Dzuljastri Abdul Razak | International Islamic University Malaysia (original) (raw)

Papers by Dzuljastri Abdul Razak

Research paper thumbnail of The relationship between service quality and customer satisfaction: the example of CJCU library

Journal of Information and Optimization Sciences, 2006

The present paper, taking Chang Jung Christian University (CJCU) Library as an example, investiga... more The present paper, taking Chang Jung Christian University (CJCU) Library as an example, investigates the users' degree of importance and the performance provided by the library. This study explores overall user satisfaction as well. A questionnaire survey is conducted to reveal users' perspectives on service quality. Based on literature, service quality has five dimensions, which are tangibles, responsiveness, reliability, assurance, and empathy. The results indicate that the overall service quality has a significantly positive effect on overall user satisfaction. Among these five dimensions except responsiveness, all of them have a significantly positive effect on overall user satisfaction. In addition, the top five important service quality features ranked by users are: collections, loaning and returning service, overall atmosphere, electronic database system, and online reservation and renewal. Furthermore, the perceived importance of service quality dimensions has no significant difference among institutes and status.

Research paper thumbnail of Determinants of the factors that cause abandoned housing projects: a study of human buyers of Islamic home financing in Malaysia

The issues of abandoned housing projects are not new in Malaysia. Without proper measures to tack... more The issues of abandoned housing projects are not new in Malaysia. Without proper measures to tackle, they will continue to haunt home buyers. This study examines responses of 328 customersobtained by means of self-administered questionnaires. Four variables namely lack of justice and equity, methods of computing and pricing, nature of contract and lack of legal and governance were used as variables. The results indicated that all the hypothesized relationships are supported. Of these, the nature of contract was found to be the main cause of the problem. The results contributes to the scanty empirical research in this area. It also benefits managers of Islamic banks to address issues that are affectingabandoned housing projects in Malaysia.

Research paper thumbnail of Affordable Islamic home financing in Malaysia: a potential synergistic venture between financial cooperatives and cash-waqf institutions

The current Islamic home financing institutional framework in Malaysia that is almost exclusively... more The current Islamic home financing institutional framework in Malaysia that is almost exclusively dominated by Islamic commercial banks and government-owned home institutions (86% and 10.5% shares of home financing outstanding respectively) are deemed as sustainable in the long run. Economists have long ago identified the contentious relationship between an Islamic commercial bank’s shareholders and its depositors an ‘agency problem’.The Malaysian government on the other hand, is under enormous pressure to gradually reduce its budget deficits. Islamic economics scholars are calling for the third sector economy players such as cooperatives and/or awqaf to address this gap. This conceptual paper aims to present a potential joint-venture by cash waqf institutions and financial cooperative to offer an affordable, musharakah mutanaqisah partnership (MMP) home financing solution to low- and middle-income families in Malaysia. Five critical stakeholders (waqif, cash waqf institutions, financial cooperative, and joint-management committee) form the critical components in this model to offer an alternative, affordable Islamic home financing framework to the current Islamic home financing providers. This model is particularly useful for relevant stakeholders especially within the cooperative society milieu in their effort to help their member-customers to acquire their homes through affordable Islamic home financing.

Research paper thumbnail of Customers’ attitude and purchase intention toward diminishing partnership home financing in Malaysia:a structural equation modeling approach

Home financing in Malaysia is mainly focus on the debt-based Bai Bithaman Ajil (BBA) mode impleme... more Home financing in Malaysia is mainly focus on the debt-based Bai Bithaman Ajil (BBA) mode implemented for the first time in 1983. This concept is viewed by many scholars as similar to debt-based conventional home financing. As an alternative, the equity-based Musharakah Mutanaqisah or Diminishing Partnership (DP) financing was introduced in 2005. This study gauges customers" perception on the salient features of DP home financing through a survey of 504 respondents comprise officers, managers and academician. Further analysis using the Structural Equation Modeling (SEM) was conducted to find out factors that influence customers" intention for DP using the Theory of Reasoned Action (TRA) framework. The main findings indicated that customers perceived the equity sharing features in DP home financing mode differ from the conventional and BBA home financing modes. The analysis using SEM further indicates that customers" intention for DP is influenced by their attitude and subjective norms.

