing with SNC events and the income derived therefrom. Finally, the study noted the influence of board of director/management on certain Sharīʿah decisions particularly on the treatment of non-ḥalāl (impermissible) income.

Practical implications

The findings of the study serve as a reference to industry players and regulators in formulating a Sharīʿah non-compliance risk management framework for tawarruq practices.

Originality/value

The survey on SNC issues in tawarruq practice constitutes the first of its kind in the existing literature.

Details

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

Keywords

Content available
Article

Aznan Hasan, Rusni Hassan, Engku Rabiah Adawiah Engku Ali, Engku Muhammad Tajuddin Engku Ali, Muhamad Abduh and Nazrul Hazizi Noordin

The purpose of this study is to propose a contemporary human resource management (HRM) framework by zakat institutions, which collect and manage religious alms, both…

Abstract

Purpose

The purpose of this study is to propose a contemporary human resource management (HRM) framework by zakat institutions, which collect and manage religious alms, both obligatory (zakat) and voluntary (ṣadaqah), in Malaysia.

Design/methodology/approach

In doing so, discussions pertaining to the key elements of zakat institutions’ HRM including recruitment, selection, performance appraisal, training and development and compensation are gathered from the existing literature and other sources of information such as zakat institutions’ websites and publications. In addition, zakat officers’ insight on how HRM is practiced at their institutions is gathered through a series of semi-structured interviews and incorporated in the findings of this study.

Findings

The paper finds that the state government, by virtue of the State Islamic Religious Council (SIRC), which is the sole trustee of all waqf properties in Malaysia, may have significant influence in formulating the human resource strategies and policies in zakat institutions.

Research limitations/implications

The proposed HRM model can be a useful reference for SIRC in enhancing the current human resource practice in its respective zakat institutions.

Originality/value

The novelty of this study lies in the proposed HRM model applicable to zakat institutions. The model emphasizes the alignment between the zakat institutions’ HRM practice and their zakat collection and distribution goals, as well as zakat management objectives in general.

Details

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

Keywords

Abstract

Details

Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

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Article

Sulaiman Lujja, Mustafa Omar Mohammad, Rusni Bt. Hassan and Umar A. Oseni

In 2014, Islamic finance assets are estimated to have exceeded US$2 trillion with over 100 products and an annual growth of over 20.7 per cent, across more than 76…

Abstract

Purpose

In 2014, Islamic finance assets are estimated to have exceeded US$2 trillion with over 100 products and an annual growth of over 20.7 per cent, across more than 76 countries, most of which are members of the Organization of Islamic Cooperation (OIC). Despite this remarkable market expansion, numerous OIC members such as Uganda are yet to fully adopt this unique financial system because of regulatory constraints. Thus, the purpose of this paper is to examine the extent to which Uganda can benchmark the Malaysian experience and best practices to overcome the regulatory challenges in introducing Islamic Banking.

Design/methodology/approach

This exploratory study adopts qualitative research methods through documentary review to elicit relevant information from the existing laws in Uganda that would accommodate the Islamic Banking system. Interpretive analysis and analytical methods are used to analyze data.

Findings

The Malaysian experience and best practices of Islamic Banking regulation need to be benchmarked by regulators. Relevant laws which require some amendments include section 37(a) and 38(1) of the Financial Institutions Act 2004 and section 29(3)(a) of the Bank of Uganda Act 2000. Similarly, tax legislation needs amendments to ensure a level playing field for Islamic finance and conventional finance products.

Originality/value

This is one of the earliest studies on models of Islamic Banking regulation suitable for adoption in Uganda. This study contributes to literature on how other jurisdictions (especially those with less regulatory prudence) could regulate Islamic Banking in a dual banking system jurisdiction.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 9 no. 3
Type: Research Article
ISSN: 1753-8394

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Article

Adam Abdullah, Rusni Hassan and Salina Kassim

The purpose of this paper is to provide a real asset management investment appraisal of the performance of containerships as a primary segment within international…

Abstract

Purpose

The purpose of this paper is to provide a real asset management investment appraisal of the performance of containerships as a primary segment within international shipping, to facilitate Islamic equity investment through a shipping fund. The objectives are to evaluate the risks and returns of shipping under the framework of Islamic equity finance, and to analyze the performance of investing in containerships over the long term, to appeal to retail and institutional clients of Malaysian asset management institutions.

