Purpose
This study aims to develop a valid and reliable Islamic financial literacy (IFL) scale that can capture all the segments of the Islamic financial sectors and which could be considered applicable for all jurisdictions across the globe.
Design/methodology/approach
To build the measure, this study followed a scale development process by collecting 698 a priori items from 81 respondents. Later, it generated an item pool through the analysis of the items with experts and gave the last form (40 items) to 287 respondents in Turkey with another IFL scale that is frequently used in the literature and a scale assessing religiosity. With explanatory factor analysis, the scale demonstrates a four-factor construct with 20 items. This construct provides good fit indexes and reliability scores.
Findings
Results of the correlation analysis and comparison of the fit indexes of alternative structures provided supportive evidence for discriminant and convergent validity of the scale and its sub-dimensions. As a result, an applicable scale is developed for countries where Islamic financial institutions are operating and where they are not.
Originality/value
One of the strengths of this study is that it represents a comprehensive scale development for the entire Islamic financial system, including banking, takaful (Islamic insurance) and fund management. In addition, the attempt to design an IFL scale applicable to any economy or individual is a pioneering attempt in the literature.
Purpose
The emerging markets have been witnessing a remarkable revival of rotating savings and credit associations (ROSCAs) serving as alternative informal financing and investment platforms, also known as savings-based finance (SBF) in Turkey. The purpose of this study is to present the SBF model mathematically, analyse the performance of the SBF sector and propose a new Sharīʿah-compliant SBF model for the acquisition of durables.
Design/methodology/approach
The paper thoroughly reviews the concept and practice of ROSCA across the globe, mathematically models and empirically analyses the performance of Turkish SBF companies using a unique data set.
Findings
The study formulates a two-person SBF model and proposes a Mudarabah-Wakalah hybrid model with a new investment feature. It is found that the concept of ROSCA is being operationalized in 105 countries across the globe under different names with slight business model modifications. The research also reveals that the demand for financing of durables in Turkey significantly increased in recent years with the demand for housing is twice greater compared to vehicles. Most importantly, a strong significant inter- and intra-comovement is observed between these durables implying that the success of the sector in one segment has attracted the customers to other SBF products. It shows that the SBF institutions can effectively serve as the alternative financing houses for pooling savings and financing the durables, and they have strong potential to capture a larger financial market share in Turkey and even globally.
Originality/value
The study constructs mathematical models and proposes a new investment wing to an existing SBF wealth fund.
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