Research paper thumbnail of Diminishing partnership home financing concept as an alternative to Bai Bithaman Ajil (BBA): empirical evidences from the perceptions of Shariah scholars and bankers

Meera and Abdul Razak (2005) suggested that the Diminishing Partnership (DP) Home Financing conce... more Meera and Abdul Razak (2005) suggested that the Diminishing Partnership (DP) Home Financing concept can be a viable alternative to Bai Bithaman Ajil (BBA) Home Financing. They argued that DP concept can address issues faced by BBA which is still the main financing mode of Islamic financial institutions to date. The major issues that have arisen are related to the concepts used, methods of computation, pricing based on interest rate benchmark, Shariah compliant, justice and societal well being. On the other hand, the DP concept is claimed to be free from the above mentioned shortcomings and said to be in line with the spirit of Islam, which promotes risk sharing and its pricing based on rental is considered to be just and fair. As these issues requires in depth understanding of the Shariah parameter as well and banking operations, a semi-structured interviews was conducted with six Shariah scholars and six bankers to seek their opinions and viewpoints on the variables investigated. The Shariah scholars generally agreed that DP concept possess greater justice, equity and follows the true spirit of Islam. Contrary to expectation, the overall views of the bankers support the implementation of DP although there were a few reservations regarding its operations. The actual implementation of DP is a challenge for bankers which require a paradigm shift from their present role as traditional financiers.

Research paper thumbnail of Exploring Application of Equity-Based Financing Through Mushārakah Mutanāqiṣah in Islamic Banks in Malaysia: Perspective from the Industry Players

International Journal of Economics, Management and Accounting, Nov 30, 2015

Due to the prohibition of interest in Islamic financial transactions as well as the nature of the... more Due to the prohibition of interest in Islamic financial transactions as well as the nature of the Islamic banks which is based on the profit and loss sharing concept, the equity-based financing should be widely adopted rather than debt-based financing which is similar to that of the conventional banks. As such, financing instruments such as Muḍārabah and Mushārakah are supposedly the major financing instruments offered by the Islamic banks. However, as argued in previous studies, the Islamic banks today are concentrating more on debt-based financing, particularly Murābaḥah and Ijārah contracts. Based on survey questionnaires on sixteen Islamic banks

Research paper thumbnail of Islamic Home Financing through Musharakah Mutanaqisah and al-Bay’ Bithaman Ajil Contracts: A Comparative Analysis

Research paper thumbnail of Consumers’ perception on Islamic home financing: empirical evidences on Bai Bithaman Ajil (BBA) and diminishing partnership (DP) in Malaysia

The Bai Bithaman Ajil (BBA) or Deferred Installment Sales facility is the most predominant mode o... more The Bai Bithaman Ajil (BBA) or Deferred Installment Sales facility is the most predominant mode of home financing in Malaysia since the introduction of Islamic banking in 1983. It is based on the debt financing where the bank buys the property from the customer and sells it back to the customer inclusive of profit. Customers make repayments at end of each month. This research examines the impact of using the prevailing debt concept which is claimed to have caused high price, customers" dissatisfaction, injustice and criticism by international scholars. In order to address these issues an alternative concept known as Musharakah Mutanaqisah or the Diminishing Partnership (DP) is also examined. In DP, bank and customers purchase the house jointly. The bank leases the house to the customers and rental payments are shared between them based on profit sharing ratio. The customer redeems the bank"s share on monthly basis until full settlement after which the house is transferred to the customer. The study investigates the perceptions of customers between BBA and DP home financing products. A survey questionnaire was conducted on 300 owners and potential house owners to gauge their features and operations. The result of paired t-test indicated significant differences between these two products. DP home financing is a viable alternative to BBA home financing measured from the descriptive results and hypothesis testing. The actual implementation of DP is a challenge for the banks and requires a paradigm shift from their present role as traditional financiers.

Research paper thumbnail of Issues and challenges facing Islamic financial institutions in Malaysia

The issue of riba or usury has long been a problem for Muslims. The establishment of Islamic fina... more The issue of riba or usury has long been a problem for Muslims. The establishment of Islamic financial institutions is a major step in addressing this predicament, as Islamic finance has been characterized as a body to remove exploitation and injustice. The concepts of Islamic finance were initially discussed in the mid 1940s; however, further details were only revealed and then practiced in the late 1960s. The Pilgrims Management and Fund Board of Malaysia (TPMFB) established in 1962 was the earliest Islamic financial institution set up to cater for the pilgrims in Malaysia. This was followed by Bank Islam Malaysia Berhad (BIMB) in 1983, which marked the beginning of commercial financial institutions offering Islamic products and services to consumers. This paper evaluates the issues, challenges and prospect of this emerging industry, and ends with suggestions and recommendations on how they can be addressed for Muslims to go forward in the field of financing.

Research paper thumbnail of Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia

Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks sh... more Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks should be involved more in equity-based financing which rely on the concept of risk and profit sharing as compared to debt-based financing which is similar to conventional banks. As such, financing instruments such as Mudarabah and Musharakah supposedly become the major financing instruments offered by the Islamic banks. However, as argued in the literature, the Islamic banks today concentrate more on the debt-based financing, in particular Murabahah and Ijarah contracts compared to equity based financing (Mohd. Ariffin et. al.2009; Khan and Ahmed, 2001; Al-Omar and Iqbal, 2000; and Al-Omar and Abdel Haq, 1996). Thus, the objectives of this study is firstly to analyse the use of various modes of financing by several Islamic banks in Malaysia and Bahrain, in particular the extent of equity-based financing, secondly, to assess the perceptions of the bankers with regard to issues on concept, pricing and compliance of Shari’ah for the use of equity-based financing in Islamic banks in Malaysia, thirdly, to investigate the most critical challenges for equity-based financing in Islamic banks in Malaysia, and lastly, to examine the current practice of Musharakah Mutanaqisah that has been applied by few Islamic banks in Malaysia. By undertaking this study, it is expected to shed the lights on the extent of involvement of the Islamic banks in Malaysia in equity-based financing. More importantly, findings of this study would enable us to make some recommendations on the possible ways to shift from debt-based financing to equity-based financing in the Islamic banks as well as the needed financial infrastructure to support the adoption of the equity-based financing by the Islamic banks.

