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Article
Publication date: 24 October 2023

Adi Saifurrahman and Salina Hj Kassim

The primary objective of this study aims to intensively explore the environment of Indonesian regulations and laws related to the Islamic banking system and micro-, small- and…

Abstract

Purpose

The primary objective of this study aims to intensively explore the environment of Indonesian regulations and laws related to the Islamic banking system and micro-, small- and medium-sized enterprises (MSME) and unveil the restrictive laws and regulatory flaws that potentially hinder the Islamic banking institution and MSME industry in achieving financial inclusion and promoting sustainable growth.

Design/methodology/approach

This paper implements a qualitative method by implementing a multi-case study research strategy, both from the Islamic banking institutions and the MSME industries. The data were gathered primarily through an interview approach by adopting purposive uncontrolled quota sampling.

Findings

The findings of this paper reveal two essential issues: First, the regulatory imbalances and restrictions could demotivate and hinder the efforts of Islamic banks in providing access to finance for the MSME segment, hence, encumbering the achievement of the financial inclusion agenda from the Islamic banking industry. Second, the flaws in MSME registration and taxation might discourage the formal MSMEs from extending their business license and prevent the informal MSME units from registering their business. This issue would potentially lower their chance of accessing external financing from the formal financial institutions and participating in supportive government programmes due to the absence of proper legality.

Research limitations/implications

Since this paper only observed six Islamic banks and 22 MSME units in urban and rural locations in Indonesia using a case study approach, the empirical findings and case discussions were limited to those respective Islamic banks and MSME participants.

Practical implications

By referring to the recommendations as presented in this paper, two critical policy implications could be expected from adopting the proposed recommendations, among others: By addressing the issues of the regulatory imbalance associated with the Islamic banking industry and introduce the deregulatory policies on profit and loss sharing (PLS) scheme implementation, this approach will motivate the Islamic banking industry in serving the MSME sector better and provide greater access to financial services, particularly in using the PLS financing schemes. By resolving the problems on MSME registration and taxation, this strategy will enhance the sustainability of the formal MSMEs’ operation and encourage the informal ones to register, hence, improving their inclusion into the formal financing services and government assistance programmes.

Originality/value

The present study attempts to address the literature shortcomings and helps to fill the gaps – both theoretical and empirical – by incorporating the multi-case study among Indonesian Islamic banks and MSMEs to extensively explore the Indonesia regulatory environment pertaining to the Islamic banking system (supply-side) and MSMEs (demand-side), and thoroughly investigates and reveals the restrictive laws and regulatory flaws that could potentially hinder the Islamic banking institutions and MSME industries in attaining financial inclusion and contributing to sustainable development.

Details

Qualitative Research in Financial Markets, vol. 16 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 28 May 2020

Rafik Harkati, Syed Musa Alhabshi and Salina Kassim

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by offering an…

1184

Abstract

Purpose

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by offering an empirical compromise on the differences in the results of studies related to competition between the two types of banks.

Design/methodology/approach

Secondary data on all banks operating in Malaysia’s diversified banking sector is collected from the FitchConnect database for the period 2011-2017. A non-structural measure of competition (H-statistic) as informed by Panzar–Rosse is used to measure the competition between conventional and Islamic banks. Panel data analysis techniques are used to estimate H-statistic. Wald test for the market structure of perfect competition/monopoly is used to affirm the validity and consistency of the results.

Findings

The findings of this study signify that the Malaysian banking sector operated under monopolistic competition during the period of study. The long-run equilibrium condition holds for the Malaysian banking sector. Competition among conventional banks is more intense than that among Islamic banks. Financial reform endeavours of Bank Negara Malaysia (BNM) along with the liberalisation wave of the financial system were successful in promoting competition, rendering the financial system contestable, resilient and dynamic.

Practical implications

Regulators and policymakers may find the results beneficial in terms of rethinking the number of banks operating in the Islamic sector. The number of banks, however, is not the only determinant of competition in the banking sector. Implications of competition change for stability and risk-taking behaviour of banks should be considered.

