Tatik Mariyanti and Akhmad Affandi Mahfudz
This paper aims to unveil the impact of government policy, socio-economic variable, Zakat Infaq Shadaqah (ZIS) and financing of Baitul Maal wat Tamwil (BMT) toward severe problem…
Abstract
Purpose
This paper aims to unveil the impact of government policy, socio-economic variable, Zakat Infaq Shadaqah (ZIS) and financing of Baitul Maal wat Tamwil (BMT) toward severe problem of poverty in Indonesia.
Design/methodology/approach
The paper considers dynamic circular causation model to produce proper solution on Indonesian style of poverty that hitherto remain unresolved.
Findings
All variables including ZIS, government policy, socio-economic variable and BMT financing have an impact toward poverty reduction.
Research limitations/implications
This paper confined to the scope of poverty that occurred in Indonesia only, and therefore all variables and literatures derived from Indonesian pedigree on poverty.
Practical implications
This paper implies that government policy will be shifted toward focusing on extending subsidy for rural society to uplift their income by involving in more real sector.
Originality/value
This paper considered to be scarce as focusing only for Indonesian style of poverty by using dynamic circular causation model as a solution.
Rosylin Mohd Yusof, Farrell Hazsan Usman, Akhmad Affandi Mahfudz and Ahmad Suki Arif
This study aims to investigate the interactions among macroeconomic variable shocks, banking fragility and home financing provided by conventional and Islamic banks in Malaysia…
Abstract
Purpose
This study aims to investigate the interactions among macroeconomic variable shocks, banking fragility and home financing provided by conventional and Islamic banks in Malaysia. Identifying the causes of financial instability and the effects of macroeconomic shocks can help to foil the onset of future financial turbulence.
Design/methodology/approach
The autoregressive distributed lag bound-testing cointegration approach, impulse response functions (IRFs) and forecast error variance decomposition are used in this study to unravel the long-run and short-run dynamics among the selected macroeconomic variables and amount of home financing offered by both conventional and Islamic banks. In addition, the study uses Granger causality tests to investigate the short-run causalities among the selected variables to further understand the impact of one macroeconomic shock to Islamic and conventional home financing.
Findings
This study provides evidence that macroeconomic shocks have different long-run and short-run effects on amount of home financing offered by conventional and Islamic banks. Both in the long run and short run, home financing provided by Islamic banks is more linked to real sector economy and thus is more stable as compared to home financing provided by conventional banks. The Granger causality test reveals that only gross domestic product (GDP), Kuala Lumpur Syariah Index (KLSI)/Kuala Lumpur Composite Index (KLCI) and house price index (HPI) are found to have a statistically significant causal relationship with home financing offered by both conventional and Islamic banks. Unlike the case of Islamic banks, conventional home financing is found to have a unidirectional causality with interest rates.
Research limitations/implications
This study has focused on analyzing the macroeconomic shocks on home financing. However, this study does not assess the impact of financial deregulation and enhanced information technology on amount of financing offered by both conventional and Islamic banks. In addition, it is not within the ambit of this present study to examine the effects of agency costs and information asymmetry.
Practical implications
The analysis of cointegration and IRFs exhibits that in the long run and short run, home financing provided by Islamic banks are more linked to real sector economy like GDP and House Prices (HPI) and therefore more resilient to economic vulnerabilities as compared to home financing provided by conventional banks. However, in the long run, both conventional and Islamic banks are more susceptible to fluctuations in interest rates. The results of the study suggest that monetary policy ramifications to improve banking fragility should focus on stabilizing interest rates or finding an alternative that is free from interest.
Social implications
Because interest plays a significant role in pricing of home loans, the potential of an alternative such as rental rate is therefore timely and worth the effort to investigate further. Therefore, Islamic banks can explore the possibility of pricing home financing based on rental rate as proposed in this study.
Originality/value
This paper examines the unresolved issues in Islamic home financing where Islamic banks still benchmark their products especially home financing, to interest rates in dual banking system such as in the case of Malaysia. To the best of the authors’ knowledge, studies conducted in this area are meager and therefore is imperative to be examined.
