Fares Djafri

PurposeIslamic financial institutions (IFIs) are required to establish a Shariīʿah Governance Framework (SGF) to strengthen their Sharīʿah-compliance mechanism and ensure that all relevant IFI regulations are in line with Sharīʿah rules and principles. Effective implementation of the Shariīʿah-compliance function will further promote stakeholder confidence, as well as the integrity of IFIs, by reducing Shariīʿah non-compliance risks. This study aims to examine the internal control framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and explore the extent to which it can be incorporated in the Sharīʿah-compliance function of IFIs.Design/methodology/approachThis study adopts a qualitative method of inquiry, utilizing the inductive method and content analysis to build comprehensive knowledge that will assist in exploring the framework of COSO methodology and the extent to which it can be adopted by IFIs.FindingsThe findings indicate that t...

Islamic finance has a lot in common with impact investment and can play a major role in addressing the problem faced by society. It also has the potential to bring add value to the efforts to mobilize resources for the sake of realizing the SDGs. This study adopts a qualitative method of inquiry and utilizes the inductive method and content analysis to explore the potential for Islamic finance to play a key role in supporting the Sustainable Development Goals (SDGs). The study found that Islamic finance can play a major role in addressing the problem faced by society and has the potential to contribute to the achievement of the SDGs through creative and productive modes of financing. Equally important, unlocking the potentials of Islamic social finance instruments such as waqf, zakat, and sadaqah will improve financial inclusion, financial sector stability and ultimately, enhance the contributions of Islamic finance to the SDGs. Besides, the integration of waqf and zakat with the fi...

Purpose-Islamic financial institutions (IFIs) are required to establish a Shari ıʿah Governance Framework (SGF) to strengthen their Shar ıʿah-compliance mechanism and ensure that all relevant IFI regulations are in line with Shar ıʿah rules and principles. Effective implementation of the Shari ıʿah-compliance function will further promote stakeholder confidence, as well as the integrity of IFIs, by reducing Shari ıʿah non-compliance risks. This study aims to examine the internal control framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and explore the extent to which it can be incorporated in the Shar ıʿah-compliance function of IFIs. Design/methodology/approach-This study adopts a qualitative method of inquiry, utilizing the inductive method and content analysis to build comprehensive knowledge that will assist in exploring the framework of COSO methodology and the extent to which it can be adopted by IFIs. Findings-The findings indicate that the existing frameworks of Shar ıʿah governance, whether that of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) or Bank Negara Malaysia (BNM), need to be further developed. Therefore, the adoption of COSO methodology in the internal Shar ıʿah audit of IFIs, as suggested by AAOIFI, is not only possible but desirable. The study also finds that the COSO framework places the highest priority on risk management in that it makes it an integral part of the decision-making process in all the institution's activities. As a result, incorporating the comprehensive COSO risk management structure within the Shar ıʿah-compliance function will enhance risk management in IFIs. Originality/value-This study highlights the importance of the COSO internal control framework and examines its components, principles and the possibility of its adoption by IFIs. The findings of this study are expected to contribute to enhancing the Shar ıʿah-compliance function of IFIs.