Research paper thumbnail of The interaction effect of trust towards profit and loss sharing element in Musharakah financing for SMES

An Islamic equity financing, namely Musharakah financing, which operates based on profit and loss... more An Islamic equity financing, namely Musharakah financing, which operates based on profit and loss sharing (PLS) principle seems to be idle in the Islamic banking operations. Even though Islamic banks was founded based on the idea of equity financing or PLS, in reality, its application in Islamic banking operations is very minimal as the current operations of Islamic bank are dominated by the debt based financing system. This gives difficulties to a certain market segment of borrowers, especially small and medium enterprises (SMEs) in getting access to financing due to their difficulties in fulfilling debt financing requirement, mainly in providing collateral and high interest payment. Despite the resilience of Musharakah financing in the financial market, many past studies put emphasis on the need to utilize Musharakah financing for the development of SMEs. This study therefore, aims to examine the potential of Musharakah as an alternative financing for SMEs. To fulfill this objective, the main attributes of Musharakah financing, namely profit and lost sharing together with its moderating factor, namely trust were examined and tested among SMEs in Malaysia. Using survey by way of a questionnaire, this study found that the main attributes in Musharakah financing have potential in providing SMEs with greater access to financing. Furthermore, the moderating factors also play a significant role in strengthening the impact of PLS in Musharakah financing towards SMEs access to financing. The results demonstrate the viability of Musharakah financing as an alternative financing for SMEs which need crucial attention from the Islamic banks.

Research paper thumbnail of Musharakah Mutanaqisah and Al-Bay’ Bithaman Ajil Contracts as means for homeownership: a conceptual comparison

Home financing takes a large chunk of peoples" income. As alternatives to conventional interestba... more Home financing takes a large chunk of peoples" income. As alternatives to conventional interestbased home financing modes, several Islamic modes are currently in existence, the dominant among which are the al-Bay" Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA is a murabahah contract, based on buy-and-sell principle while the MMP consists of a musharakah (partnership) contract and an ijarah (rental) contract where the equity of the financier follows a diminishing balance method. Scholars are consensus on the Shari"ah permissibility of the MMP contract, but nonetheless, are not consensus on the permissibility of the BBA contract. Middle Eastern scholars generally disapprove of the BBA, which on the contrary is popular in Malaysia, Indonesia, and Brunei etc. This paper is a theoretical paper that compares these two contracts for the financing of assets, from Islamic and economic perspectives. The paper concludes that the MMP has several advantages over the BBA for the customer. Apart from being consensus Shari"ah-compliant, it can be made to avoid interest (riba) totally by means of using some rental or house price index while reducing the cost of homes and the duration of financing. The balance of financing, at any point in time, never exceeds the original price of the asset, unlike under the BBA where it can. When implemented through cooperatives, the MMP can also provide an investment avenue for members while not contributing to macroeconomic problems through the fractional reserve money creation process; and hence is argued to be consistent with the maqāsid al-Sharī"ah. The paper also provides a mathematical derivation note for the MMP.

Research paper thumbnail of Determinant Factors of Equity-Based Crowdfunding in Malaysia

Labuan Bulletin of International Business and Finance (LBIBF)

Crowdfunding as a means for investment using Fintech is relatively new. The popularity of venture... more Crowdfunding as a means for investment using Fintech is relatively new. The popularity of venture capital and angel financing as a source of funds for businesses has decreased due to the advent of Fintech. The services provided are similar to traditional finance, such as simple transactions to payments, brokering and risk management. However, entrepreneurs and project owners are linked to investors by means of digitalization platforms which enable greater participation in sourcing for capital. The objective of this research is to find factors that determine fintech investment using crowdfunding in Malaysia using Technology Acceptance Model (TAM) as its based theory. Four variables are used as measurements, namely perceived informativeness, network externality, return on investment and platform quality. Data is collected by means of questionnaires to investigate the validity of the proposed model. SPSS is then used to analyze the data collected using reliability, correlation and mult...