Details
Keywords
Rosylin Bt Mohd Yusof, Akhmad Affandi Mahfudz, Ahmad Suki Che Mohamed Arif and Nor Hayati Ahmad
This paper aims to propose a new pricing alternative called Rental Rate Index (RR-I) that captures the true value of property to be used by Islamic banks in Musharakah Mutanaqisah…
Abstract
Purpose
This paper aims to propose a new pricing alternative called Rental Rate Index (RR-I) that captures the true value of property to be used by Islamic banks in Musharakah Mutanaqisah (MM) contract for home financing.
Design/methodology/approach
By formulating a profit rate based on Rental Index (RI) and House Price Index (HPI), the proposed rate eliminates conventional profit rate benchmarking, and, at the same time, suggests a fair, equitable and sustainable financing. This new RR-I (measured by RPI/HPI) enables computerization of the MM system in home financing to be easily implemented. A financial simulation is developed to demonstrate the feasibility of this newly proposed rate.
Findings
This newly proposed RR-I is found to be more stable, having less fluctuations, resilient to macroeconomic conditions and yet comparable to the conventional interest rates, without depending on them. It can also be regarded as a rate that is fair and sustainable to both the customer and the bank, as it measures the actual rate of return to both parties in MM contract.
Research limitations/implications
The paper confines one contract, namely, MM, as it is claimed to be more Shariah-compliant than others.
Practical implications
The finding also sheds some light on the recommendation by Bank Negara Malaysia, which is to consider RR that is more indicative of the actual rental price while taking into account the competitiveness of the product. (BNM, 2007).
Social implications
This paper wreaks customer patronage in selecting the contract of home financing.
Originality/value
This paper attempts to resolve the issue of benchmarking RR to the conventional interest rate in the MM contract. Studies conducted on this issue via simulation approach are meager.
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Keywords
Akhmad Affandi and Dewi Puji Astuti
The purpose of this paper is to examine the poverty rates of Indonesia, Malaysia and Pakistan, representing majority Muslim populations, and of India as a minority Muslim…
Abstract
Purpose
The purpose of this paper is to examine the poverty rates of Indonesia, Malaysia and Pakistan, representing majority Muslim populations, and of India as a minority Muslim population, according to Ibn Khaldun's dynamic model on poverty.
Design/methodology/approach
According to Ibn Khaldun, poverty is not merely influenced by economic dimension. He initiated fundamental factors as mentioned in his formula P=f(W,G,N,S,g,J ) where P is a function of Wealth of the Nation (W ), Government (G ), Human Resource (N ), Sharia (S ), Growth ( g) and Justice ( J ). This study generates secondary data covering from 2000‐2010 or after financial crisis of 1997. These data employed using Panel method.
Findings
The study's findings reveal that the variable of Dynamic model of Ibn Khaldun influenced significantly the level of poverty in Indonesia as a Muslim majority population, whereas in Pakistan only the HDI variable has significant influence. Meanwhile (like Malaysia) in India, the variable of Dynamic model of Ibn Khaldun does not influence significantly.
Research limitations/implications
Each country has certain characteristics and background with respect to economic growth, government policy and population that might influence poverty. As a result, the application of Ibn Khaldun model varies accordingly.
Practical implications
The findings reveal that quite a few challenges lie ahead in applying Ibn Khaldun model in these countries. This needs to be taken on promptly by each country, especially Muslim countries.
Originality/value
This paper is one of few studies which employ Ibn Khaldun theory on poverty, using panel data to investigate the appropriateness of the model.
Details
Keywords
Akhmad Affandi and Dewi Puji Astuti
The purpose of this study is to examine the poverty rate of Indonesia, Malaysia and Pakistan representing majority Muslim populations and that of India as a minority Muslim…
Abstract
Purpose
The purpose of this study is to examine the poverty rate of Indonesia, Malaysia and Pakistan representing majority Muslim populations and that of India as a minority Muslim population according to Ibn Khaldun's dynamic model on poverty.
Design/methodology/approach
According to Ibn Khaldun, poverty is not merely influenced by economic dimensions. He initiated fundamental factors, as mentioned in his formula, which are the functions of Wealth of the Nation, Government, Human Resource, Shariah, Growth and Justice. This study generates secondary data covering the period from 2000 to 2010 or after the financial crisis of 1997. These data were generated using the Panel method.