Shari’ah is a complete code of life that encompasses al-ahkam al-i’tiqadiyyah or sanctions relating to belief, ahkam al-‘amaliyyah or sanctions relating to conducts and worship, and al-ahkam al-akhlaqiyyah or sanctions relating to moral and ethics. In fact, ethics (akhlaq) is considered the third building block in Islam after faith (aqidah) and law (Shari’ah). Islam accords them high value and considers them one of the objectives of legislation (Lahsasna, 2013). Muslim scholars and economists unanimously agreed that the Islamic finance industry does not exist merely to capitalize the huge financial market rather it aims to achieve a greater and universally beneficial purpose through its various commandments, exhortations, prohibitions and doctrines. Al-Ghazali is widely acknowledged as the first to attempt to systematize thinking about the maqāṣid of the Shari’ah. In al-Mustasfa he classified the maqāṣid based on a hierarchy of priority into essentials (ḍarūriyyāt), complementaries (ḥājiyyāt) and embellishments (taḥsiniyyāt). He further stated that essentials (ḍarūriyyāt) involve preservation of five values namely faith or religion (din), life (nafs) lineage (nasl) intellect (‘aql) property (mal) (Al-Khelaifi, 2004; Laldin, 2010). The Shari’ah objective relating directly to Islamic finance obviously falls within the ambit of protection of wealth (hifz al-mal) (Al-Khelaifi, 2004; Laldin, 2010; Dusuki and Bouheraoua, 2011; Ahmed, 2011). However, the necessity of incorporating various aspects of sustainable development instruments into financing decision-making has always been envisaged in order to ensure the interconnectivity of the other rubrics in Islamic finance consideration. Recently, ethical and responsible financing and investment have been the central attention in business and finance. Several investment approaches such as responsible investment, socially responsible investing (SRI), impact investing, sustainable investment, ethical investment, green investment and the value-based intermediary (VBI) have been developed to combine financing return and moral impact. More importantly, the use of green energy has become an integral part of the UN’s Sustainable Development Goals (SDGs), which have been incorporated into the economic growth plans of many nations. This writing discusses ethics in business and finance in the light of the objectives of Shari’ah (maqasid as-Shari’ah). The concept, components and categorisations of maqasid are also discussed in brief. It explains the key ethical principles underlying Islamic finance from Islamic perspectives. The Shari’ah mechanisms including the fundamental principles in dealings and human interaction to ensure the wellbeing of every individual are also discussed. The last section discusses various sustainable development instruments such as socially responsible investing (SRI), principles of environmental, social and corporate governance (ESG), and value-based intermediation (VBI), with some examples on key roles each instrument plays in achieving sustainable development goals (SDGs) and relevancy from maqasid perspectives.

Islamic finance has a lot in common with impact investment and can play a major role in addressing the problem faced by society. It also has the potential to bring add value to the efforts to mobilize resources for the sake of realizing the SDGs. This study adopts a qualitative method of inquiry and utilizes the inductive method and content analysis to explore the potential for Islamic finance to play a key role in supporting the Sustainable Development Goals (SDGs). The study found that Islamic finance can play a major role in addressing the problem faced by society and has the potential to contribute to the achievement of the SDGs through creative and productive modes of financing. Equally important, unlocking the potentials of Islamic social finance instruments such as waqf, zakat, and sadaqah will improve financial inclusion, financial sector stability and ultimately, enhance the contributions of Islamic finance to the SDGs. Besides, the integration of waqf and zakat with the financial sector can play a major role in realizing the SGDs such as reducing the vulnerability of the poor. The study also found that the maqasid discussion in the financial sphere should be extended to integrate various sustainable development instruments such as SRI, ESG, and VBI. The integration between SDGs and Maqasid al-Shariah should also be considered to overcome the challenges faced by the Islamic finance industry in implementing SDGs.

Purpose: Islamic finance is considered one of the fastest-growing segments of the global financial industry. Over the last four decades, Islamic finance has expanded globally to western and other non-Muslim countries. This paper aims to explore the potential for China to tap into the Islamic finance market and the challenges that may face the implementation of Islamic finance there.
Methodology: This study adopts a qualitative method of inquiry and utilizes the inductive method and content analysis to build comprehensive knowledge that would assist in exploring the significance and potential benefits that China may gain from the adoption of Islamic finance.
Findings: The study reveals that China has a huge opportunity to capitalize on Islamic finance for economic development, particularly in the implementation of China’s Belt and Road Initiative (BRI). The paper also highlights the critical success factors for introducing Islamic finance in China, most importantly, political will. Genuine support from the government is needed for the effective introduction of Islamic finance in the country. This support should be subsequently followed by the development of the legal framework, an amendment of the laws, broad publicity to raise public awareness, and effective collaboration with international organizations.
Significance: To the best of the authors’ knowledge, this study is among the few which highlights the potential for China to tap into the Islamic finance market. It is expected to contribute to enhancing the implementation and development of the Belt and Road Initiative (BRI).