Originality/value

Within the context of Malaysia’s diversified banking system, given the contradictory results reported in studies on competition, this study is an effort to provide a plausible middle ground. It suggests a possible answer as to why competition nature has not changed since the policy change initiatives of BNM, namely, banks merger, expansion of Islamic banking operation scope and liberalisation process.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 10
Type: Research Article
ISSN: 1759-0817

Keywords

Open Access
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 pawnbroking) among…

5462

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

Article
Publication date: 19 December 2022

Adi Saifurrahman and Salina H.J. Kassim

This study aims to explore and analyse the credit risk assessment procedure conducted by the Indonesian Islamic banks to address the issue of asymmetric information among their…

Abstract

Purpose

This study aims to explore and analyse the credit risk assessment procedure conducted by the Indonesian Islamic banks to address the issue of asymmetric information among their micro-, small- and medium-sized enterprise (MSME) clients. This study also investigates the gaps in credit risk assessment procedures by comparing Islamic banks’ practices and presenting several recommendations to reinforce the credit risk evaluation procedures and eventually promote more inclusion of the MSME segment into the Islamic financial services.

Design/methodology/approach

This paper adopts a qualitative method by implementing a multi-case study research strategy. The data were gathered primarily through an interview approach by incorporating purposive uncontrolled quota sampling.

Findings

The result of this study implies that the Islamic banks in Indonesia have their own unique approaches and strategies in assessing the credit risk and have several similarities in performing their evaluation procedures for the MSME. Despite seemingly adequate approaches and measures taken by the Islamic banks to eliminate the asymmetric information problem, the study identifies several gaps that occur within the Islamic banks’ methods of credit risk assessment.

Research limitations/implications

Since this study focuses on Indonesia and emphasises the two segments of Islamic banks, which consist of Islamic commercial and rural banks, in performing the MSME credit risk assessment; therefore, the findings of this study were limited around the observed Islamic banks within the MSME segment purview.

Practical implications

By referring to the recommendations as proposed by this paper, four implications could be expected from adopting these respective recommendations, among others: more effective evaluation procedures for the MSME, provision of a clear path and more efficient approach to assess the MSME units, lower financing cost and increase the confidence of Islamic banking industry in disbursing more financing to the MSME sector. This mechanism will potentially improve Islamic financial inclusion for the MSME due to the greater access to financial services; hence, the sector could contribute even more to Indonesia’s growing economy.

Originality/value

By incorporating a multi-case study among Indonesian Islamic banks pertaining to their methods in evaluating MSME customers, this study identifies several gaps affecting the effectiveness of MSME credit risk assessment. Furthermore, this study also presents a proposed framework to address these gaps accordingly by suggesting the salient strategies to minimise the issues of information asymmetry and enhance the MSME credit risk assessment procedure.

Details

Qualitative Research in Financial Markets, vol. 15 no. 3
Type: Research Article
ISSN: 1755-4179

Keywords

Open Access
Article
Publication date: 27 March 2020

Abdelkader Laallam, Salina Kassim, Engku Rabiah Adawiah Engku Ali and Buerhan Saiti

This study aims to highlight the importance of intellectual capital (IC) for the operation of waqf (Islamic endowment) institutions, as few studies have discussed this issue in…

4710

Abstract

Purpose

This study aims to highlight the importance of intellectual capital (IC) for the operation of waqf (Islamic endowment) institutions, as few studies have discussed this issue in relation to non-profit religious organisations, particularly waqf organisations. Consequently, this study hopes to contribute to the development of waqf institutions in terms of human capital proficiency, the efficiency of operations and the effectiveness and sustainability of performance.

Design/methodology/approach

The authors reviewed a significant body of relevant studies written on various aspects of IC, to highlight the significance of considering IC in the operation of non-profit organisations (NPOs) and waqf institutions.

Findings

This study highlights the importance of IC in the operation of waqf institutions. It provides a platform that facilitates understanding of the existing obstacles and challenges in waqf institutions (such as lack of accountability, lack of funding, mismanagement and lack of trained labour, among others) and offers potential solutions through the consideration of knowledge and IC.

Research limitations/implications

This study is a conceptual analysis of IC in the context of NPOs. Future studies should conduct empirical testing, which will provide more detailed discussion and enriching insights into the issue of IC and the performance of NPOs, particularly in the case of waqf institutions.

Practical implications

This study provides several important implications for waqf institutions and other NPOs, as it sheds light on the consideration of knowledge and IC in their operations.

Originality/value

To the best of the authors’ knowledge, this study is the first to discuss the issues of waqf in the light of IC and provide an integrated framework for the operation of waqf institutions.

Details

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

Keywords

Open Access
Article
Publication date: 17 May 2021

Mohamed Al Amine Sano and Salina Kassim

The purpose of this paper is to seek to establish an effective governance framework for waqf (Islamic endowment) in the Republic of Guinea that would assist in enhancing…

2294

Abstract

Purpose

The purpose of this paper is to seek to establish an effective governance framework for waqf (Islamic endowment) in the Republic of Guinea that would assist in enhancing socio-economic activities and eradicating poverty in the country.

