<i>Riba</i> and interest in Islamic finance: semantic and terminological ıssue

Suharto, Ugi

doi:10.1108/imefm-08-2016-0109

Cited by 34 publications

(25 citation statements)

References 4 publications

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“…High engagement with Murabaha contract does not support the realisation of ethics and Maqās id al-Sharī'ah. This is one of the most controversial financial transactions in the Islamic finance, among such contentious issues, as imposing a penalty on default payment, use of interest-rate as a benchmark (i.e LIBOR), rebate on early payment of Murabaha (Haron et al 2015;Suzuki and Uddin 2016;Suharto 2018; Alziyadat and Ahmed 2019). Therefore, this research amplifies the critical call of some researchers (Hasan 2004;Hasan 2005;Iqbal and Molyneux 2005) who express the need to assess the utilisation of PLS contracts compared to Mud  ārabah, as it is one of the important MSI components to measure the performance of IBs against their Maqās id al-Sharī'ah objectives.…”

Section: Introductionmentioning

confidence: 99%

Analysing Islamic banking ethical performance fromMaqāṣid al-Sharī‘ahperspective: evidence from Indonesia

Alhammadi

Alotaibi

Hakam

2020

Journal of Sustainable Finance & Investment

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This paper aims to investigate Islamic banking performance based on higher ethical objectives enshrined within Sharī'ah (Islamic legal rulings); namely, Maqās id al-Sharī'ah. First, we examine the importance of both ethical and social concerns on bank performance in general. Second, we analyse the ethical and social performance of Islamic banks (IBs) based on the Maqās id al-Sharī'ah Index (MSI) that emphasises disclosures related to education, social justice, and redistribution of wealth. Third, we investigate how far IBs have gone towards achieving Maqās id al-Sharī'ah goals during the last decade, post-global financial crises (GFC) period, with a particular focus on Indonesia as a case study. Hence, testing whether IBs achieve socioeconomic justice and attain best practice by securing social good. The selected banks' annual reports were examined, applying content analysis to obtain the necessary data, using the Simple Additive Weighting (SAW) method to determine the level of Maqās id in the sample. Empirical evidence suggests that conventional performance measurements do not truly reflect IBs' higher ethical objectives, and create a deficiency of attaining Maqās id al-Sharī'ah performance in these banks. This research extends the previous literature on evaluating the performance of IBs beyond the financial return, which includes their ethical and social identity based on the Maqās id al-Sharī'ah scale, especially the post-GFC period. The result also reveals that there is a financial cost to achieving the Maqās id al-Sharī'ah, as IBs that achieved high MSI scores have sacrificed financially. This supports the findings of the literature that IBs prefer financial returns over their ethical and social impact.

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Section: Introductionmentioning

confidence: 99%

Analysing Islamic banking ethical performance fromMaqāṣid al-Sharī‘ahperspective: evidence from Indonesia

Alhammadi

Alotaibi

Hakam

2020

Journal of Sustainable Finance & Investment

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“…The experts who argue that Islam recognises TVM include Zarqa (1983), Khan (1991); Khaf (1994), Ahmad and Hassan (2004); Rosly (2005), Abdul Khir (2013);and Suharto (2018). They shared similar thoughts on the higher price charged in the differed contract as a form of TVM.…”

Section: Time Value Of Moneymentioning

confidence: 99%

Time value of money in Islamic accounting practice: a critical analysis from maqāṣid al-Sharī‘ah