Purpose-This study aims to investigate the relevance of the theory of planned behaviour (TPB) in predicting the intentional behaviour of refugee entrepreneurs. This paper uses key components of the theory on attitude, subjective norms and perceived control to explore the willingness of refugees to participate in microenterprise support programmes (MESP) in refugee camps. Design/methodology/approach-This study used a positivist research approach, comprising a quantitative basis of enquiry and gathered data via survey questionnaires. In total, 400 usable questionnaires were completed and used for analysis. This study uses descriptive and inferential analysis with SPSS and confirmatory factor analysis with AMOS to test three key TPB hypotheses. Findings-The structured model revealed acceptable high goodness-of-fit indices. Also, the findings indicated that out of three hypotheses, two hypotheses (attitude and perceived control) were substantial, positive and significant. However, the relationship between subjective norms of refugees and their intention to participate in MESP was insignificant. The findings of this study indicate the low-profile refugees give to the views and opinions of the surrounding communities when it comes to determining their intentional behaviour. As such, some poignant implications may relate to microfinance and microcredit programmes targeting refugees. Practical implications-The present study illustrates the interrelationships between the proposed variables. Also, by understanding the relationships between the selected variables, the findings would be useful for the concerned authorities to ameliorate and upgrade the well-being of refugees along with empowering their environment, which would facilitate their engagement in business and entrepreneurship. Originality/value-This study explores the relevance of TPB and its components in the context of the intentional behaviour of refugee entrepreneurs. It further illuminates the distinction of refugee behaviour towards entrepreneurship and MESP.

This research investigates the Sharīʿah compliance of the pricing elements used in family takāful products. The reviewed literature has revealed a great deal of emphasis on the Sharīʿah aspects of the takāful contract, distribution of surplus, models used, incorporating waqf in takāful, and the relationship among the parties. Other research has focused on the operational and technical aspects of takāful such as underwriting, pricing, reserving and risk management. None of these studies has addressed the Sharīʿah compliance of the pricing elements of family takāful products. Through qualitative research using open-ended interviews as well as content analysis, this research analyses the conformity of family takāful pricing mechanism with the Sharīʿah principles of price-setting (tasʿīr). The research findings indicate that the assumptions of mortality and morbidity are Sharīʿah compliant based on the principles of ibāḥah (permissibility), maṣlaḥah (public interest), istiqrāʾ (induction) and ʿurf (custom). However, the investment returns assumption is not quite fair to the shareholders should there be a loss in the investment. The research also indicates that the concept of time value of money is a Sharīʿahcompliant element that can be used to price family takāful products. Further, the findings highlight that the pricing elements such as health condition are deemed unfair by some practitioners. Similarly, adding an extra loading to the contribution because of family medical history should not be taken for granted.

Islamic finance has grown considerably over the last four decades and has a global reach. It is considered one of the fastest-growing segments of the global financial industry. One of the biggest challenges for Islamic finance in the next decade is in financial technology (known as Fintech). In the digital world, traditional financial practice will be left behind. This paper examines the phenomenon of financial innovation and technology in Islamic finance and its Shariah parameters. The research adopts a qualitative approach employing the inductive method to trace primary and secondary data on the topic and the descriptive method to describe the emergence of fintech in the Islamic finance industry. The study found that all financial innovations are generally welcomed and can be considered as benefits (Maslahah) to the customers and to the whole financial industry. Innovations in fintech become impermissible only if there is clear evidence from the Shariah that they are against the basic rules of the Shariah. The study also highlights the relationship between fintech and Shariah compliance and suggested to have a proper Shariah governance framework in order to ensure the operation of fintech is in total compliance with Shariah. Besides that, authorities and regulators are required to develop Shariah standards that would explicitly spell out the requirement of Shariah that are fundamental to fintech operations and practices.

Keywords: Innovation, Fintech, Digital World, Shariah Compliance, Islam-ic Finance.

