This paper focuses on the positive impacts of using smoothing tools such as Profit Equalisation Reserve or PER and Investment Risk Reserve or IRR to smoothen the rate of return or profit on investments to investment account holders (IAH) of Islamic financial institutions (IFIs). Since the goal of introducing PER and IRR into Islamic banks is to compete with the conventional banking industry, it is a shield used by Islamic banks to protect their risks such as displaced commercial risk (DCR), withdrawal risk (WR), and reputation risk. This is a qualitative review of the positive impacts of using smoothing tools in Islamic financial institutions. One of the major issues highlighted is Islamic banks' sensitivity to the conventional interest rate changes because many Islamic banking products are benchmarked against the conventional interest rate. Moreover, the limited techniques and instruments available to mitigate the rate of return risk also need the regulators' serious attention. Before the use of smoothing tools was restricted by BNM, Islamic banks were allowed to save up until 15% from profit gain. However, in certain circumstances, BNM has allowed IB’s to save up to 30% from profit gains. Hence, smoothing tools like PER and IRR enabled Islamic banks to be competitive and manage their unique risks. This research is focused on the positive aspects of using smoothing tools (STs) and does not cover the negative aspects from the Shari’ah, legal or corporate governance point of view. Since the abandonment of smoothing tools by IFI’s after the instructions of Bank Negara Malaysia (BNM) in 2014, there has not been much debate about the benefits of using STs. Therefore, this paper might provide a spark required to re-ignite the whole debate once again. Penelitian ini berfokus pada dampak positif dari penggunaan alat pemulusan seperti Profit Equalization Reserve (PER) dan Investment Risk Reserve (IRR) untuk memperlancar tingkat pengembalian atau keuntungan investasi kepada investment account holders (IAH) dari Islamic financial institutions (IFIs). Karena tujuan memperkenalkan PER dan IRR ke bank syariah adalah untuk bersaing dengan industri perbankan konvensional, itu adalah perisai yang digunakan oleh bank syariah untuk melindungi risiko mereka seperti displaced commercial risk (DCR), withdrawal risk (WR), dan reputation risk. Penelitian Ini menggunakan tinjauan kualitatif tentang dampak positif penggunaan alat pemulusan di lembaga keuangan Islam. Salah satu isu utama yang disoroti adalah sensitivitas bank syariah terhadap perubahan suku bunga konvensional karena banyak produk perbankan syariah yang dibandingkan dengan suku bunga konvensional. Selain itu, keterbatasan teknik dan instrumen yang tersedia untuk memitigasi risiko tingkat pengembalian juga perlu mendapat perhatian serius dari regulator. Sebelum penggunaan alat pemulusan dibatasi oleh BNM, bank syariah diperbolehkan menabung hingga 15% dari perolehan keuntungan. Namun, dalam keadaan tertentu, BNM mengizinkan IB untuk menghemat hingga 30% dari perolehan keuntungan. Oleh karena itu, alat pemulusan seperti PER dan IRR memungkinkan bank syariah menjadi kompetitif dan mengelola risiko unik mereka. Penelitian ini difokuskan pada aspek positif dari penggunaan smoothing tools (STs) dan tidak mencakup aspek negatif dari sudut pandang syari'ah, hukum atau tata kelola perusahaan. Sejak ditinggalkannya alat pemulusan oleh IFI setelah instruksi Bank Negara Malaysia (BNM) pada tahun 2014, tidak banyak perdebatan tentang manfaat penggunaan STs. Oleh karena itu, tulisan ini mungkin memberikan percikan yang diperlukan untuk menyalakan kembali seluruh perdebatan sekali lagi.
Modern Islamic finance has grown from a mere complement to conventional finance into a more viable and competitive form of financial intermediation in the world. It has received remarkable patronage from many Muslim majority countries since the advent in 1963. The Gambia is a Muslim majority West African nation where Islamic banking began in the country since 1997. However, the patronage of Islamic banking in the Gambia is quite insignificant compared to many Muslim countries. Hence, this paper seeks to analyze the perception of the Gambian public towards Islamic banking. A sample size of 459 respondents collected through questionnaire survey was used to collect the research data and the methodology adopted was quantitative with descriptive-cum-exploratory research design. SPSS version 25 and Microsoft Excel 2010 were used to analyze the data. Findings indicated that the perception of the Gambian public towards Islamic banking is generally positive and awareness about the existence of Islamic banking was high. However, knowledge about Islamic banking principles and understanding of Islamic banking products and operations were quite poor. Results also suggest that the Gambian public is willing to patronize Islamic banking, however, religion although important, but it is not the main patronage factor for Islamic banking in the Gambia. Results of Multiple Regression indicated that two of the independent variables namely, awareness and understanding of Islamic banking principles and products were not statistically significant in influencing public perception of Islamic banking while independent variables such as bank selection criteria and willingness to patronize were statistically significant.
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