Rusni Hassan

The possibility of application of salam in Malaysian Islamic banking system

Purpose - This research aims to explore the theoretical nature of salam contract in depth, the extent of its use in the banking arena of Malaysia and to test the theoretical feasibility of its future application by the Islamic banks in Malaysia by suggesting an Islamic banking product structure based on salam contract. Design/methodology/approach - This is a legal exploratory study primarily focused on library research. Findings - Salam contract is more susceptible to risks than the rest of the Islamic commercial contracts used by the Islamic banks in Malaysia and none of the Islamic banks in the country utilize this type of contract as a mode of financing. However, the research indicates that a feasible banking product based on salam contract could be formulated to help poor farmers in the country. To prove this a new model product based on salam contract to help farmers is created by the authors and the pros and cons of the product with the risk mitigating ways are explored. It is found that theoretically, this product is workable. Originality/value - This research will complement the knowledge based on practical applicability of salam and is targeted to the Islamic financial Institutions in Malaysia, who are the prospective beneficiaries.

Modelling public behavioral intention to adopt Islamic banking in Uganda: The theory of reasoned action

Purpose - Islamic banking (IB) has resulted in abundant cross boarder financial flows and diversified economic inter linkages with over USD 2 trillion in assets that have extended beyond Muslim countries to more established global financial centres and other emerging economies. Despite this remarkable diffusion, numerous developing and least developed countries are yet to embrace IB. This paper examines the factors that determine public intention to adopt IB in Uganda. Design/methodology/approach - The study undertook a quantitative approach where the Theory of Reasoned Action (TRA) was used as a theoretical framework and Structural Equation Modeling (SEM) technique was applied to determine the relationship between attitude, subjective norm and public intention to adopt IB. Thus, a sample of 300 bank customers was surveyed using a questionnaire. Findings - Initially, the measurement model did not fit the data well. So, the model was modified by removing an indicator with a lower loading. Finally, the structural model under maximum likelihood estimate analysis confirmed a good model fit for the data. Key findings were; attitude positively influenced intention to adopt IB whereas subjective norm influence to intention is mediated by attitude. Furthermore, public intention to adopt IB in Uganda can be predicted by attitude (R2 = .89) which also mediates the prediction of subjective norm to intention (R2 = .58). Originality/value - To the best of the authors’ knowledge, no study has employed the TRA on the feasibility and adoption of IB. Thus, the present study is relevant in extending the theoretical body of knowledge by validating the TRA in a new field.

Shari’ah supervisory board characteristics effects on Islamic banks’ performance: Evidence from Malaysia

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.

The feasibility of adopting Islamic banking system under the existing laws in Uganda

Purpose - In 2014, Islamic finance assets are estimated to have exceeded USD 2 trillion with over 100 products and an annual growth of over 20.7%,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 due to 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 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.

The Independence of Shari`ah Board Members in Islamic Banking with Particular Reference to Malaysia and Indonesia

Legal enforcement relies on at least three aspects; the existing regulatory framework, the institution acting for the enforcement of such regulatory framework, and the conduct of the persons involved. Islamic banking, as a legal entity is also subject to the legal enforcement of various regulations, including Shari`ah compliance. The well being of Shari`ah compliance in Islamic banking does not solely depend on the regulations issued, but also (as the above legal theory suggests) depends on the response of the public as well as on the institution which acts to enforce such compliance. It is clear that the Shari`ah board is one of the institutions in this important circle. Hence, the discussion on the Shari`ah board as the body that is designated to cater such compliance is significant to comprehend the whole aspect of the implementation of Shari`ah compliance. The regulation of Shari`ah compliance indicates that the compliance on the product and operation of Islamic banking with the Shari`ah principles is an ultimate basis for Islamic banking. It is part and parcel of Islamic banking’s Shari`ah governance. Having said this, there must be a body responsible for the supervision towards such compliance. It is for this reason the Shari`ah board is established within an Islamic bank or conventional bank conducting Islamic banking business. Due to the faith-based nature of the Islamic banking business, the task of the Shari`ah board is much wider than just in terms of products supervision. The members of such board need to cover more comprehensive aspects than advisors in conventional banking business. In order to perform its function perfectly, the capacity of the members certainly needs enhancement. They are required to posses a deep understanding on Shari`ah principles not only in the product development, but rather in all activities of Islamic banking. It is therefore, through the robust regulations pertaining to the role, duties and responsibilities of the Shari`ah board, the challenges towards Shari`ah compliance that the bank may enccounter, could be properly responded. Presumably from the above discussion, the compliance of Islamic banks to Shari`ah principles, to a great extent, is also determined by the role of such board. Consequently, this body needs sufficient authority to enable its members to perform their functions effectively. The members also shall be given proper independence from undue influence of the board of directors and the board of management within the industry. This paper seeks to explore the independency of the Shari`ah board members in Malaysia and Indonesia, which is very practical in nature. Prior to that, the overview on the theoretical aspect will be presented to provide a clear understanding on independence of the Shari`ah board members.