The research investigates the Sharīʿah compliance of the pricing elements used in family takāful products. The reviewed literature has revealed a great deal of emphasis on the Sharīʿah aspects of the takāful contract, distribution of surplus, models used, incorporating waqf in takāful, and the relationship among the parties. Other research has focused on the operational and technical aspects of takāful such as underwriting, pricing, reserving and risk management. None of these references has addressed the Sharīʿah compliance of the pricing elements of family takāful products. That is the research gap addressed in this paper.
In addressing it, the paper builds a fundamental framework based on the following three notions:
1 The pricing methodologies of insurance and takāful are similar despite the differences between their contracts and objectives.
2 The pricing elements need Sharīʿah investigation and substantiation in view of some concerns raised by industry experts and Sharīʿah scholars about the unfairness of certain underwriting and pricing elements.
3 The price in insurance and takāful is commensurate with the nature of the risk, the sum covered and the estimated time of the risk occurrence.

The research finds that since insurance and takāful cross in the area of pricing, takāful has adopted actuarial practices that use assumptions based on best estimate. All jurisdictions of insurance and takāful emphasize that pricing should be adequate, fair and responsive to the economic environment. However, the regulatory framework for pricing is still lagging in the takāful market.

The research deciphers the components of pricing, focusing only on the assumptions of mortality, morbidity, investment return, interest rate and time value of money. The remaining pricing elements such as risk discount rate, lapse basis and profit loading are beyond the scope of this research as they have not triggered any Sharīʿah issue in the eyes of the authors. The following summarises the key findings:
1. As for mortality and morbidity, the research discovers that these two assumptions are Sharīʿah compliant based on the principles of ibāḥah (permissibility), maṣlaḥah (public interest), istiqrāʾ (induction) and ʿurf (custom). Despite being predictive in nature, the statistically proven tables of mortality and morbidity are deemed the best estimates of the insured’s time of death and injury.
2. As for investment returns as a pricing element, the research acknowledges the cash flow method, which prices products at a loss in order to recoup the profitable rate from future investment returns. If profitable, the investment return would offset any underwriting loss. However, the research raises a concern on the repercussions of investment losses. While the participant may not be very much concerned about profits in non-unitised takāful funds, the shareholders’ losses in the same funds may affect the solvency of the takāful funds, let alone the expected profitability. This may amount to an unfair arrangement for the shareholders that the regulators may have to address.
3. The assumptions of inflation and interest rates are also used, especially in the valuation of assets. Both function within the concept of the time value of money; therefore, this research has discussed whether the concept is Sharīʿah compliant. In this regard, the authors observe that time value of money is used in both contracts of exchange and contracts of donations. In contracts of exchange, the time value of money is inherent in some sales such as bayʿ bi thaman ājil (deferred sale), bayʿ al-taqsīṭ (sale by instalment) and bayʾʿatayn  fī bayʿah (two sales in one). In contracts of tabarruʿ, the donation can still be calculated based on the time value of money if there are future cash flows. Both partake in the time value of money from the technical aspect only.

Other assumptions such as health condition are found to be Sharīʿah compliant despite some industry experts’ opinion that the existing underwriting process (which affects pricing) is not in line with the spirit of taʿāwun or mutual cooperation. However, regarding consideration of the family medical history of the participant, no consensus on its fairness and Sharīʿah compliance has been garnered. Still some Sharīʿah scholars are not quite satisfied that the participant should be arbitrarily charged a loading for his/her family medical history. Concurring with this observation, the researchers recommend a regulatory amendment to this consideration. However, the issue is still open for further Sharīʿah investigation to arrive at a Sharīʿah ruling on the matter. 

Since fees and charges are all imbedded in the gross contribution paid by the participant, the research identifies two issues that warrant Sharīʿah investigation.
1. Fee on the tabarruʿ fund as practiced in Malaysia The research identifies obscurity in the justification for imposing such a fee on the tabarruʿ fund by the takāful operator since the wakālah fee covers the administrative expenses of the risk fund. The linkage of this fee to the performance of the fund as in the Malaysian context would make it behave like an ‘upfront surplus’. The research recommends the embedment of this fee in the wakālah fee if operationally justified.
2. The cost of qarḍ The authors have conducted a series of interviews with five actuaries and one CEO of a retakāful company in Malaysia. Some secondary data on the issue have also been referred to. Two views were prominent: (i) the first group holds that the cost of qarḍ is not embedded in the price while (ii) the second group maintains the opposite view. The researchers acknowledge the lack of transparency on this issue, and it was too difficult to figure out whether the cost of qarḍ is in fact imbedded in the price. For those who ascertained that the cost of qarḍ is factored into the price, they maintained that qarḍ must be provided for in the capital structure, especially when some regulations would consider the qarḍ irrevocable if not recouped within a stipulated period of time. Based on juristic analysis on qarḍ in the context of takāful, the research concluded that the cost of funds cannot be charged as doing so would be tantamount to ribā.

