Norma Saad

A comparative analysis of the performance of conventional and Islamic unit trust companies in Malaysia

Purpose - The purpose of this paper is to investigate the efficiency of selected conventional and Islamic unit trust companies in Malaysia during the period 2002 to 2005. Design/methodology/approach - The paper adopts Data Envelopment Analysis (DEA) to investigate efficiency, as measured by the Malmquist index, which is decomposed into two components: efficiency change and technical change indexes. Findings - The study indicates that technical efficiency is the main contributor to enhancing the efficiency of the Malaysian unit trust industry. In addition, the larger the size of the unit trust companies, the more inefficient the performance. In comparing the efficiency of unit trust companies, the study finds that some of the Islamic unit trust companies perform better than their conventional counterparts. Research limitations/implications - The study is limited to five Islamic unit trust companies. Thus, the findings of this study are indicative, but inconclusive for the unit trust industry as a whole. Practical implications - The results have two important implications for both conventional and Islamic unit trust companies in Malaysia. First, the deterioration of total factor productivity (TFP) in the unit trust industry in Malaysia is due to the deficiency of innovation in technical components. Second, the size of the unit trust companies has an adverse effect on the TFP performance. Originality/value - The contribution of this study is that it analyzes the efficiency of the two types of unit trust industry which are important and relevant for Malaysia. This significance arises from the dual financial system, in which the Islamic unit trust companies operate in parallel with their conventional counterparts. The comparison sheds some light on the performance of the Islamic unit trust companies, whose operations are based on profit-sharing, in contrast to the conventional unit trust companies.

Assessing the Impact of Islamic Microfinance on Poverty Alleviation in Northern Nigeria

Nigeria is one of the leading economies in Africa endowed with vast oil reserve and abundant human and material resources. Despite these resources, poverty among the populace is widely spread. The National Planning Commission in Nigeria in 2012 reported that more than 75 million people are trapped by poverty. Several efforts have been put forward at various points in time by successive governments, private entrepreneurs and other development partners to overcome the menace of poverty among the populace. Recently, the Islamic microfinance becomes a mechanism through which poverty is being challenged aswitnessed in some Muslim countries such as Bangladesh, Malaysia, and Pakistan. The purpose of this study is to examine the role of Islamic mircofinance products on poverty alleviation in northen part of Nigeria. The study used recipients of Islamic loan from some selected microfinance banks in Kano and Jigawa states of Nigeria. A total of 400 samples drawn from beneficiaries of Islamic microfinance loan through simple random sampling were used. Questionnaires were used and the data generated were analyzed using Pearson correlation analysis. The findings of the study has also identified that amount of Islamic loan, age, level of education, and gender as important variables for increasing household income. Microfinance regulators or policy makers (Central Bank of Nigeria) will also make use the findings of this study in designing policy framework for microfinance institutions in Nigeria.

The Perception of Micro-entrepreneurs and Petty Traders on Conventional and Islamic microfinance: A Case Study of Pakistan

Microfinance is a general term that entails the provision of financial services to micro- entrepreneurs or to those who do not have access to banking facilities. The current issues faced by micro-entrepreneurs are difficulties in seeking financing from financial institutions due to lack of sufficient collateral, no credit history, irregular or uneasily verified sources of income. Consequently, they often rely on relatives or local moneylender s who charge high interest rates. Thus, on grounds of equity and justice, Islamic microfinance seems to provide an alternative needed by them. This research deals with the perceptions of micro-entrepreneurs and petty traders towards conventional and Islamic microfinance in Pakistan. It further investigates the intention to use Islamic microfinance and challenges for the micro-entrepreneurs. A total of 270 people were surveyed by means of self- administered questionnaire. The sample comprises 81 percent males and 19 percent females in three major cities; Rawalpindi, Lahore and Peshawar. Results of this study indicate that Islamic microfinance is a preferred choice as compared to conventional microfinance and best answer to poverty eradication. Although, Islamic microfinance is a new concept but majority of respondents had some understanding of this concept. However, the respondents also expressed their dissatisfaction to the management of Islamic banks.

Is Zakat Capable of Alleviating Poverty? An Analysis on the Distribution of Zakat Fund in Malaysia

Poverty is a serious problem in a majority of Muslim countries. The teachings of Islam, through the Holy Quran and the Hadith, stresses on the significance of zakat as a social tool to bridge the differences between the rich and poor Muslims. Zakat viewed in this context can play an important role in Muslim socio-economic development; if it is managed properly. Having said this, zakat institutions in Muslim countries had hitherto not only been seen as less successful in overcoming the problem but also eradicating poverty. One of the reasons can be attributed to how zakat institution is perceived to have been so engaged in its efforts to “optimize” the collection of zakat, which unfortunately at the expense of the disbursement side. It is against this backdrop that this paper is written. Specifically, this paper analyzes the current practice of zakat distribution in several states in Malaysia with an eye on examining how zakat fund is being distributed among the eight asnaf. It critically evaluates whether or not the current practice of zakat distribution in Malaysia is effective in alleviating poverty among the poor Muslim population in Malaysia. Based on the findings, the paper provides several relevant recommendations on how to improve the distribution of zakat fund so that it can be effectively used to help the poor and eliminate poverty.

The Role of Regulatory System in Ensuring Halal Compliance Among Poultry Firm Operators in Malaysia

Halal food compliance is a fundamental issue which has constantly plagued Muslim consumers, thus becomes a major challenge for Malaysia as a leader in the development of global halal market. This study explores the roles of a regulatory system in securing halal compliance in poultry slaughtering and processing businesses. Halal compliance describes the ability of the businesses to act according to halal requirements as outlined by the halal authority. Their level of compliance depends on the effectiveness of the enforcement efforts. It is generally assumed that high level of enforcement will result in high level of compliance. However, enforcement involves costs in terms of monetary, human capital and time. This study provides a review of the regulatory system in the poultry industry practised in Malaysia and explores common problems faced by the authorities in enforcing halal compliance among poultry slaughtering and processing businesses. A content analysis approach was employed to gather adequate data for the purpose of this study. The results show that securing halal compliance requires collective efforts and coordination between the regulatory bodies involved in the industry. This study provides better understanding of control mechanism in halal industry in general, which helps in securing halal authenticity and subsequently halal integrity throughout food supply chains as envisioned in the Halal Industrial Master Plan (HIMP).

An Exploratory Study on the Understanding of the Concept of Riba and Factors Determining Patronization of Conventional Banks among Muslims in Malaysia

Currently, there are 27 banking institutions consisting of 16 Islamic banks and 18 conventional banking institutions offering Islamic banking products and services under the Islamic Banking Scheme (IBS) in Malaysia. Hence it can be a valid question to ask that why Muslims in Malaysia are still patronizing the conventional banks when there are enough alternatives now. This study has been conducted to unearth the reasons for whyMuslims in Malaysia haveaccounts in conventional banks and to examine the level of knowledge and understandingabout riba among Malaysian Muslims. It is important to check the level of knowledge about riba because initially interest intruded in Muslim countries through disagreement among scholarsin the past, scholars have differed over the technical definition of riba. A total of 563 respondents were surveyed and their responses were analyzed using SPSS. The most important fact revealed by this study is that Muslims in Malaysia possess a good understanding of the concept of riba. The lack of knowledge about riba is not a reason fordealing with conventional banks. The result also shows that being familiar with the bank is the dominant reason for choosing one bank over another, among customers of conventional banks. When the relationship between demographic profile and various misconceptionsabout ribawas tested, academic qualification appears to be a significant factor. The findings of this study can help in designing effective promotional strategy for Islamicbanks.