Baehaqi

Birton

Hudaefi

2020

JIABR

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Purpose This paper aims to critically analyse the application of present value (PV) practised in the concept of time value of money (TVM) from the perspective of maqāṣid al-Sharī‘ah (objective of Islamic law) explained by Ibn ‘Ashur. The analysis is important as this concept has been adopted in the practice of Islamic accounting measurement. Design/methodology/approach This paper uses qualitative research approach. The authors first review literature related to TVM in Islamic perspective to understand the extent to which the scholarly articles have been discussing this topic. Furthermore, the authors conduct face-to-face interviews with the experts to comprehend the means of TVM application in the recent Islamic accounting practices. The tawhid (monotheistic) paradigm is further used with special reference to the concept of maqāṣid al-Sharī‘ah of Ibn ‘Ashur to critically analyse the practice of TVM in Islamic accounting measurement. Findings This study identifies the opposing views among the experts on the topic of TVM from the Islamic perspective. That is, the experts’ opinion on this issue can be classified into two. Firstly, a view that rejects TVM and proposes the concept of economic value of time. Secondly, an opinion that recognises TVM with the basis of bay’ al-mu’ajjal (deferred sale). This paper further critically analyses these two opposing opinions. The discussion is established based on the theory of maqāṣid al-Sharī‘ah as explained by Ibn ‘Ashur and the excerpts from interviewing the experts. This work draws a conclusion that such PV-based measurement of TVM does not meet the Islamic principles explained in the theory of Ibn ‘Ashur’s maqāṣid al-Sharī‘ah. Thus, the practice of PV measurement in Islamic accounting is debatable. Research limitations/implications This study does not establish a positivism discussion. It is thus the generalisation of this work is not applicable to the Islamic perspective in general. Rather, it is limited to Ibn ‘Ashur’s maqāṣid al-Sharī‘ah. Practical implications An analysis of PV measurement adoption in Islamic accounting from maqāṣid al-Sharī‘ah perspective is practically important to raise the awareness that such practice is debatable in Islamic principles. That is, such debate opens new arena for academics, industry professionals and other related stakeholders to further discuss an ideal practice of Islamic accounting. Originality/value This paper is among the pioneers that analyses the concept of TVM, in particular relation to PV measurement in Islamic accounting practice from the perspective of Ibn ‘Ashur’s maqāṣid al-Sharī‘ah.

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“…In addition, Asadov et al (2018) recommend sharing all contract performing costs between the buyer and the IF institutions. Suharto (2018) provides a relevant analogy to the U.S. Internal Revenue Service (IRS) installment method in calculating taxable income from property sales. They compared the Murabaha contract with the IRS installment sale where part of the profit is actually interest.…”

Section: Islamic Finance Instrumentsmentioning

confidence: 99%

The substance and form of Islamic Finance instruments: an accounting perspective

Ebrahim

Abdelfattah

2021

JIABR

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Purpose This study aims to critically analyze the fundamentals of the current major Islamic Finance (IF) instruments and contracts in light of both the foundations of IF and the concept of substance over form in the accounting conceptual framework. Such analysis is believed to be necessarily for the IF institutions to provide better and more genuine service to their customers. Design/methodology/approach To achieve the study purpose, the methodology is based on theoretical analysis and analytical review of the major IF contracts. Findings The IF industry needs to focus on the economic substance of the products offered to their clients. In developing and promoting their products, IF institutions need to focus on the ultimate and substantial goals of Islamic Sharia rather than re-packaging existing conventional products under different arrangements and formats to make them appear as Sharia-compliant to their clients. Both religious scholars and IF professionals need to engage in much deeper analysis and understanding of the substantial design of IF instruments and the concept of usury in modern economy. Research limitations/implications This paper does not intend to develop a comprehensive framework for the design of IF instruments to meet the economic substance and ultimate goals of IF principles or measure such economic substance. However, that is definitely a subject for further research. Originality/value By applying concepts like substance over form from other business fields such as the accounting theoretical framework to the IF instruments and contracts, we should gain better understanding and practical implications of these instruments and figure out ways to improve their design to be more consistent with and better serve the ultimate goals of the Islamic Sharia.

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Riba and interest in Islamic finance: semantic and terminological ıssue

Cited by 34 publications

References 4 publications

Analysing Islamic banking ethical performance fromMaqāṣid al-Sharī‘ahperspective: evidence from Indonesia

Analysing Islamic banking ethical performance fromMaqāṣid al-Sharī‘ahperspective: evidence from Indonesia

Time value of money in Islamic accounting practice: a critical analysis from maqāṣid al-Sharī‘ah

The substance and form of Islamic Finance instruments: an accounting perspective

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