The research recommends that the regulators place more regulations on certain family takāful products that are prone to either aggressive or conservative modes of pricing. The research also recommends that cost of qarḍ, as indicated by some practitioners, should not be factored into the pricing of takāful products.

Keywords: pricing, underwriting, takāful, assumptions, Sharīʿah

According to the International Islamic Financial Market Sukuk Report (IIFM, 2018), the global sukuk issuance has grown exponentially over the last three decades, recording a total issuance of US$ 97.9 billion in 2018 with Malaysia topped the list with US$ 32.8 billion representing 33.5 % of the world’s total. In the light of Malaysia’s experience as a foremost sukuk issuer, this paper examines the underlying concept and nature of the sukuk, the operational and structures involved in sukuk, and the legal and regulatory frameworks for sukuk issuance in Malaysia. In terms of methodology, the research adopts a qualitative approach employing the inductive method to trace primary and secondary data on the topic and the descriptive method to describe the Malaysian experience in sukuk issuance. The research also adopts the analytical method to evaluate the viability of sukuk issuance in the Malaysian context. The study found that the developments of sukuk in Malaysia is very promising due to the abundant encouragement provided by the regulators. The research has also concluded that the success of the Malaysian experience is due to the legal and regulatory frameworks and the infrastructure support system that facilitates and govern the sukuk issuance. It is also attributable to the Shariah framework that is uniquely co-exists with the existing legal framework to regulate sukuk issuances. These contribute to the adherence of Shariah provisions and facilitate the growth of the industry thereby making Malaysia a leading model in sukuk issuance.

Keywords: Sukuk, Legal framework, Shariah framework, Islamic finance,
Malaysia.

In February 23, 2017, the London School of Economics and Political Science (LSE) and Hamad Bin Khalifa University (HBKU) organized a workshop on the topic of “FINTECH AND ISLAMIC FINANCE: APPLYING HIYAL & MAKHARIJ AND OTHER ISLAMIC PRINCIPLES”. This report is a summary of the event, conveying key themes and discussion points of the workshop. Annotations are therefore not assigned to a specific individual.

Purpose

Despite extensive studies on predictors and antecedents of organizational commitment, empirical researches on the impact of workplace spirituality on organizational commitment remain scarce. This study aims to examine the impact of the dimensions of workplace spirituality on agents’ organizational commitment in Islamic insurance (Takaful) industry in Malaysia.

Design/methodology/approach

This study employs a positivist research approach, comprising of a quantitative basis of enquiry, and gathered data via survey questionnaires. A total of 600 questionnaires were distributed and finally 395 usable cases were selected for analysis. Pearson correlation and stepwise multiple regressions analysis methods were used to analyze the data.

Findings

The findings indicated that spirituality in the workplace has a positive and significant effect on organizational commitment. The relationship between each and every component of workplace spirituality and organizational commitment was found to be substantial, positive and significant. The study findings will enable Islamic insurance companies to understand the importance of spirituality in the workplace and will further improve their function and performance by way of enhancing employees’ spirituality in the workplace. This study suggests developing of more spiritual training, workshops, lectures and seminars on spirituality at the workplace which will help employees of takaful operators and agencies to cope effectively with life problems, reduce stress, boost loyalty and enhance organisational commitment.

Originality/value

This study raises awareness on the importance of spirituality in the workplace and investigates the influence of its components to enhance organizational commitment, which will ultimately; contribute to improving and sustaining human well-being and organizational performance.