Research paper thumbnail of Cooperative behavior (ta’awun) between mosques and civic organizations in empowering asnafpreneurs through IIUM m-kitchen® project

Research paper thumbnail of Identifying accessibility of financing for MSMEs in East Java Indonesia

UMY Press eBooks, 2020

This chapter examined the extent to which MSMEs have accessibility to their financing in the curr... more This chapter examined the extent to which MSMEs have accessibility to their financing in the current situation. Primary data was collected by self-administered questionnaires with a sample of 250 respondents from selected MSME owners in six different regencies in East Java. Descriptive statistics was employed in the analysis. The study revealed that conventional financing is preferred to Islamic financing. The study also indicated that personal savings, categorized as internal financing, are the largest sources of fund for MSMEs surveyed in initial, current and future time. This indicates that MSMEs de-pend highly on their savings for financing their daily business operations. However, the study also indicates that bank loans or external funding are considered to be most accessible, followed by personal savings and loans from relatives. Findings suggest that massive socialization on Islamic finan-cial literacy is absolutely needed to enhance the awareness of MSME owners on Islamic financing products

Research paper thumbnail of Mkitchen® UIAM Penggerak Asnaf Sejahtera Lestari

Meso Publishing eBooks, Aug 31, 2021

Research paper thumbnail of A Journey of Ta’awun (Cooperative Behaviour) in Edu-Action at IIUM Mkitchen® and Masjid al-Syakirin Gombak (MASG)

Meso Publishing eBooks, Aug 9, 2021

This book narrates the journey of ta'awun (cooperative behaviour) at IIUM Mkitchen® project with ... more This book narrates the journey of ta'awun (cooperative behaviour) at IIUM Mkitchen® project with Masjid Al-Syakirin Gombak (MASG). The main objective of the project is transform the mosque as a platform to provide free food, to up skill in foodpreneurship, to create new employment opportunities, to give empowerment and to nurture entrepreneurship (3Es) for poor and needy people in the surrounding area of it. Ta'awun refers to cooperative behaviour among the participants, the sponsors, and the beneficiaries in initiating, planning, sponsoring, executing and evaluating the Mkitchen® project at Masjid Al-Syakirin Gombak (MASG). The journey officially started on 24th January 2021 through its first meeting among the interested as well as committed members. After executing two events, the project was continued with a full scale project for a month. The project has secured its proof of concept (POC). Nevertheless, the project has been continued with a small scale due to the movement restriction by the authority to prevent the spread of coronavirus disease (COVID-19).

Research paper thumbnail of Business model shifts: masjid kitchens as soup kitchens, jobs employment and empowering asnaf entrepreneurs, and income generation for the masjid

Research paper thumbnail of Factors that determine financial performance of SMES in Malaysia

Small and Medium Enterprises (SMEs) has been recognized as the backbone to a country’s economic d... more Small and Medium Enterprises (SMEs) has been recognized as the backbone to a country’s economic development and social benefits. Malaysian SMEs contributed 38.8% to overall GDP, 17.3% to total exports and 66.2% to total employment. Huge budget allocations were put every year to enhance and encourage the improvement on SMEs. However, it was found that many of the SMEs failed within the first years of its business operations despite various programs and initiatives by the government agencies. Therefore, this paper aims to determine factors that determine sustainable financial performance of SMEs in Malaysia namely, Financial Knowledge, Financial Attitude, Financial Socialization Agents, Financial Skills and Accounting Skills. The relationship of these factors towards SMEs performance is measured using regression and factor analysis conducted using the Statistical Package for the Social Sciences (SPSS) software. Findings reveal that all factors have a significant relationship with SME ...

Research paper thumbnail of Islamic Home Financing Through Musharakah Mutanaqisah: A Crowdfunding Model

Concept and Application of Shariah for the Construction Industry, 2018

Home financing takes a large chunk of peoples' income. As alternatives to conventional interest-b... more Home financing takes a large chunk of peoples' income. As alternatives to conventional interest-based home financing modes, several Islamic modes are currently in existence, the dominant among which are the al-Bay' Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA is a murabahah contract, based on buy-and-sell principle while the MMP consists of a musharakah (partnership) contract and an ijarah (rental) contract where the equity of the financier follows a diminishing balance method. Scholars are consensus on the Shari'ah permissibility of the MMP contract, but nonetheless, are not consensus on the permissibility of the BBA contract. Middle Eastern scholars generally disapprove of the BBA, which on the contrary is popular in Malaysia, Indonesia, Brunei etc. This paper is a theoretical paper that compares these two contracts for the financing of assets, from Islamic and economic perspectives. The paper concludes that the MMP has several advantages over the BBA for the customer. Apart from being consensus Shari'ah-compliant, it can be made to avoid interest (riba) totally by means of using some rental or house price index while reducing the cost of homes and the duration of financing. The balance of financing, at any point in time, never exceeds the original price of the asset, unlike under the BBA where it can. When implemented through cooperatives, the MMP can also provide an investment avenue for members while not contributing to macroeconomic problems through the fractional reserve money creation process; and hence is argued to be consistent with the maqāsid al-Sharī'ah. The paper also provides a mathematical derivation note for the MMP.

