INDONESIA - ARTICLES - Utilization of Zakat as a Fiscal Component in Islamic Economic System

Maksimalisasi Zakat Sebagai Salah Satu Komponen Fiskal Dalam Sistem Ekonomi Islam (Utilization of Zakat as a Fiscal Component in Islamic Economic System)

Azharsyah Ibrahim

State University of Ar-Raniry - Faculty of Law - Ar-Raniry State Institute of Islamic Studies

May 22, 2012

JURISPRUDENSI Jurnal Syari'ah, Januari-Juni 2011

Abstract:     

In economics, fiscal policy is defined as the use of government expenditure and revenue collection (taxation) to influence the economy. Governments use fiscal policy to influence the level of aggregate demand in the economy, in an effort to achieve economic objectives of price stability, full employment, and economic growth. Fiscal policy in an Islamic state should have an ideological orientation. This means that fiscal policy in an Islamic economy has to be evolved in the ideological framework of Islam and cannot be value-neutral. This paper aims to comprehensively study the potency of zakah in Indonesia and its potential use as a stabilization device in Islamic economic system. Data for this research are gathered through related-literatures including books, journal articles, internet sites and other related resources. The research found that the potency of zakah in Indonesia is increasing year of year. The Indonesia Magnificience of Zakah calculated that Indonesia has IDR 27,2 trillion in 2010 while Asian Development Bank estimated up to IDR 100 trillion. Thus, Indonesia has very big potency to use zakah as a fiscal component because some part of zakah proceeds could be withheld in an inflationary situation and these funds could be released to increase purchasing power in a period of depressed economic activity.

Note: Downloadable document is in Indonesian.- source SSRN

AUSTRALIA - ARTICLES - Accommodating Islamic Banking and Finance in Australia

Accommodating Islamic Banking and Finance in Australia

Salim Farrar

University of Sydney - Faculty of Law

University of New South Wales Law Journal, Vol. 34, No. 1, pp. 413-442, 2011

Sydney Law School Research Paper No. 12/15

Abstract:
Islamic banking and finance is still at the embryonic stage in Australia. There have been uncertainties as to how and to what extent the systems of governance at State and Federal levels should adapt in light of the difficulties faced by both local Islamic finance service providers and potential Islamic investors from overseas looking to invest their petrodollars in Australia. This paper takes a contextual and critical look at the current regulatory framework with special focus on taxation and prudential standards, and explores the need and possibilities for reform. (download link)

INDONESIA - ARTICLES - Islamic Banking Service Quality and Withdrawal Risk: The Indonesian Experience

Islamic Banking Service Quality and Withdrawal Risk: 

The Indonesian Experience

Muhamad Abduh

International Islamic University of Malaysia (IIUM)

International Journal of Excellence in Islamic Banking and Finance, Vol. 1, No. 2, pp. 1-15, 2011

Abstract:
This paper aims first to evaluate the service quality of Islamic banking and second to explore the withdrawal behavior of Islamic banking depositors based on their evaluation towards its service quality in the context of Indonesia. A total of 276 Islamic banking customers in Jakarta, Indonesia, were involved through a direct survey. Factor analysis was carried out to uncover the key dimensions of Indonesian Islamic banking service quality. Next, we use central tendency measurement to extract the information of depositors’ withdrawal behavior towards those dimensions. Afterwards, the importance and performance analysis (IPA) was employed to evaluate the level of Indonesian Islamic banking service quality. The exploratory factor analysis uncovered five key dimensions of Indonesian Islamic banking service quality, including reliability, bank-customer relationship, tangibles, Shari`ah issues, and rates and charges. Shari`ah and tangible are the first and second most influence factors for depositors to withdraw their funds from Islamic bank. However, despite their high level of importance, Shari`ah and tangible were always perceived poor in performance while others were largely modest. Within this kind of situation, withdrawal risk is, therefore, should be the most potential risk to be anticipated. (download link)

INDONESIA - ARTICLES - Can the obligation of zakat be enforced in a non-Islamic state like Indonesia ?