Keywords: Takaful, Organizational commitment, Well-being, Islamic insurance, Spirituality in the workplace

This paper aims to investigate the issues and challenges faced by Islamic banks in implementing Microfinance (MF) in selected Islamic banks in Malaysia. An empirical study is endeavoured consisting of semi structured interviews with senior managers and officers from four Islamic banks in order to address the main research questions. Out of the four selected Islamic Banks, only two are currently providing MF. The MF programs in these two banks are mostly restricted to pensioners, army wives, registered companies and companies operating for a minimum of two to three years. The main challenges facing Islamic Banks when dealing with MF can be highlighted in the following points: the default risk, the lack of funds and the unwillingness of shareholders to take MF risk, the high operating cost, the complexity of MF processing, and regulatory restrictions. Other hindrances include the lack of well trained staff capable of efficiently managing MF. This research concludes with a call for Islamic Banks to seriously participate in economic and social development through greater involvement in MF.

The global takaful market is estimated by market analysts to reach a premium of U.S. $ 12.5 billion by 2015. Malaysia is considered the second largest takaful in the world with total asset of US$ 3.2 billion. One of the new innovations of takaful and insurance in Malaysia is Perbadanan Insurance Deposit Malaysia (PIDM) which is also known internationally as the Malaysia Deposit Insurance Corporation (MDIC). The role of MDIC is to provide protection to owners of takaful certificate and to ensure the stability and confidence in the market by protecting policy holder (takaful certificate). Therefore, this study investigates the extent to which MDIC is relevant to takaful operators. Personal interviews are carried out with shariah advisers of takaful operators to deduce the actual practice, the ideal role and to gain access to the field of MDIC and its implications in Malaysia. The findings of this research indicate that MDIC is relevant to takaful operators and part of the regulations that should be supported and encouraged. Furthermore, the study also found that shariah advisers suggest Wakalah bi ajr as an alternative of kafalah-bi al-ajr by shifting the scheme to tabarru'model. In addition, the study found that the contribution paid should be charged to the participants' fund; this is because the protection provided by MDIC is for the fund that belongs to the participants and takaful operators deemed to be wakeel (agent) only.

The global takaful market is estimated by market analysts to reach a premium of US$ 12.5 billion by 2015. Malaysia is considered one of the largest takaful markets in the world with total assets of US$ 3.2 billion. The Islamic insurance sector or takaful has seen remarkably global growth in many major markets, especially in Muslim dominated countries. However, the development of Islamic finance, particularly takaful in Algeria appears to have lagged behind. Although there are two Islamic banks operating in Algeria, Islamic insurance or takaful has yet to be introduced into the Algerian financial market. Due to this fact, this research explores issues and challenges that potentially face the introduction of takaful into the Algerian financial market. An empirical study is endeavoured consisting of semi-structured interviews with Algerian experts in the area of Islamic finance and takaful to deduce the issues and challenges that might face the introduction of takaful in Algeria. This study found that there would be economic and spiritual benefits if takaful is introduced in Algeria. In addition, the respondents agreed that the most important challenge that might face the introduction of takaful is political will whereby genuine support from the government is needed for the effective introduction of Islamic insurance or takaful in Algeria. This support should be subsequently followed by broad publicity of the newly introduced industry, an amendment of the laws, and the development of the necessary infrastructures to facilitate an effective collaboration with international organizations.

This paper aims to investigate the issues and challenges faced by Islamic banks in implementing MF in selected Islamic banks in Malaysia. An empirical study is endeavoured consisting of semi structured interviews with senior managers and officers from four Islamic banks in order to address the main research questions. Out of the four randomly selected Islamic Banks, only two are currently providing MF. The MF programs in these two banks are mostly restricted to pensioners, army wives, registered companies and companies operating for a minimum of two to three years. The main challenges facing Islamic Banks when dealing with MF can be highlighted in the following points: the default risk, the lack of funds and the unwillingness of shareholders to take MF risk, the high operating cost, the complexity of MF processing, and regulatory restrictions. Other hindrances include the lack of well trained staff capable of efficiently managing MF. This research concludes with a call for Islamic Banks to seriously participate in economic and social development through greater involvement in MF. Originality/value –MF in Islamic Banks has been theoretically discussed at length, yet, empirical studies are almost non-existent. Despite being conducted on Malaysian Islamic Banks, the findings of this research represent a general outlook at the main challenges in implementing MF in Islamic Banks and provide a platform for greater engnement in MF among Islamic Banks.