Design/methodology/approach

Accordingly, the methodology adopts an investment analysis of a full population of historical data over a period of 20 years, to evaluate performance involving a maritime return on investment (MROI), internal rate of return (IRR), net yield and standard deviation measures of risk and return.

Findings

The findings reveal that while earnings are volatile in comparison to capital market expectations, unlevered, tax-free returns on containership investments outperform financial and other real assets.

Research limitations/implications

Shipping is a strong growth industry with about 84 per cent of global trade carried out by the international shipping industry. The problem is that many Islamic asset management institutions and investors have essentially no exposure to Islamic investment in international shipping.

Practical implications

However, shipping is a highly capital-intensive industry, and currently 75 per cent of ship lending has been conducted by European banks and financed on a conventional basis. Post-financial crisis, ship owners, ship lenders and shipyards have all been exposed to the impact of over-levered balance sheets and debt finance. There is a demand for alternative sources of finance.

Social implications

By communicating risk and reward more effectively, retail and institutional investors, as well as Islamic finance institutions, will realize that the social benefit of equity finance on the basis of profit sharing is more efficient at allocating investible resources than debt finance at interest, thereby increasing investment and economic growth.

Originality/value

The significance is that Islamic equity finance, rather than debt at the time-value of money, should enhance the development of international shipping.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 1
Type: Research Article
ISSN: 1759-0817

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Article

Nazrul Hazizi Noordin, Siti Nurah Haron, Aznan Hasan and Rusni Hassan

The purpose of this study is to provide a critical review on how the Khazanah’s Sukuk Ihsan was structured in compliance with the requirements for issuance of Sustainable…

Abstract

Purpose

The purpose of this study is to provide a critical review on how the Khazanah’s Sukuk Ihsan was structured in compliance with the requirements for issuance of Sustainable and Responsible Investment (SRI) sukuk set by the Securities Commission (SC) Malaysia.

Design/methodology/approach

To explain the structures and features of the Sukuk Ihsan, this study extracted important information from the sukuk’s Principle Terms and Conditions and Information Memorandum and presented them in a simple and easy-to-understand way. Next, this study refers to Part D: Requirement for Issuance, Offering or Invitation to Subscribe or Purchase Sustainable and Responsible Investment Sukuk of the SC’s Guidelines on Sukuk (revised edition: 28 August 2014) to assess the compliance of the sukuk in terms of eligibility of SRI sukuk issuer and SRI projects, use of proceeds, reporting and disclosure and independent assessment on SRI programmes. In addition, this study then compares the requirements stated in the SC’s SRI Sukuk Framework with the International Capital Market Association’s Green Bond Principles (GBP) and the USA’s Social Impact Bond (SIB) Act 2014.

Findings

The present study finds that the definition of eligible SRI sukuk issuer in the Guidelines on Sukuk seems to be more stringent compared to the one provided in the GBP and the US’ SIB Act. Nevertheless, the SRI Sukuk Framework provides a more comprehensive yet precise list of eligible SRI projects, covering both environmental and social aspects, compared to the GBP (which only focuses on broad categories of environmental projects) and also the USA’s SIB Act (explicitly outlines 13 social projects which are aligned with the US Federal Government’s agenda in tackling social illnesses). Indeed, the main difference between the eligible SRI sukuk projects and its conventional counterparts lies in its compliance to Shariah principles. It is also observed that a significant emphasis has been given on SRI legislations in ensuring proper reporting and disclosure provided to the SRI sukuk stakeholders together with critical evaluation on the impacts of SRI programmes provided by an independent assessor.

Practical implications

This paper contributes towards enriching the literature on the Islamic capital market, particularly on the integration between sukuk and social impacts investing. This paper was intended to highlight the important requirements in issuing SRI sukuk to various stakeholders of the Islamic capital market.

Originality/value

The authors hope to shed some lights on the unique features and structural applications of SRI sukuk and its importance in becoming an effective instrument to raise funds for social agenda of a country by providing a real and practical example.