Design/methodology/approach

It examines key governing features within the said country’s waqf legal framework and undertakes a comparison with other countries’ legal frameworks. This paper also examines waqf-related legal references of Guinea and other countries and analyses relevant online sources such as journal articles, research papers, webpages as well as informal discussions with persons informed on the subject matter within and outside the Republic of Guinea.

Findings

This paper identifies a number of prevailing issues affecting the development of the institution of waqf in the Republic of Guinea and, thereafter, proposes key reformatory measures. These include the passing of general codified legislation that comprehensively governs waqf affairs in the country and the setting up of a dedicated supervisory entity and competent managerial bodies to ensure the smooth and effective operation of the institution in the country.

Originality/value

This research proposes an innovative and befitting governance framework for waqf operations in the Republic of Guinea. These recommendations, if correctly adopted, would ensure the viability and efficacy of the institution of waqf in the Republic of Guinea and would lead to socio-economic development, as has been the case in other nations. Moreover, other countries with underdeveloped waqf governance systems could also model their waqf operations based on these recommendations, as they are most likely already encountering or going to encounter identical issues in this particular field.

Details

ISRA International Journal of Islamic Finance, vol. 13 no. 2
Type: Research Article
ISSN: 0128-1976

Keywords

Article
Publication date: 25 August 2020

Rafik Harkati, Syed Musa Alhabshi and Salina Kassim

The purpose of this study is to investigate the influence of capital adequacy ratio (CAR) prescribed in Basel III on the risk-taking behaviour of Islamic and conventional…

1035

Abstract

Purpose

The purpose of this study is to investigate the influence of capital adequacy ratio (CAR) prescribed in Basel III on the risk-taking behaviour of Islamic and conventional commercial banks in Malaysia. It also investigates the claim that the risk-taking behaviour of Islamic banks (IBs) and conventional banks (CBs) managers is identically influenced by CAR.

Design/methodology/approach

Secondary data for all CBs operating in the Malaysian banking sector are gathered from FitchConnect database for the 2011–2017 period. Both dynamic ordinary least squares and generalised method of moments techniques are used to estimate a panel data of 43 commercial banks, namely, 17 IBs and 26 CBs.

Findings

The findings of this study lend support to the favourable influence of CAR set in Basel III accord on risk-taking behaviour of both types of banks. CBs appeared to be remarkably better off in terms of capital buffers. Evidence is established on the identicality of the risk-taking behaviour of IBs and CBs managers under CAR influence.

Practical implications

Even though a high CAR is observed to hamper risk-taking of banks, the findings may serve as a signal to regulators to be mindful of the implications of holding a high CAR. Similarly, managers may capitalise on the findings in terms of strategising for efficient use of the considerable capital buffers. Shareholders are also concerned about managers’ use of the considerable capital buffers.

Originality/value

This study is among a few studies that endeavoured to provide empirical evidence on the claim that IBs mimic the conduct of CBs in light of the influence of CAR prescribed in Basel III on risk-taking behaviour, particularly banks operating within the same banking environment.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 10
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 28 August 2021

Laily Dwi Arsyianti and Salina Kassim

This paper aims to investigate low-income households in Indonesia with regard to their perspective on charity-giving and its comparison with acquiring debt behavior as their…

Abstract

Purpose

This paper aims to investigate low-income households in Indonesia with regard to their perspective on charity-giving and its comparison with acquiring debt behavior as their tendencies on taking and giving behaviors toward monetary form. The research framework is seen from the Islamic perspective.

Design/methodology/approach

Theory of social production function and theory of planned behavior are used as a theoretical framework. A total of 98.89% of the distributed questionnaires were collected and analyzed using structural equation modeling. Behavior of giving charity and acquiring debt are compared according to the given determinants.

Findings

Under the given Islamic framework, charity is found to be not confined to the donor’s wealth. It is rather centered on religiosity and faith. Subjective norm does not influence intention toward charity. Hence, it only depends on consideration and awareness of a person toward regular giving of charity. Unlike debt that is confined by a person’s wealth, the intention to take debt consecutively of low-income households are also affected by their attitudes, significant others and experiences.

Research limitations/implications

Respondents are residents of six Indonesian territories that represent West, Middle and East Indonesia.

Practical implications

Findings are useful for social, as well as microfinance practitioners who are interested in the financial education on low-income households and study their perspective and behavior.