Research paper thumbnail of The relationship between service quality and customer satisfaction: the example of CJCU library

Journal of Information and Optimization Sciences, 2006

The present paper, taking Chang Jung Christian University (CJCU) Library as an example, investiga... more The present paper, taking Chang Jung Christian University (CJCU) Library as an example, investigates the users' degree of importance and the performance provided by the library. This study explores overall user satisfaction as well. A questionnaire survey is conducted to reveal users' perspectives on service quality. Based on literature, service quality has five dimensions, which are tangibles, responsiveness, reliability, assurance, and empathy. The results indicate that the overall service quality has a significantly positive effect on overall user satisfaction. Among these five dimensions except responsiveness, all of them have a significantly positive effect on overall user satisfaction. In addition, the top five important service quality features ranked by users are: collections, loaning and returning service, overall atmosphere, electronic database system, and online reservation and renewal. Furthermore, the perceived importance of service quality dimensions has no significant difference among institutes and status.

Research paper thumbnail of Determinants of the factors that cause abandoned housing projects: a study of human buyers of Islamic home financing in Malaysia

The issues of abandoned housing projects are not new in Malaysia. Without proper measures to tack... more The issues of abandoned housing projects are not new in Malaysia. Without proper measures to tackle, they will continue to haunt home buyers. This study examines responses of 328 customersobtained by means of self-administered questionnaires. Four variables namely lack of justice and equity, methods of computing and pricing, nature of contract and lack of legal and governance were used as variables. The results indicated that all the hypothesized relationships are supported. Of these, the nature of contract was found to be the main cause of the problem. The results contributes to the scanty empirical research in this area. It also benefits managers of Islamic banks to address issues that are affectingabandoned housing projects in Malaysia.

Research paper thumbnail of Affordable Islamic home financing in Malaysia: a potential synergistic venture between financial cooperatives and cash-waqf institutions

The current Islamic home financing institutional framework in Malaysia that is almost exclusively... more The current Islamic home financing institutional framework in Malaysia that is almost exclusively dominated by Islamic commercial banks and government-owned home institutions (86% and 10.5% shares of home financing outstanding respectively) are deemed as sustainable in the long run. Economists have long ago identified the contentious relationship between an Islamic commercial bank’s shareholders and its depositors an ‘agency problem’.The Malaysian government on the other hand, is under enormous pressure to gradually reduce its budget deficits. Islamic economics scholars are calling for the third sector economy players such as cooperatives and/or awqaf to address this gap. This conceptual paper aims to present a potential joint-venture by cash waqf institutions and financial cooperative to offer an affordable, musharakah mutanaqisah partnership (MMP) home financing solution to low- and middle-income families in Malaysia. Five critical stakeholders (waqif, cash waqf institutions, financial cooperative, and joint-management committee) form the critical components in this model to offer an alternative, affordable Islamic home financing framework to the current Islamic home financing providers. This model is particularly useful for relevant stakeholders especially within the cooperative society milieu in their effort to help their member-customers to acquire their homes through affordable Islamic home financing.

Research paper thumbnail of Customers’ attitude and purchase intention toward diminishing partnership home financing in Malaysia:a structural equation modeling approach

Home financing in Malaysia is mainly focus on the debt-based Bai Bithaman Ajil (BBA) mode impleme... more Home financing in Malaysia is mainly focus on the debt-based Bai Bithaman Ajil (BBA) mode implemented for the first time in 1983. This concept is viewed by many scholars as similar to debt-based conventional home financing. As an alternative, the equity-based Musharakah Mutanaqisah or Diminishing Partnership (DP) financing was introduced in 2005. This study gauges customers" perception on the salient features of DP home financing through a survey of 504 respondents comprise officers, managers and academician. Further analysis using the Structural Equation Modeling (SEM) was conducted to find out factors that influence customers" intention for DP using the Theory of Reasoned Action (TRA) framework. The main findings indicated that customers perceived the equity sharing features in DP home financing mode differ from the conventional and BBA home financing modes. The analysis using SEM further indicates that customers" intention for DP is influenced by their attitude and subjective norms.

Research paper thumbnail of Diminishing partnership home financing concept as an alternative to Bai Bithaman Ajil (BBA): empirical evidences from the perceptions of Shariah scholars and bankers

Meera and Abdul Razak (2005) suggested that the Diminishing Partnership (DP) Home Financing conce... more Meera and Abdul Razak (2005) suggested that the Diminishing Partnership (DP) Home Financing concept can be a viable alternative to Bai Bithaman Ajil (BBA) Home Financing. They argued that DP concept can address issues faced by BBA which is still the main financing mode of Islamic financial institutions to date. The major issues that have arisen are related to the concepts used, methods of computation, pricing based on interest rate benchmark, Shariah compliant, justice and societal well being. On the other hand, the DP concept is claimed to be free from the above mentioned shortcomings and said to be in line with the spirit of Islam, which promotes risk sharing and its pricing based on rental is considered to be just and fair. As these issues requires in depth understanding of the Shariah parameter as well and banking operations, a semi-structured interviews was conducted with six Shariah scholars and six bankers to seek their opinions and viewpoints on the variables investigated. The Shariah scholars generally agreed that DP concept possess greater justice, equity and follows the true spirit of Islam. Contrary to expectation, the overall views of the bankers support the implementation of DP although there were a few reservations regarding its operations. The actual implementation of DP is a challenge for bankers which require a paradigm shift from their present role as traditional financiers.