Can the Obligation of Zakat Be Enforced in a Non-Islamic State Like Indonesia?

Alfitri

Faculty of Islamic Law, STAIN Samarinda

September 30, 2011

Abstract:
The question of the justification of the state’s intervention for the running of a religious doctrine has always become relevant since Indonesia opted for Pancasila instead of Islam as the state ideology. By analyzing Indonesian Constitutional Court’s decisions on the matters of religious freedom and social and economic rights, this article argues that zakat obligation can be enforced in Indonesia. The state intervention for the running of zakat administration in Indonesia is deemed to be necessary because the voluntary system of zakat obligation has marginalized the role of zakat in income redistribution. In addition, the complete incorporation of zakat into the fiscal system would help Indonesia to achieve their objective of social justice. However, the state must allocate the burdens and benefits of tax and other levies justly in order to avoid discrimination among the citizens of Indonesia.(source)

INDONESIA - ARTICLES - Corporate Governance Disclosure in the Annual Report: An Exploratory Study on Indonesian Islamic Banks

Corporate Governance Disclosure in the Annual Report: An Exploratory Study on Indonesian Islamic Banks

Salim Darmadi 

Indonesian Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) 

Abstract: Due to their different characteristics, banks are expected to report the features of their corporate governance in the corporate report. This paper is aimed to explore disclosure on corporate governance mechanisms in annual reports of Islamic commercial banks in Indonesia. Corporate governance mechanisms addressed in this study include the Shariah Supervisory Board, the Board of Commissioners, the Board of Directors, board committees, internal control and external audit, and risk management. Employing a sample comprising seven Islamic commercial banks in Indonesia, the present study constructs the so-called Corporate Governance Disclosure Index (CGDI) to score the banks’ disclosure level. It is revealed that Bank Muamalat and Bank Syariah Mandiri, the county’s two largest and oldest Islamic commercial banks, score higher than their peers. Disclosure of the sample banks on some dimensions, such as board members and risk management, is found to be strong. On the other hand, disclosure on internal control and board committees tends to be weak. The result of this study may have some important implications for the enhancement of corporate governance disclosure of Islamic banks, thereby wider acceptance and enhanced reputation could be gained. (source)

INDONESIA - ARTICLES - Effect of Capital Structure on Banks Performance: A Profit Efficiency Approach Islamic and Conventional Banks Case in Indonesia

Effect of Capital Structure on Banks Performance: A Profit Efficiency Approach Islamic and Conventional Banks Case in Indonesia

Ade Salman Al-Farisi

affiliation not provided to SSRN

Riko Hendrawan

affiliation not provided to SSRN Abstract: Banks were knowned to have volatile capital structure caused by their financial liquidity. This paper aims to examine the impact of capital structure towards performance of two group of banks, conventional and Islamic banks, by using profit efficiency approach. Two stages procedure were employed. In the first stage we measure profit efficiency score for each bank in Indonesia during year 2002-2008 by using distribution free approach (DFA). In the second stage we employ banks’ capital ratio to measure their impact towards their performance.

Output from the first stage indicate that bank’s average profit efficiency scores equal to 0,60. Whereas the maximum score equal to 0,78. So there is still room around 0,18 Indonesian banks to improve their performance. The output also indicate the Islamic banks in Indonesia succeed to place their position at top 20% highest profit efficiency score.

