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Islamic finance has faced a two-fold criticism from scholars; viz. constructive criticism and destructive criticism. Majority of the scholars criticize it with the intention to improve its overall development, but some scholars are more negative in their criticism. This paper proposes that Islamic banks (a component of Islamic finance) are not char...
Context in source publication
Context 1
... Al-Shariah is the fundamental logic behind Islamic financial system and the operating guidelines of Islamic finance are drawn from the same. Islamic banking is based on some rules that are explained briefly in Figure 1. Prohibition of speculation Prohibition of Riba: Riba is an Arabic word which means 'interest'. ...
Similar publications
Islamic finance has gained considerable prominence in the last several decades spurred by a growing demand for Shariah-compliant financial products. This has led to the significant growth of Islamic banking, providing individuals with Shariah-compliant loans and other financial products. Challenges arise when Islamic investors aim to invest in corp...
Citations
... Islamic scholars believe that conventional financial products offered by conventional banks and financial institutions (CBF) are prohibited for Muslims to consume, given their interest basis, inequitable risk sharing and investments not permissible in Islam. Instead, Muslims are encouraged to consume Islamic banking and finance (IBF) products characterized by shared profits/losses, risk and investments in Islamically permitted assets (Hudi et al., 2019;Lone and Ahmad, 2017). Globally, the IBF industry has assets valued at over A$3.67tn as of 2019 (IFSB, 2020). ...
Purpose
This study aims to investigate how Australian Muslims make consumption-related decisions regarding the purchase of home loan products.
Design/methodology/approach
This exploratory research used in-depth semistructured interviews with community leaders from leading Muslim ethnic communities. Seventeen community leaders from the six largest Muslim community groups by country of birth and living in Melbourne and Sydney were selected for the interviews. The interview data was analyzed using NVivo 12.
Findings
The findings suggest that despite knowledge of and concern for Islamic tenets regarding the consumption of banking and financial products, including home loans, most Muslims viewed conventional home loans (CHL) as being permitted, essential or innocuous. Reasons for such views include the interpretation of Islamic tenets, limited awareness of available Islamic home loan offerings, convenience factors related to accessing CHL offerings, service quality levels, availability of technology-based services such as internet banking, and the influence of social groups and communities.
Research limitations/implications
This research helps marketers understand the attitudes, subjective norms (SN) and behavioral factors related to the Muslim consumption of home loans.
Practical implications
The findings of this research can facilitate the development of financial products and marketing strategies that better appeal to Muslims. Such loan products can improve the uptake of home loans (and, in effect, homeowners) by Muslims, potentially improving social and financial inclusion.
Social implications
This research helps marketers understand the attitudes, SNs and behavioral factors related to the Muslim consumption of home loans, which can facilitate the development of financial products and marketing strategies that better appeal to Muslims. Such loan products can improve the uptake of home loans (and, in effect, homeowners) by Muslims, potentially improving social and financial inclusion.
Originality/value
This qualitative study explores the drivers of Muslim consumers’ uptake of home loans in Australia. Drawing upon the theory of planned behavior and the literature, antecedents to attitude, SNs and perceived behavioral control that influence intention and behavior were investigated. It identifies factors influencing decision-making related to home loans by Australian Muslims, contributing to a theoretical framework to investigate Muslims’ consumption of financial products.
... Islamic banking discourages interest due to its side effects (Zakir Hossain 2009). Islamic banking is spreading all over the world and is growing stronger not just in Muslim countries but in Europe, USA, Africa and many other non-Muslim countries (Lone 2016;Lone and Ahmad 2017). Conventional banking also operates Islamic banking windows, strong evidence of acceptance and viability of Islamic banking (Iqbal and Molyneux 2005). ...
In the wake of the 2008 global financial crisis, the Fintech industry and Islamic banking were striving to fill the existing
void through innovation and different business approaches. Losing trust in conventional banking, the advancement of
technology and the internet globally, and customers' craving for trustworthy and reliable financial systems are the main
incentives for the expansion and growth of Fintech and Islamic Finance. In view of this growth, the current study tests the
adoption of the novel mechanism Fintech Value Chain Financing (FVCF) using Unified Theory of Acceptance and Use
of Technology (UTAUT) model among potential users, Aarti (middlemen) in the agriculture sector. A cross-sectional
self-administered questionnaire survey was conducted; 500 questionnaires were distributed following purposive
sampling to collect data for analysis. Findings revealed that perceived benefits expectancy, perceived efforts
expectancy, perceived credibility, anxiety, and consumer innovativeness are strong predictors of the adoption of FVCF.