Research paper thumbnail of Exploring Application of Equity-Based Financing Through Mushārakah Mutanāqiṣah in Islamic Banks in Malaysia: Perspective from the Industry Players

International Journal of Economics, Management and Accounting, Nov 30, 2015

Due to the prohibition of interest in Islamic financial transactions as well as the nature of the... more Due to the prohibition of interest in Islamic financial transactions as well as the nature of the Islamic banks which is based on the profit and loss sharing concept, the equity-based financing should be widely adopted rather than debt-based financing which is similar to that of the conventional banks. As such, financing instruments such as Muḍārabah and Mushārakah are supposedly the major financing instruments offered by the Islamic banks. However, as argued in previous studies, the Islamic banks today are concentrating more on debt-based financing, particularly Murābaḥah and Ijārah contracts. Based on survey questionnaires on sixteen Islamic banks

Research paper thumbnail of Islamic Home Financing through Musharakah Mutanaqisah and al-Bay’ Bithaman Ajil Contracts: A Comparative Analysis

Research paper thumbnail of Consumers’ perception on Islamic home financing: empirical evidences on Bai Bithaman Ajil (BBA) and diminishing partnership (DP) in Malaysia

The Bai Bithaman Ajil (BBA) or Deferred Installment Sales facility is the most predominant mode o... more The Bai Bithaman Ajil (BBA) or Deferred Installment Sales facility is the most predominant mode of home financing in Malaysia since the introduction of Islamic banking in 1983. It is based on the debt financing where the bank buys the property from the customer and sells it back to the customer inclusive of profit. Customers make repayments at end of each month. This research examines the impact of using the prevailing debt concept which is claimed to have caused high price, customers" dissatisfaction, injustice and criticism by international scholars. In order to address these issues an alternative concept known as Musharakah Mutanaqisah or the Diminishing Partnership (DP) is also examined. In DP, bank and customers purchase the house jointly. The bank leases the house to the customers and rental payments are shared between them based on profit sharing ratio. The customer redeems the bank"s share on monthly basis until full settlement after which the house is transferred to the customer. The study investigates the perceptions of customers between BBA and DP home financing products. A survey questionnaire was conducted on 300 owners and potential house owners to gauge their features and operations. The result of paired t-test indicated significant differences between these two products. DP home financing is a viable alternative to BBA home financing measured from the descriptive results and hypothesis testing. The actual implementation of DP is a challenge for the banks and requires a paradigm shift from their present role as traditional financiers.

Research paper thumbnail of Issues and challenges facing Islamic financial institutions in Malaysia

The issue of riba or usury has long been a problem for Muslims. The establishment of Islamic fina... more The issue of riba or usury has long been a problem for Muslims. The establishment of Islamic financial institutions is a major step in addressing this predicament, as Islamic finance has been characterized as a body to remove exploitation and injustice. The concepts of Islamic finance were initially discussed in the mid 1940s; however, further details were only revealed and then practiced in the late 1960s. The Pilgrims Management and Fund Board of Malaysia (TPMFB) established in 1962 was the earliest Islamic financial institution set up to cater for the pilgrims in Malaysia. This was followed by Bank Islam Malaysia Berhad (BIMB) in 1983, which marked the beginning of commercial financial institutions offering Islamic products and services to consumers. This paper evaluates the issues, challenges and prospect of this emerging industry, and ends with suggestions and recommendations on how they can be addressed for Muslims to go forward in the field of financing.

Research paper thumbnail of Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia

Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks sh... more Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks should be involved more in equity-based financing which rely on the concept of risk and profit sharing as compared to debt-based financing which is similar to conventional banks. As such, financing instruments such as Mudarabah and Musharakah supposedly become the major financing instruments offered by the Islamic banks. However, as argued in the literature, the Islamic banks today concentrate more on the debt-based financing, in particular Murabahah and Ijarah contracts compared to equity based financing (Mohd. Ariffin et. al.2009; Khan and Ahmed, 2001; Al-Omar and Iqbal, 2000; and Al-Omar and Abdel Haq, 1996). Thus, the objectives of this study is firstly to analyse the use of various modes of financing by several Islamic banks in Malaysia and Bahrain, in particular the extent of equity-based financing, secondly, to assess the perceptions of the bankers with regard to issues on concept, pricing and compliance of Shari’ah for the use of equity-based financing in Islamic banks in Malaysia, thirdly, to investigate the most critical challenges for equity-based financing in Islamic banks in Malaysia, and lastly, to examine the current practice of Musharakah Mutanaqisah that has been applied by few Islamic banks in Malaysia. By undertaking this study, it is expected to shed the lights on the extent of involvement of the Islamic banks in Malaysia in equity-based financing. More importantly, findings of this study would enable us to make some recommendations on the possible ways to shift from debt-based financing to equity-based financing in the Islamic banks as well as the needed financial infrastructure to support the adoption of the equity-based financing by the Islamic banks.

