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Article
Publication date: 2 September 2024

Muhannad Ahmad Atmeh, Bassam Mohammad Maali and Usama Fendi

This paper aims to propose a model of Zakah treatment for financial instruments. The model depends on the link between the financial assets and liabilities that emerge from a…

77

Abstract

Purpose

This paper aims to propose a model of Zakah treatment for financial instruments. The model depends on the link between the financial assets and liabilities that emerge from a financial instrument contract.

Design/methodology/approach

The determination of Zakah on contemporary financial instruments is controversial, with various conflicting Fatwas being presented. This paper introduces a theoretical model that integrates Fiqh rules, accounting, finance and economic principles to propose a method for calculating Zakah on financial instruments. This theoretical model can be the foundation for future empirical and statistical testing.

Findings

The proposed model advocates omitting the financial assets/liabilities when determining the Zakah base for companies, as the Zakah burden relies on the owner of the real asset. The paper elaborates on the implementation of the model on debts, investments and cash accounts.

Research limitations/implications

The paper does not investigate whether or not the accounting approach in dealing with financial contracts is deemed acceptable by Fiqh scholars, nor does it discuss whether or not this may affect the Zakah fatwas regarding these types of accounts.

Practical implications

The paper establishes a conceptual framework for the Zakah on financial assets. This will pave the way for future empirical research and testing to validate the framework in different contexts. In addition, if regulators adopt this model and apply it to all companies, it would promote fairness and justice at the national level.

Social implications

The proposed model advocates omitting the financial assets/liabilities when determining the Zakah base for companies, as the Zakah burden relies on the owner of the real asset. The paper elaborates on the implementation of the model on debts, investments and cash accounts.

Originality/value

To the best of the authors’ knowledge, this is the first attempt to utilize the accounting approach in order to determine the amount of Zakah.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 17 no. 6
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 20 January 2020

Usama Adnan Fendi

This paper aims to provide an essential framework for establishing Shariah-compliant deposit insurance scheme, by reviewing the Shariah provisions concerning the available…

554

Abstract

Purpose

This paper aims to provide an essential framework for establishing Shariah-compliant deposit insurance scheme, by reviewing the Shariah provisions concerning the available approaches for deposit guarantee, types of deposits in Islamic financial institutions and the permissible party to incur the cost of this guarantee.

Design/methodology/approach

This paper reviews the Fiqh rules and principles approved by the well-known Islamic Fiqh references, as well as the resolutions of International Islamic Fiqh Academy (IIFA) and Shariah standards issued by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and presents these resolutions and judgments in a modern applicable way.

Findings

This paper recommends that the Islamic scheme for deposit insurance should be established based on Takaful insurance principle, and this scheme must adopt fund segregation principle to comply with Shariah provisions for guarantee permissibility.

Research limitations/implications

The paper bridges the gap between theory and practice by highlighting how the proposed model can be initiated in practice, thus, it can influence public policy in countries with Islamic banking system.

Originality/value

This paper represents a significant contribution toward the establishment of a consensual Shariah-compliant Islamic deposit insurance model.

Details

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

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Article
Publication date: 24 December 2020

Bassam Mohammad Maali, Usama Adnan Fendi and Muhannad Ahmad Atmeh

This paper aims to investigate the economic substance of Islamic banks’ transaction as perceived by the employees and regulators of banks and the effect of such substance on the…

464

Abstract

Purpose

This paper aims to investigate the economic substance of Islamic banks’ transaction as perceived by the employees and regulators of banks and the effect of such substance on the need for special accounting standards for Islamic banks. If there is a distinctive “Islamic economic substance”, then special accounting practices may be necessary such as the standards of the Accounting and Auditing Organization for Islamic Financial Institutions.

Design/methodology/approach

A qualitative inquiry on one of the leading Islamic banks in the Middle East was conducted to investigate the economic substance of the bank’s main two transactions; the deposit system and Murabaha financing, as perceived by informants within one of the earliest Islamic banks and its regulators.

Findings

It is found that despite the belief that the transactions under examination were different from equivalents within conventional banking, practice within the bank was not consistent with such a belief. Informants largely perceived the economic reality of the investigated transaction as being not different from conventional banks’ transactions, and this would affect the need for special accounting and regulatory frameworks.

Research limitations/implications

This investigation is confined to informants working within one Islamic bank; their views and perceptions may not coincide with those working in other Islamic banks in the world.

Practical implications

The results of this investigation provide policy implications for Islamic banks, regulators and standards setters in regard to the need for special accounting standards for Islamic banks.

Originality/value

The paper is one of the first papers that uses a qualitative inquiry on the main transactions of Islamic banks and the related need for special accounting practices. The paper provides a new perspective on the debate over whether Islamic banking is genuinely innovative or is merely a replicate for conventional banking.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 14 no. 2
Type: Research Article
ISSN: 1753-8394

Keywords

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