Purpose This study aims to investigate whether Islamic morality is considered by Islamic rural banks in credit application assessments. Design/methodology/approach To achieve the objective, the authors conduct an exploratory analysis of data gathered through document analysis, focus group discussions and interviews with Islamic rural banks stakeholders. Additionally, the authors conduct a survey to validate the findings. Findings The authors find that while Islamic rural banks conduct conventional credit analysis using 5Cs (character, capacity, collateral, capital and conditions), the banks also consider Islamic morality in their credit decisions. They emphasise several indicators such as reputation for keeping promises to customers, to suppliers, to neighbours and the Islamic character (akhlaq) of the credit applicants. Overall, the authors conclude that Islamic rural banks consider Islamic morality in their credit assessments. Originality/value To the best of the authors knowledge, this is the first study using a mixed method of quantitative and qualitative approach to investigate how Islamic rural banks assess the credit applications. In particular, this study examines whether Islamic rural banks consider Islamic morality in their credit decisions.
Tawarruq which is also known as commodity Murabahah in Islamic banking is widely practiced in Malaysia to structure different types of Islamic banking products. The widespread use of tawarruq has made Islamic banks to be re-named as “tawarruq banks” and some even call tawarruq as the “magic lamp” of the industry. Shariah scholars have criticised this frequent usage of tawarruq in Islamic banking industry of Malaysia, while the practitioners have replied by saying that if tawarruq is a shariah approved concept, then what is wrong with the usage of it? However, from the shariah perspective, the issue here is not about the shariah compliance of tawarruq transactions per se. It is about the shariah limitations imposed by the scholars on the use of it. This simply means that there is a reservation made by shariah scholars in allowing the usage of tawarruq contract in Islamic finance as tawarruq is a contract allowed to be used when one has to choose between a conventional loan and tawarruq. The purpose of this research is thus to show the alternative Islamic commercial contracts that could be used to structure Islamic banking products that have been structured in the market using tawarruq. It is anticipated that the outcome of this research will assist Islamic banking industry to understand why and how they can move away from tawarruq.
This chapter presents a brief description regarding the types and characteristics of entrepreneurial activities in Malaysia. This chapter further illustrates the programs and policies initiated to promote entrepreneurial activities in Malaysia, followed by entrepreneurship and economic development in Malaysia, informal entrepreneurship in Malaysia, as well as characteristics of informal micro-entrepreneurship. Finally, this chapter provides future directions for micro-enterprises to propose initiatives that focus on developmental programs and policy making in Malaysia. To introduce successful micro-credit programs, underlying organizations in emerging economies should be consistent in terms of cost-efficient operations without favoritism and political elements.
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