Research paper thumbnail of The interaction effect of trust towards profit and loss sharing element in Musharakah financing for SMES

An Islamic equity financing, namely Musharakah financing, which operates based on profit and loss... more An Islamic equity financing, namely Musharakah financing, which operates based on profit and loss sharing (PLS) principle seems to be idle in the Islamic banking operations. Even though Islamic banks was founded based on the idea of equity financing or PLS, in reality, its application in Islamic banking operations is very minimal as the current operations of Islamic bank are dominated by the debt based financing system. This gives difficulties to a certain market segment of borrowers, especially small and medium enterprises (SMEs) in getting access to financing due to their difficulties in fulfilling debt financing requirement, mainly in providing collateral and high interest payment. Despite the resilience of Musharakah financing in the financial market, many past studies put emphasis on the need to utilize Musharakah financing for the development of SMEs. This study therefore, aims to examine the potential of Musharakah as an alternative financing for SMEs. To fulfill this objective, the main attributes of Musharakah financing, namely profit and lost sharing together with its moderating factor, namely trust were examined and tested among SMEs in Malaysia. Using survey by way of a questionnaire, this study found that the main attributes in Musharakah financing have potential in providing SMEs with greater access to financing. Furthermore, the moderating factors also play a significant role in strengthening the impact of PLS in Musharakah financing towards SMEs access to financing. The results demonstrate the viability of Musharakah financing as an alternative financing for SMEs which need crucial attention from the Islamic banks.

Research paper thumbnail of Musharakah Mutanaqisah and Al-Bay’ Bithaman Ajil Contracts as means for homeownership: a conceptual comparison

Home financing takes a large chunk of peoples" income. As alternatives to conventional interestba... more Home financing takes a large chunk of peoples" income. As alternatives to conventional interestbased home financing modes, several Islamic modes are currently in existence, the dominant among which are the al-Bay" Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA is a murabahah contract, based on buy-and-sell principle while the MMP consists of a musharakah (partnership) contract and an ijarah (rental) contract where the equity of the financier follows a diminishing balance method. Scholars are consensus on the Shari"ah permissibility of the MMP contract, but nonetheless, are not consensus on the permissibility of the BBA contract. Middle Eastern scholars generally disapprove of the BBA, which on the contrary is popular in Malaysia, Indonesia, and Brunei etc. This paper is a theoretical paper that compares these two contracts for the financing of assets, from Islamic and economic perspectives. The paper concludes that the MMP has several advantages over the BBA for the customer. Apart from being consensus Shari"ah-compliant, it can be made to avoid interest (riba) totally by means of using some rental or house price index while reducing the cost of homes and the duration of financing. The balance of financing, at any point in time, never exceeds the original price of the asset, unlike under the BBA where it can. When implemented through cooperatives, the MMP can also provide an investment avenue for members while not contributing to macroeconomic problems through the fractional reserve money creation process; and hence is argued to be consistent with the maqāsid al-Sharī"ah. The paper also provides a mathematical derivation note for the MMP.

Research paper thumbnail of Determinant Factors of Equity-Based Crowdfunding in Malaysia

Labuan Bulletin of International Business and Finance (LBIBF)

Crowdfunding as a means for investment using Fintech is relatively new. The popularity of venture... more Crowdfunding as a means for investment using Fintech is relatively new. The popularity of venture capital and angel financing as a source of funds for businesses has decreased due to the advent of Fintech. The services provided are similar to traditional finance, such as simple transactions to payments, brokering and risk management. However, entrepreneurs and project owners are linked to investors by means of digitalization platforms which enable greater participation in sourcing for capital. The objective of this research is to find factors that determine fintech investment using crowdfunding in Malaysia using Technology Acceptance Model (TAM) as its based theory. Four variables are used as measurements, namely perceived informativeness, network externality, return on investment and platform quality. Data is collected by means of questionnaires to investigate the validity of the proposed model. SPSS is then used to analyze the data collected using reliability, correlation and mult...