Social implications

This paper indirectly contributes to changing the perspective of society about charity-giving, especially in philanthropy subject. This paper is also highly recommended for regulator’s input on financial education, as well as for practitioners, consultants and educators.

Originality/value

Charity basically can assist low-income households experiencing financial hardship, which may be the consequence of consecutive taking debt. Most of the studies on charity-giving focus on high-income households, likewise the debt behavior. Charity-giving in voluntary form is also not widely discussed in view of behavior, specifically in Asian countries like Indonesia.

Details

International Journal of Ethics and Systems, vol. 37 no. 4
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 27 May 2022

Abdelkader Laallam, Burhan Uluyol, Salina Kassim and Engku Rabiah Adawiah Engku Ali

The purpose of this paper is to investigate the relationship between the sub-components of intellectual capital and organisational performance in waqf institutions in Algeria.

Abstract

Purpose

The purpose of this paper is to investigate the relationship between the sub-components of intellectual capital and organisational performance in waqf institutions in Algeria.

Design/methodology/approach

Data was collected through structured questionnaires from a sample of 193 waqf employees working in 23 different provinces in Algeria and analysed using partial least squares – structural equation modelling (PLS-SEM) software to test the path modelling and the relationship between the instruments.

Findings

The results of this research show that human capital, structural capital and spiritual capital have a positive and significant relationship with organisational performance. However, relational capital, social capital and technological capital did not demonstrate any kind of role in the context of waqf institutions in Algeria.

Practical implications

The findings of this research are of great importance for waqf institutions in Algeria, as they provide a comprehensive screening with regard to organisational performance of these institutions through the lens of intellectual capital. The findings help waqf managers and policy makers consider effective solutions for the weaknesses and challenges impeding the performance of waqf institutions, in the hope of retrieving their role in serving and developing societies.

Originality/value

In the existing body of literature, there is a lack of research focusing on intellectual capital in the context of religious non-profit organisations particularly waqf institutions. Thus, this research adds to the body of knowledge on intellectual capital while highlighting its role and importance within the waqf industry, particularly in the context of Algeria. This research is considered among the primary attempts to investigate the impact of intellectual capital components on the organisational performance of waqf institutions in Algeria.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 7
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 27 June 2019

Taslima Julia and Salina Kassim

Environmental degradation has been identified as one of the major impediments for development in Bangladesh. The World Health Organization has ranked Bangladesh fourth among the…

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Abstract

Purpose

Environmental degradation has been identified as one of the major impediments for development in Bangladesh. The World Health Organization has ranked Bangladesh fourth among the most polluted countries in the world. Faced with this challenge, the Government of Bangladesh introduced the Green Financing Policy and encouraged banks to participate in offering green financing as part of the efforts to promote environment-friendly economic activities for sustainable economic development. This study aims to examine the financial performance of selected commercial banks that offered green financing in Bangladesh in the period from 2012 to 2014.

Design/methodology/approach

In achieving this objective, the paper has divided the various sections of green banking policy under Maqasid Shariah framework of Imam Al-Ghazali, which is preserving faith, life, intellect, posterity and wealth. After that, green performance is compared between five conventional banks and five Islamic banks, according to the secondary data gathered from the annual reports and sustainability reports, as well as verified based on interviews. Finally, based on quantitative and qualitative thematic analysis approach, it is identified which banks meet most of the Shariah objectives along with performing sustainably.

Findings

The study finds that none of the banks fully meet the green/sustainable policy requirements; however, the Islamic banks are ahead in preserving faith, intellect and wealth circulation.

Research limitations/implications

This research is mostly based on secondary data; banks’ non-disclosure of green data was an impediment to run in-depth and fair comparisons. However, to check the reliability and validity of secondary data, two heads of sustainable banking department from conventional bank and two from Islamic bank have been interviewed.

Practical implications

Based on the findings, several recommendations are made on ways to expedite green financing, which can ultimately enhance contribution of Islamic banks toward the sustainable economic growth of the country while fulfilling Maqasid Shariah.

Social implications

Because the green banking policy aim is very much in line with Maqasid Shariah which is the aim of Islamic banks, Islamic banks can presumably contribute more to the sustainable economic growth of the country by aligning their entire operations with green policies.

Originality/value

To the best of the authors’ knowledge, this study is perhaps the earliest initiative to compare Islamic and conventional banks’ green performances in Bangladesh.

Details

Journal of Islamic Marketing, vol. 11 no. 3
Type: Research Article
ISSN: 1759-0833

Keywords

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