Details

Journal of Islamic Accounting and Business Research, vol. 9 no. 3
Type: Research Article
ISSN: 1759-0817

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Article

Naji Mansour Nomran, Razali Haron and Rusni Hassan

Islamic banks (IBs) must stay Shari’ah compliant to enhance their customer loyalty and obtain a competitive edge. Given the performance of Shari’ah supervisory board (SSB…

Abstract

Purpose

Islamic banks (IBs) must stay Shari’ah compliant to enhance their customer loyalty and obtain a competitive edge. Given the performance of Shari’ah supervisory board (SSB) continues to be a matter of concern especially for IBs across countries that have a different regulatory environment, the purpose of this paper is to examine the effects of SSB characteristics on IBs’ performance in Malaysia being a country that applies the most extreme intervention of regulatory agencies (pro-active model).

Design/methodology/approach

A sample of 15 Malaysian IBs is used to test the study hypotheses for the period from 2008 to 2015 using the Generalized Method of Moments estimator.

Findings

The results reveal strong support for a significant association between SSB size, doctoral qualification, change in the SSB composition and performance. In addition, the study supports the view that SSB with cross-membership and reputation is very important in improving the performance of IBs.

Research limitations/implications

First, the paper focused only on Malaysia which adopts a pro-active model, and therefore, extending the investigation to include countries that adopt the different models may provide a better view of the best Shari’ah governance (SG) practices for IBs. Second, there is a need for more empirical analysis regarding the optimal SSB size of IBs.

Practical implications

This paper provides empirical evidence for regulators and policy makers in Malaysia, to understand how to enhance the performance of IBs using SG. Furthermore, marketers of Malaysian IBs should focus on SG practices as an important element for attracting Muslim customers, especially as there is a lack in this aspect.

Originality/value

To date, it seems there is no empirical study that has examined to what extent the impact of SSB characteristics on IBs performance can be affected by the degree of agencies intervention, whether extreme or slight. Malaysia has been chosen as the only country that adopts the most extreme model.

Details

International Journal of Bank Marketing, vol. 36 no. 2
Type: Research Article
ISSN: 0265-2323

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Article

Sulaiman Lujja, Mustafa Omar Mohammed and Rusni Hassan

Islamic banking (IB) has been globally embraced by over 76 countries, with over $2tn in assets. Despite this remarkable progress, there are countries that are yet to fully…

Abstract

Purpose

Islamic banking (IB) has been globally embraced by over 76 countries, with over $2tn in assets. Despite this remarkable progress, there are countries that are yet to fully embrace IB (Uganda inclusive). All the ongoing initiatives in Uganda (at policy level) to establish IB require supporting study of public awareness and attitudes toward IB. This will stimulate a down-top approach to the feasibility of IB and policymaking, thus providing a fertile ground for wider consideration of the majority stakeholders’ views in formulating standards and policy guidelines regulating IB. This study aims to explore the perception of Ugandans towards IB.

Design/methodology/approach

The study is exploratory in nature and uses a quantitative method. Out of the 400 questionnaires distributed, only 354 were usable for further analysis. SPSS 21 was used to analyze data using descriptive statistics and factor analysis.

Findings

Major findings indicate that unlike non-Muslims, Muslims are more knowledgeable about the IB culture, although both groups have low awareness about IB terminologies. There were inconsistences in Muslim and non-Muslim attitudes toward IB, for instance; while non-Muslims are motivated by “profitability”, Muslims’ inclination to IB is mainly due to “religious and profitability combined”. Both groups demonstrated some uniformity in their selection criteria of banks such as “third party influence”, although they are inconsistent in other factors.

Originality/value

The novelty of this study rests in its down-top approach to feasibility of IB by gauging the perception of majority stakeholders before IB is established. The study is conducted in a heterogeneous society unlike many of similar studies that have focused on Muslim majority countries. As most studies (with similar background) are at least 18 years old, this study remains outstanding in gauging the dynamics of stakeholders in Muslim minority countries which have yet established IB.

Details

Journal of Islamic Accounting and Business Research, vol. 9 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

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