Research paper thumbnail of Cooperative behavior (ta’awun) between mosques and civic organizations in empowering asnafpreneurs through IIUM m-kitchen® project

Research paper thumbnail of Identifying accessibility of financing for MSMEs in East Java Indonesia

UMY Press eBooks, 2020

This chapter examined the extent to which MSMEs have accessibility to their financing in the curr... more This chapter examined the extent to which MSMEs have accessibility to their financing in the current situation. Primary data was collected by self-administered questionnaires with a sample of 250 respondents from selected MSME owners in six different regencies in East Java. Descriptive statistics was employed in the analysis. The study revealed that conventional financing is preferred to Islamic financing. The study also indicated that personal savings, categorized as internal financing, are the largest sources of fund for MSMEs surveyed in initial, current and future time. This indicates that MSMEs de-pend highly on their savings for financing their daily business operations. However, the study also indicates that bank loans or external funding are considered to be most accessible, followed by personal savings and loans from relatives. Findings suggest that massive socialization on Islamic finan-cial literacy is absolutely needed to enhance the awareness of MSME owners on Islamic financing products

Research paper thumbnail of Mkitchen® UIAM Penggerak Asnaf Sejahtera Lestari

Meso Publishing eBooks, Aug 31, 2021

Research paper thumbnail of A Journey of Ta’awun (Cooperative Behaviour) in Edu-Action at IIUM Mkitchen® and Masjid al-Syakirin Gombak (MASG)

Meso Publishing eBooks, Aug 9, 2021

This book narrates the journey of ta'awun (cooperative behaviour) at IIUM Mkitchen® project with ... more This book narrates the journey of ta'awun (cooperative behaviour) at IIUM Mkitchen® project with Masjid Al-Syakirin Gombak (MASG). The main objective of the project is transform the mosque as a platform to provide free food, to up skill in foodpreneurship, to create new employment opportunities, to give empowerment and to nurture entrepreneurship (3Es) for poor and needy people in the surrounding area of it. Ta'awun refers to cooperative behaviour among the participants, the sponsors, and the beneficiaries in initiating, planning, sponsoring, executing and evaluating the Mkitchen® project at Masjid Al-Syakirin Gombak (MASG). The journey officially started on 24th January 2021 through its first meeting among the interested as well as committed members. After executing two events, the project was continued with a full scale project for a month. The project has secured its proof of concept (POC). Nevertheless, the project has been continued with a small scale due to the movement restriction by the authority to prevent the spread of coronavirus disease (COVID-19).

Research paper thumbnail of Business model shifts: masjid kitchens as soup kitchens, jobs employment and empowering asnaf entrepreneurs, and income generation for the masjid

Research paper thumbnail of Factors that determine financial performance of SMES in Malaysia

Small and Medium Enterprises (SMEs) has been recognized as the backbone to a country’s economic d... more Small and Medium Enterprises (SMEs) has been recognized as the backbone to a country’s economic development and social benefits. Malaysian SMEs contributed 38.8% to overall GDP, 17.3% to total exports and 66.2% to total employment. Huge budget allocations were put every year to enhance and encourage the improvement on SMEs. However, it was found that many of the SMEs failed within the first years of its business operations despite various programs and initiatives by the government agencies. Therefore, this paper aims to determine factors that determine sustainable financial performance of SMEs in Malaysia namely, Financial Knowledge, Financial Attitude, Financial Socialization Agents, Financial Skills and Accounting Skills. The relationship of these factors towards SMEs performance is measured using regression and factor analysis conducted using the Statistical Package for the Social Sciences (SPSS) software. Findings reveal that all factors have a significant relationship with SME ...

Research paper thumbnail of Islamic Home Financing Through Musharakah Mutanaqisah: A Crowdfunding Model

Concept and Application of Shariah for the Construction Industry, 2018

Home financing takes a large chunk of peoples' income. As alternatives to conventional interest-b... more Home financing takes a large chunk of peoples' income. As alternatives to conventional interest-based home financing modes, several Islamic modes are currently in existence, the dominant among which are the al-Bay' Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA is a murabahah contract, based on buy-and-sell principle while the MMP consists of a musharakah (partnership) contract and an ijarah (rental) contract where the equity of the financier follows a diminishing balance method. Scholars are consensus on the Shari'ah permissibility of the MMP contract, but nonetheless, are not consensus on the permissibility of the BBA contract. Middle Eastern scholars generally disapprove of the BBA, which on the contrary is popular in Malaysia, Indonesia, Brunei etc. This paper is a theoretical paper that compares these two contracts for the financing of assets, from Islamic and economic perspectives. The paper concludes that the MMP has several advantages over the BBA for the customer. Apart from being consensus Shari'ah-compliant, it can be made to avoid interest (riba) totally by means of using some rental or house price index while reducing the cost of homes and the duration of financing. The balance of financing, at any point in time, never exceeds the original price of the asset, unlike under the BBA where it can. When implemented through cooperatives, the MMP can also provide an investment avenue for members while not contributing to macroeconomic problems through the fractional reserve money creation process; and hence is argued to be consistent with the maqāsid al-Sharī'ah. The paper also provides a mathematical derivation note for the MMP.