This study is a pioneer of its kind. The study’s contribution to the literature is a newly operationalized instrument for the
constructs along with other variables that extend the UTAUT model and the findings provide new insights to consider
the UTAUT model to segregate organization-based variables. This study is beneficial for the practitioners of Islamic
Financial Institutions (IFIs) update the financial system by using the FVCF.
... Kamarulzaman and Madun (2013) found that the frontline employees in IFIs themselves are unaware and unclear on their own products/services, which finally fail them to market their products/services to the customers. Lone and Ahmad (2017) argued that IFIs are incapable of understanding the needs of the customer, which finally fails them to train their employees and tailor their product. The significance of human resources in the takaful industry has been studied by a number of researchers such as Salleh et al. (2012) on the Quranic conditions applicable to the agents in takaful; Zawawi et al. (2021) on takaful practitioners' sustainable practice; Njagi (2019) on personality traits of takaful salesforce; and Ghani and Shaari (2016) on ethical aspects of takaful agents. ...
Purpose-
This study aims to examine the impact of information overload (referred to as the saddling effect in this study) of underlying contracts on the sales performance of the salesforce at takaful institutions with special reference to addressing the heterogeneous effect among distribution channels.
Design/methodology/approach-
A total of 311 samples were collected from the sales professionals of the takaful industry in Malaysia using a purposive sampling technique and the empirical analysis was conducted with the measures of model fit and bootstrapping technique using partial least square structural equation modeling and multi-group analysis.
Findings-Empirical results indicate that the saddling effect of the underlying contracts is evident among the salesforce and the magnitude of the impact was found to be heterogeneous between the groups of salesforces in different distribution channels.
Practical implications-
Findings recommend respective authorities of takaful institutions to intensify capacity building for their salesforce, particularly in the area of shariah knowledge and the nature of underlying Islamic contracts used in the takaful products. A significant heterogeneous effect between distribution channels suggests that the actions and policy formulations should be diverse between the salesforce at different distribution channels and higher attention should be catered for the salesforce at the direct selling channel.
Originality/value-
The increased information expectation (i.e. underlying contract knowledge) on takaful salesforce and its impact on their sales performance have not been documented before. The increase in information may create a burdening effect or what is referred to in this study as the information or knowledge "saddling effect." If a saddling effect is identified, this may be a formidable reason for the slowing growth of the takaful industry in the respective market. It is expected that the outcome of this study would assist not only to fill the gap in the literature on personnel selling in the takaful industry but also will assist the takaful institutions in formulating appropriate policies for tackling the issue of the saddling effect of underlying contracts.
... Takaful dianggap sebagai salah satu komponen penting dalam gagasan kewangan Islam. Menurut Chapra (1979) dan Lone & Ahmad (2017), gagasan kewangan Islam memperjuangkan beberapa matlamat antaranya: i) menerapkan nilai-nilai Islam dalam aktiviti komersil, ii) menjunjung persaudaraan dan keadilan sejagat, iii) menghapuskan jurang pendapatan, dan iv) mempromosikan kebajikan social. ...
Abstrak Fenomena penyakit berjangkit antara faktor yang merencatkan kestabilan sosioekonomi sesebuah masyarakat khususnya populasi miskin. Ia disebabkan aktiviti perekonomian yang terbatas, kos perubatan yang meningkat dan akses fasiliti kesihatan yang terhad. Takaful mikro merupakan antara instrumen kewangan Islam yang menawarkan skim perlindungan kesihatan kepada populasi ini. Walau bagaimanapun, operasi takaful mikro dikatakan mempunyai beberapa isu, antara yang utamanya ialah permasalahan kewangan. Sungguhpun secara teoritikalnya, zakat sering dikaitkan sebagai sumber dana alternatif untuk operasi takaful, namun dari sudut praktikalnya idea ini masih samar. Kajian ini bertujuan untuk meneroka potensi, isu serta cabaran takaful mikro sebagai instrumen perlindungan kesihatan bagi kawalan penyakit berjangkit, khususnya dalam kalangan populasi miskin. Metode kajian kepustakaan dan dokumentasi digunakan untuk mendapatkan data. Bagi tujuan analisis, kaedah analisis kandungan, diskriptif, induktif dan deduktif digunakan secara konsisten. Hasil kajian mendapati bahawa takaful mikro adalah relevan untuk menghadapi wabak penyakit berjangkit. Beberapa prospek dan cabaran bagi penggunaan zakat dalam operasi takaful mikro turut dikenalpasti. Kajian ini sesuai
... However, Islamic banking is waxing stronger not just in Muslim countries but also getting popular in the USA, Europe, Africa, and many non-Muslim countries (Z. Iqbal & Mirakhor, 2011;Lone & Ahmad, 2017;Lone & Fayaz Ahmad, 2016). The proliferation of Islamic banking is because its interest free and its benefits are long lasting . ...