Result from the second stage indicate that bank’s capital ratio have a negative effect on their profit efficiency. Futhermore, the negative effect happened to be higher for the Islamic bank group compared to conventional bank. This result consistent with Diamond & Rajan (2001) opinion that higher capital could degrade bank’s profit performance. (source)

INDONESIA - ARTICLES - Performance Analysis of Indonesian Islamic and Conventional Banks

Performance Analysis of Indonesian Islamic and Conventional Banks

Viverita

University of Indonesia (UI) - Graduate School of Management, Faculty of Economics

Abstract:     
The sharia banking phenomenon get higher attention for the last two decades, and received special attention by the banking industry. In sharia banking, interest-based principal is not allowed; instead, profit-and-loss-sharing is applied. In Indonesia, the practice of sharia-based banking system is based on the Banking Act No. 7 May 1992. This Act provides Islamic banks freedom to develop their own strategy to generate income, either in the form of profit sharing or through the interest. Although there was only one Islamic bank operated at the time the Government passed the law, the number has been continue to growing since then. This study aims to answer the question on the performance of Indonesian Islamic banks’ during the latest four-year period using individual-bank data. In addition, this study also attempts to compare the performance of Islamic and conventional banks. Using three financial efficiency ratios, (i.e. cost efficiency ratios, revenue efficiency ratios and profit efficiency ratios), it is found that there is a significant performance improvement of Islamic banks due to costs and revenue efficiency. T-test and F-test are used to check significance difference of Islamic and conventional banks. Results from the study show that Islamic banks experienced higher cost efficiency (CITR and NIER) than that of conventional banks. In addition, Islamic banks also appear to be able to generate more revenue and profit efficient than those of conventional banks. This indicates that Islamic banks are able to generate more revenue and profit than conventional banks, although they have less experience than conventional banks. Furthermore, big Islamic banks have also higher value of revenue efficiency (NIM) and profit efficiency ratios (ROAA and ROAE) than big conventional banks.(source)

INDONESIA - ARTICLES - Depositor Sensitivity to Risk of Islamic and Conventional Banks: Evidence from Indonesia

Depositor Sensitivity to Risk of Islamic and Conventional Banks: Evidence from Indonesia

Erie Febrian

University of Padjadjaran

Aldrin Herwany

Department of Management, University of Padjadjaran; Centre for Management Studies (LMFE) University of Padjadjaran

The International Journal of Business and Finance Research, Vol. 5 No. 3, pp. 29-44, 2011

Abstract: Islamic banks operate without involving interest, and therefore are believed to be less risky during financial crises than conventional banks. This advantage may not be significant if the government either partially or fully guarantees bank deposits. In the presence of deposit insurance the public can be indifferent to risk of both Islamic and conventional banks. However, insufficient studies have examined the issue of deposit insurance impact on depositor behavior and market discipline. This research conducts empirical tests on whether the risk of Islamic and conventional banks influence depositors in Indonesia, during two periods using cross-sectional analysis. This research also investigates the behavior of Indonesian depositors towards risk of both bank types during the US crisis through panel data analysis. Data from all insured domestic banks in Indonesia, from January 2002 to December 2009 are examined.(source)

INDONESIA - ARTICLES - Switching Barrier Factors in Islamic Banking and the Effects on Customer Retention

Switching Barrier Factors in Islamic Banking and the Effects on Customer Retention

Tatik Suryani

STIE Perbanas Surabaya

Herizon Chaniago

affiliation not provided to SSRN



Abstract: banking industries in Indonesia is growing rapidly. Consequently, the hyper competition among them can’t not be avoided. Every Islamic banking tried hard to achieve competitive advantage by attracting new customer and keeping the old customer to retain. In this situation, research about switching barrier factors in Islamic banking is very important for understanding further the kinds of switching barrier factors and the contribution to customer retention. The objective of research is to explore the switching barrier factors that retain customer not to switch from Islamic banking and their contribution to customer retention. Research involved 250 Islamic banking customers in Surabaya as samples. By using exploratory factor analysis, the result indicates that there are five factors that underlying customer not switch from Islamic banking. These factors namely: the way of relationship approach to customers, compliance to Islamic principles, service recovery, switching cost and risk perceived factor. By using discrimination analysis the result indicate that there is significantly differences in switching barriers factors between customer based on the intention to retain.  (source)

