Islamic finance – Jurnal Pengurusan

Issues and Challenges in Offering Mudarabah and Musharakah Products in Islamic Finance

amrularshad — Mon, 10 Oct 2022 09:54:03 +0000

The study aims to explore the views of scholars, bankers and entrepreneurs in promoting mudārabah and mushārakah based contracts and to analyse their views to strengthening those practises. The study utilized qualitative research approach which consists of document analysis, interviews and observations in few phases. The study found few industrial concerns such as the needs on checks and balances in mudarabah and mushārakah to avoid failure; the lacking of some good qualities and hence certain conditions must be imposed on entrepreneurs if they want to conduct business based on musharakah or mudarabah contracts. In addition, although all respondents agreed that the daman concept is actually contrary to the concept of mudarabah (muqtada al-‘aqd), they still stress the need for a mechanism to make entrepreneurs serious in conducting the business. However, the disappointing conclusion derived from the interviews is that the industry is quite reluctant to enhance their participation in mudarabah- and mushārakah-based products.

Market Reactions Towards the Announcement of Sukuk Issuance: Evidence from Malaysian Market

sufizulkarnain01 — Sat, 08 Oct 2022 18:27:56 +0000

Drawing from the significance and implication that investors can use to properly comprehend the trend in market reaction from the new issuance of information, this study aims to investigate the market’s reaction toward the announcement of Islamic bond or sukuk. The Islamic bond market provides not only an avenue for more dynamic capital trades and portfolio diversification but also functions as an engine that accelerates the growth of the Islamic capital market. This study specifically aims to investigate whether the announcements of sukuk issuance that carry any new information can create impact on the market’s reactions. The overall sample time frame for this study is divided into three event windows; before, during and after the financial crisis in order to ascertain any unusual impact on the market’s return during the 2007-2008 financial crises. The stock market return is measured via the FTSE and Bursa Malaysia’s KLCI. In order to offer a more robust finding on the returns, this study re-measured the market return using Bursa Malaysia’s FTSE EMAS Index as it is a better representation of the sample population. The data collected from Bursa Malaysia, Bloomberg and DataStream database will be then analysed using Brown and Warner’s standard event study methodology of Brown and Warner (1985). Based on the 115 sukuk issuances between 2002 and 2013 (a period of 12 years), this study reveals that the effect of the announcement is significantly negative a day before and on the announcement date. On top of that, the result finds that there is a significantly positive reaction 30 days after the announcement of sukuk issuance which indicates that investors take a longer time to absorb the information from the sukuk announcement. The existence of a significantly positive reaction of stock markets during the financial crisis periods could be attributed to the conditions where the Islamic debt issuance might have sent an incredible signal about the financial position of the company, which have helped in solving the financial problem, especially during the economic downturn. However, the EMAS Index shows none of these significant results. The significant findings in this study (i.e., when uses the KLCI) are expecting to contribute clearer evidence and strategies concerning whether the information regarding sukuk can help investors to form a better investment strategy.

Islamic Finance and COVID-19 Recovery: The Role Profit-Loss Sharing Contract

syazwinaramjan — Sat, 08 Oct 2022 12:27:43 +0000

This note uncovers the beauty of Islamic finance via its Profit-Loss Sharing Contract (PLSC) as a financing tool in helping the economy and businesses to recover from COVID-19 economic crisis. PLSC is a contract that shares business risks between participants, while Interest-Based Contract (IBC) requires entrepreneurs to bear the entire business risks. Besides its fairness and justice in wealth creation and income distribution, past literature have shown that PLSC has been successfully adopted in various countries across industries. Redesign of mind-set and role from self-interest to common interest and from intermediaries to entrepreneurs are needed for the financial sector to embrace the benefits of PLSC towards achieving economic and societal sustainability.