Financial technology and digitization are an essential part of the financial sector in the recent age, especially for Islamic Financial Institutions (IFIs), who offer a variety of products and services to the different sectors/segments of society. Demand for food is rising, but agricultural productivity is reducing worldwide. The reason behind this contraction is the decreasing trend of investment in agriculture due to the shortage of credit and financing facilities. IFIs promised to provide financing, and Fintech is considered as an opportunity to manage this problem. The study aims to explore challenges for the small farmers regarding agricultural financing through IFIs in the presence of conventional financing sources to find out a solution with the help of Fintech integration. This study was undertaken to collect data through focus group and in-depth interviews. Population of the study is small farmers of agriculture sector in the Gujranwala region. A sample of 70 people were chosen based on purposive sampling to create focus groups (seven focus groups) and in-depth interviews of the selected respondents. The sample size of the study was decided based on the territorial classification of the selected area of the Gujranwala region to approach the maximum number of target audiences for this study. Moreover, unstructured in-depth interviews were carried out to collect data from small farmers. Individual farmer is the unit of analysis for this study. Interviews were transcribed and coded to develop the themes to conclude the results. Findings of the study indicate that conventional banks don't provide loans to vulnerable small farmers due to risk burden and high interest; collateral requirements; bribery, and lengthy procedure for financing that discourage the small farmers to approach these banks. However, IFIs especially Islamic banks provide interest-free but offer very limited financing products/services to small farmers. Moreover, these financing facilities are not accessible to small farmers. Therefore, the use of financial technology with value chain financing emerged as a viable alternative that can tackle the financing issues by integrating small farmers and other stakeholders with IFIs. This study has several implications for IFIs, policy makers, and other stakeholders.
... Table 1 provides information on the main differences between Islamic banks and traditional ones. The activities of the Islamic Financial Centre OJSC "Bakai Bank" can be referred to the number of innovative approaches in the field of lending based on Islamic principles (Ahmad Lone and Ahmad, 2017;Alharbi, 2016). This bank opened in 2018 and became the first commercial bank in the CIS to receive a regulatory license to launch a full range of Islamic banking services. ...
The relevance of the study is due to the necessity to solve the problems of agricultural lending in the Kyrgyz Republic. The problems of financing and lending to agriculture are still urgent in the Kyrgyz Republic, therefore, specific financial instruments of Islamic banking, which are highly appreciated in the practise of other countries, are well suited for project financing, work in conditions of high uncertainty characteristic of agriculture in the Kyrgyz Republic. The purpose of the study was to identify alternative loan products for agricultural economic entities based on Islamic principles of financing in the Kyrgyz Republic. Research objectives: to provide brief information on the current state in the field of agricultural lending; give brief information on the development of Islamic principles of lending in the Kyrgyz Republic; define the concept and classification of Islamic banking instruments in agriculture; define the financial instrument “Ijara” and identify its advantages. Research methods: methods of the empirical level (studying of literature and other sources of information, observation, comparison), methods of the theoretical level (study and generalisation, analysis and synthesis). In the process of writing this article, Islamic banking instruments have been reviewed and classified. The concept of Ijara contract was considered, new modern technologies in the field of Islamic banking were investigated. The main distinctive principles of Islamic banking from the Western model of financial leasing were analysed. The credit history of agriculture and forestry of the Kyrgyz Republic was analysed.
... Kamarulzaman and Madun (2013) found that the frontline employees in IFIs themselves are unaware and unclear on their own products/services which finally fail them to market their products/services to the customers. Lone and Ahmad (2017) argued that Islamic banks are incapable of understanding the needs of the customer which finally fails them to train their employees and tailor their product. ...
Purpose
This study aims to examine the burdening effect of Shariah knowledge on the sales performance of the salesforce at Islamic financial institutions (IFIs) with special reference to addressing the heterogeneous effects of work experience.
Design/methodology/approach
A total of 335 samples were collected from the sales professionals of IFIs in Malaysia using a purposive sampling technique and the empirical analysis was conducted with the measures of model fit and bootstrapping technique using partial least square structural equation modeling and multi-group analysis.
Findings
Empirical results indicate that the burdening effect of Shariah knowledge is evident among salesforce and the magnitude of the impact remains consistent across the groups of salesforces with different levels of work experience.