WORLD - ARTICLES - Foundations of Forgiveness in Islamic Bankruptcy Law: Sources, Methodology, Diversity

Foundations of Forgiveness in Islamic Bankruptcy Law: Sources, Methodology, Diversity

Jason J. Kilborn
The John Marshall Law School; Radboud University Nijmegen

Abstract: This article provides a detailed examination of the structure, sources, and ultimate content of the Islamic law of distressed debt. With specific illustrations from the Qur'an, sunna, and fiqh (Islamic jurisprudence), it orients non-specialists on the path to understanding where Islamic law comes from, how it is structured, and what its most salient provisions say about the proper treatment of insolvent debtors. Tracing the various divisions within Islam on the proper identification of shari'a, this article reveals a rich tapestry of contrasting views among and within the shi'a and sunni doctrinal schools of thought. Both the original sources and the secondary juristic analyses of these sources struggle with a delicate balance between forcing debtors to pay their debts while enjoining creditors to be patient and forgiving with respect to distressed debtors. It is hoped that this detailed and sensitive discussion will enhance the increasingly frequent insolvency law reform conversations between Westerners and those in Muslim nations by encouraging the former to respectfully engage with classical Islamic sources and methods, as opposed to advancing arguments based merely on Western views of economic expediency, efficiency, and experience.(source)

INDONESIA - ARTICLES - Shariah compliant model of business entities

Shariah Compliant Model of Business Entities

Irawan Febianto - University of Padjadjaran - Faculty of Economics, Department Management and Business

World Journal of Social Science, Forthcoming

The twentieth first century has witnessed resurgence in the observance of fundamental Islamic business practices around the world. However, the fact cannot be denied that the current state of business under unbridled capitalism in the majority of cases in the Muslim world remains far from the Islamic ideal. This gap between the ideal and the reality is widening rapidly and has become a threat not only to the well being of the masses but also to the very peace and stability of Muslim societies.This paper try to describe the model of shariah compliant business entities. It presents the basic understanding of the concept of business in Islam and its business characteristics. It also explore the form of business management model that is shariah compliant. This paper will also propose a model of shariah compliant of business that is focusing on five aspects of business entities: the functions of management, the process of business, corporate culture, corporate governance, and corporate social responsibility. (source)

ARTICLE - The Economic Significance of Waqf: A Macro Perspective

The economic significance of waqf : a macro perspective

Mochammad Arif Budiman

State Polytechnic of Banjarmasin, Indonesia; International Islamic University of Malaysia (IIUM) - Faculty of Economic and Management Sciences

Dimas Bagus Wiranata Kusuma

affiliation not provided

8th International Conference on Tawhidi Methodology Applied to Microenterprise Development, January 2011

Abstract:     

There has been an accusation among few scholars blaming that the institution of waqf could not any longer perform its economic role in the modern times. To them, instead of being a vital institution as it was at pre-modern era, waqf nowadays seems to be an impediment to the development in most of Islamic countries. This paper however is meant to clarify such an accusation and attempts to point out the economic significance of waqf in the context of modern economy. (download)

ARTICLE - The Role of Waqf for Environmental Protection in Indonesia

The Role of Waqf for Environmental Protection in Indonesia

Mochammad Arif Budiman

State Polytechnic of Banjarmasin, Indonesia; International Islamic University of Malaysia (IIUM) - Faculty of Economic and Management Sciences

Aceh Development International Conference (ADIC), Kuala Lumpur, March 26-28, 2011

Abstract:     

Indonesia is now suffering from critical environmental problems. These heavy problems obviously need to be surmounted and appropriate solutions should be taken in order to reduce further potential calamities. Waqf as a charitable institution in Islam is expected to play its significant role to carry out environmental protection and therefore to ensure a more sustainable development in the country. This paper tries to elaborate potential of waqf institution for environmental protection and to reveal advantages and benefits of making waqf a means for environmental protection.(download)