Scrutinizing the Malaysian Regulatory Framework on Shari’ah Advisors for Islamic Financial Institutions

Islamic banking, takaful and Islamic Capital Market are the main component of Islamic financial system in Malaysia. Shari’ah compliance is one of the attributes to distinguish Islamic Financial Institutions (IFIs) from its counterpart. Adherence to Shari’ah principles is fundamental to the operations of IFIs and such adherence is a continuing process as long as such institutions operate. The Shari’ah Advisors appointed by the IFIs are responsible in ensuring the Shari’ah compliance of IFIs in carrying out its Islamic financial business. The requirement for the appointment of Shari’ah Advisors in IFIs has been included in the statutes governing IFIs as well as guidelines and circulars issued by authoritative bodies related to Islamic banking, takaful and Islamic Capital Market. This indicates that, the appointment of Shari’ah Advisors in IFIs is a vital to the industry. A specific regulatory framework on Shari’ah Advisors is essential in regulating their duties and responsibilities as may be in ensuring that the operations of IFIs conform to Shari’ah principles. Furthermore, a strong regulatory framework on Shari’ah Advisors is one of the factors in ensuring the resilience development of Islamic finance industry. Henceforth, this study seeks to analyze the Malaysian regulatory framework on Shari’ah advisors as their significant roles and responsibilities in ensuring Shari’ah compliance of IFIs.

The possible inclusion of legal provisions in Islamic banking and finance: The case study of the Mozambican regulatory framework

Purpose This paper aims to thoroughly examine the extent to which the current legal and regulatory framework is inclusive towards Islamic banking and finance (IBF) practices in the attempts to introduce IBF as a significant component in the Mozambique’s financial system. This is achieved by providing a critical review on the Mozambican current legal and regulatory framework including the court and arbitration system, as well as the country’s financial institutions law and regulations. Design/methodology/approach The methodology used in this study is the qualitative approach. The analysis made is based on descriptive and analytical approach whereby the study examined and critically analysed the banking regulations in Mozambique with the purpose of finding the legal gap in the existing legal and regulatory framework that allows the introduction of IBF in the country. Findings This study finds that whilst some legal provisions in the current legal and regulatory framework are conflicting with the Shari’ah principles such as the definition of loans and the concept of interest, there is also a certain number of enabling features that can be immediately explored, including deposits (with no interest), leasing operations, investment funds or venture capital. Research limitations/implications At present, to the best of the authors’ knowledge, this is the first attempt ever made to assess the compatibility of the existing Mozambican commercial laws with the Islamic principles hence identifying the challenges that might arise due to the implementation of IBF practices in Mozambique. Practical implications This paper has several practical implications in the sense that it helps the financial market authorities in Mozambique to be able to foresee possible inclusion of provisions on Islamic transactions in the country’s existing financial regulations. Social implications The contributions of this paper lie in the valuable recommendations made on the insertion of Islamic principles in the current regulatory framework as well as assisting in overcoming some of the conflicting aspects in medium to long term. Mozambique should explore and benefit from the experience and lessons learned by the neighbouring countries that have successfully adopted the IBF practice. It is recommended that the Central Bank should establish a “task force team”, comprising of multi-skilled professionals and experts in Islamic finance from various internal areas ranging from licensing to supervision together with Shari’ah scholars and representatives from the Muslim Community, to study the required process for adoption of IBF in the country. Originality/value There is no other study on IBF in Mozambique, particularly on legal and regulatory aspects.

Re-inventing PTPTN study loan with blockchain and smart contracts

The issue of default payments from borrowers of the National Higher Education Fund Corporation (PTPTN) is worrisome. Many borrowers fail to pay their loans and claims that the PTPTN has poor management and filing system. This study proposed a prototype for managing study loan repayment utilizing blockchain and smart contracts. Borrowers have full access toward their accounts and ledgers while corporation filing and management system get automatically up-to-date with the assistance of smart contracts.

Bank Performance and Shari’ah Supervisory Board Attributes of Islamic Banks : Does Bank Size Matter ?

This study aims to provide new empirical evidence on whether the impact of Shari’ah Supervisory Board (SSB) characteristics on Islamic Banks (IBs) performance can be affected by the size of the bank by using a sample of 25 banks for the period from 2007 to 2015. Six SSB characteristics were employed as explanatory variables which are (size, cross-membership, educational qualification, reputation, experience and change in the composition). By employing random-effects GLS and GMM method for a robustness check, it is found that four SSB characteristics (size, cross-membership, educational qualification and change in the composition) significantly affect the performance of IBs when the full sample is examined. However, the findings vary when the sample is divided into two subsamples, large and small bank. Four SSB characteristics (size, cross-membership, reputation and experience) are found to play an important role in enhancing the performance of large IBs while only (reputation and experience) significantly affect the performance of small IBs. This confirms that the impact of SSB characteristics on performance concentrates more on large IBs as compared to the small banks. Thus, there is a lack of Shari’ah governance practices in the small IBs in Malaysia and Indonesia as compared to the large banks.

Providing a Mobile Service for Academics and Professionals: Need Analysis for the Development of Mobile App Glossary of Terms in Islamic Banking and Finance

Newer development in mobile technology allows the use of hand phone which can be extended not only to communication but also to other personal life styles such as digital references in a form of dictionary or encyclopedia, to the users for just in time, just enough, and just for me access of information. One of the areas that received vast attention nowadays by educationists and learners alike is the area of Islamic banking and finance. The expansion of Islamic banking practices through various local financial institutions leads to the need in understanding the terminologies used in the industry in “just-in-time” manner due to the dynamism of the field itself. In view of this scenario, the present research seeks to shed some light using a workable model (George in Rapid instructional design: Learning ID fast and right. San Francsico, 2000) for developing a purposeful mobile Islamic banking terminology glossary app in a more convenient way and made it operational via devices such as iPhone, iPad or any Android-based smart gadgets. It further explored the prototype development and its implementations for mobile accessibility by providing multilingual glossary of Islamic banking and finance terminologies (Malay-Arabic-English). The translation of specific terms from any academic field needs collaboration between experts both from the language and subject domains. This paper reports the findings of the need analysis stage, inclusive of mapping users’ device type, Internet accessibility, reasons for owning mobile devices, delivery and user interface, and preferred features to be embedded in the mobile app.