Practical implications
Findings suggest respective authorities of IFIs intensify capacity building for their salesforce particularly in the area of Shariah knowledge and nature of underlying Islamic contracts used in the financial products. An insignificant heterogeneous effect of work experience suggests respective authorities that the actions and policy formulations are equally important among the entire salesforce regardless of the number of years of job tenure each salesforce holds.
Originality/value
As customer awareness and knowledge may be influenced by the information transferred via the IFI employees (especially salesforce in IFIs), any information overload (i.e. additional requirement of Shariah knowledge/features) on the IFI employees may, therefore, negatively influence customer patronage and reduce IFI market share. However, the increased information expectation (i.e. Shariah knowledge/features) on IFI employees and its impact on market share along with the heterogeneous effect of work experience has not been documented before. If a burdening effect of Shariah knowledge is identified, this may be a formidable reason for the slowing growth of Islamic finance.
... The study of Imran and Kpodar (2016) reveals that an Islamic bank is non-negatively related to the growth of assets subsequently monitoring other elements of growth. Lone and Ahmad (2017) suggested that Islamic banks are in-between organizations that offered healthier perceptions about the financial system of Islamic institutions to additional develop the industry of Islamic banking and help society better. Lone and Ahmad (2017) used the SERVQUAL model to detect customer satisfaction in Islamic banking windows and full-fledged Islamic bank and they investigated customer's perceived better image regarding Islamic banking. ...
The foremost intention of this study is to investigate the influence of macroeconomic variables on the growth of assets in Islamic banks of Pakistan for 11 years from 2008-2018. Descriptive statistics, correlation matrix, and ordinary least square technique are used for data analysis. Thus, the findings indicate that the provision of domestic credit (% GDP) has positive and a significant influence on the growth of assets in Islamic banks in Pakistan. The consumer price index has a negative influence on the growth of assets in Pakistan because as the consumer’s price index has been risen up, consumers reduce their expenditures on goods and services, thus gathering assets in Islamic banks will be reduced. Thus, the consumer’s price index has negative effect on the growth of assets in Islamic banks. The outcomes of this research are consistent with the previous studies and shows same results. Keywords: Macroeconomics Variables, Growth of Assets in Islamic Banks, Domestic Credit, Consumer Price Index, Pakistan.
... This idea is supported by Ali From past studies, there are two types of criticism laid at the door of the Islamic banking industry. One group criticise constructively and another group destructively (Lone & Ahmad, 2017). In detail, one group offers criticism to improve the industry whereas the other party is very cynical about the Islamic banking industry. ...
The rapid growth of Islamic banks has become a focus of all investors and consumers. Malaysia has put in a lot of effort to develop and gather acceptance from all citizens of the country for Islamic banking. Hence, throughout the sector's expansion, there have been several critics, such as shariah scholars, investors, and consumers. For instance; a lack of shariah experts in both economics and shariah itself, interest rates as benchmark, similarities with conventional banks etc. As the Malaysian Islamic banking system is growing and expanding, as are its critics. Therefore, the main purpose of this study to provide adequate arguments on the contemporary criticisms and challenges being faced by Islamic banks in Malaysia. This study has adopted a qualitative approach; conducting semi-structured interviews and observations. The findings recognised shariah compliancy, interest rates as a benchmark, and a lack of shariah scholars are the most pertinent current issues for Islamic banks in Malaysia. Through the supports of scholars, policy makers, and consumers, these issues can be resolved over time with Islamic finance literacy. The outcome of this study may benefit policy makers, investors, Muslim consumers, as well as stakeholders of Islamic banking and finance.
... While, assets-based provinces in Indonesia can be seen in the following table: Table-2 Source: tracking results, processed However, on the other hand, people's expectations (Lone & Ahmad, 2017) of the vital role of Islamic banking (Yuniarti, 2017) in order to participate in helping the growth as well as the development of the level of welfare of the Indonesian people (Saputro et al., 2018). Until now, it assessed by many Islamic banking experts or Islamic economics themselves are still far from expectations, even blunt, given the banking behavior that it runs not much different from conventional banking (Elsa et al., 2018(Elsa et al., , pp. 2008(Elsa et al., -2016, even considered more 'detrimental' to Muslims themselves (Raz, 2019). ...
The development and growth of shari'a banks after more than two decades in Indonesia is very spectacular, so that spurred the level of economic growth, but if it is related to the substance of the objectives of sharia bank establishment is the alleviation of poverty and unemployment, it will even increase. Based on data from research studies examining, the contribution of Islamic banking to the development of national law, namely by the existence of people who behave economically in sharia and business behavior of Muslim entrepreneurs are included in the targets of the Islamic economic movement in Indonesia. Even though it looks rather slow, the non-financial side of this economic activity is also growing.