Findings
The findings of this study reveal that the dynamic model of Ibn Khaldun significantly influenced the level of poverty in Indonesia as a Muslim-majority population, whereas in Pakistan, only the human development index variable has a significant influence. Meanwhile, like Malaysia, in India, the dynamic model of Ibn Khaldun did not have significant influence.
Research limitations/implications
Each country has certain characteristics and background with respect to economic growth, government policy and population that might influence poverty. As a result, the application of Ibn Khaldun's model varies accordingly.
Practical implications
The findings reveal that quite a few challenges lie ahead in applying Ibn Khaldun's model in these countries. This needs to be taken on promptly by each country, especially Muslim countries.
Originality/Value
This paper is one of the few studies which use Ibn Khaldun' theory on poverty using panel data to investigate the appropriateness of the model.
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Muhammad Fazlurrahman Syarif and Ahmet Faruk Aysan
This study aims to understand the practices and rules of Sharia crowdfunding policies in Indonesia given the rapid growth of financial technology and the increasing importance of…
Abstract
Purpose
This study aims to understand the practices and rules of Sharia crowdfunding policies in Indonesia given the rapid growth of financial technology and the increasing importance of crowdfunding as a funding alternative for micro, small, and medium enterprises (MSMEs).
Design/methodology/approach
This study used qualitative methods, exploratory methods and literature studies for data collection. The focus is on understanding the regulatory environment and institutional framework that support Sharia crowdfunding in Indonesia.
Findings
Despite a specific law regulating Sharia crowdfunding, several authoritative institutions in Indonesia offer FinTech, crowdfunding and Sharia crowdfunding services. Some regulations have been issued, such as Bank Indonesia Regulation Number 19/12/PBI/2017 and Financial Services Authority (OJK) Regulation Number 37/POJK.04/2018, which was later amended to Number 57/POJK.04/2020. This study emphasizes the crucial role of OJK in providing security guarantees for implementing FinTech, including crowdfunding. At the same time, Sharia crowdfunding also follows fatwas issued by DSN-MUI.
Research limitations/implications
This study describes Sharia crowdfunding policies in Indonesia and indicates that further research could delve deeper into specific cases and examine the impact of these policies on the growth and sustainability of Sharia crowdfunding.
Practical implications
This study underlines the need to enhance Sharia crowdfunding standards and to create rules that explicitly address this issue. This has implications for regulatory authorities, FinTech companies and MSMEs seeking to leverage Sharia crowdfunding.
Social implications
This study suggests potential social implications, including a more inclusive financial system that complies with Islamic principles and supports MSMEs' growth.
Originality/value
This study is unique in its focus on Sharia crowdfunding policies in Indonesia, providing a comprehensive view of the regulatory landscape and existing institutional framework.
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Burhanuddin Susamto and Akhmad Akbar Susamto
This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.
Abstract
Purpose
This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.
Design/methodology/approach
The analysis in this paper adopts a qualitative content analysis approach to review the existing literature on Islamic deposit insurance and propose a new model.
Findings
The proposed model includes a revised scheme. In the event of a bank failure, the funds used to reimburse depositors of the failed bank are divided into two distinct categories. The first category includes nonrepayable premiums that have been previously paid by the failed bank and managed by the Islamic deposit insurance agency or Islamic deposit insurance corporation. The second category comprises qard hasan, an interest-free loan provided by the Islamic deposit insurance agency or Islamic deposit insurance corporation using the deposit insurance funds from the collective pool of premiums of other banks.
Practical implications
The proposed model ensures that well-managed banks are not unfairly burdened by the failures of their poorly managed counterparts, thus preventing a sense of unfairness and inefficiency. Implementing the proposed model may result in higher business practices and risk management standards, ultimately leading to better depositors’ protection and banking system’s stability.
Originality/value
This paper offers a significant contribution to the limited literature on Islamic deposit insurance. The proposed model enriches the discourse and offers valuable insights for the future development of Islamic banking.