The Journal of Muamalat and Islamic Finance Research

The Participation of Alumni in Successful Endowment and Waqf Funds

Nurul Adilah Hasbullah — 2024-06-01

Endowment and waqf funds are essential sources of income for Higher Educational Institutions (HEIs) in many countries, including Malaysia. Identifying the elements that contribute to the success of these funds can help sustain them. The previous scholars discovered that several elements drive the success of endowment funds in HEIs; one such element is alumni networks. This was also discovered to determine successful fundraising in another study. In this regard, this study examines this element in the context of Malaysia to observe its role in determining the success of endowment and waqf funds, particularly in public universities in this country. Simultaneously, this study also investigates the factors that drive the establishment of these alumni networks. To achieve these objectives, this study adopted a qualitative approach using interviews. Several representatives from selected universities were interviewed, and the information obtained was transcribed and analyzed. It was discovered that alumni networks are essential determinants of the success of endowment and waqf funds at the selected universities. Several key factors were identified that can help build alumni networks, such as assistance from alumni associations, a positive experience while studying, and awareness of charitable giving. This study suggests that universities can emphasize these three factors to build relationships with alumni and ensure continual contributions.

Intersection Between Modern Technologies and Halal Tourism

Md Siddique E Azam — 2024-06-01

The rapid pace of digital innovation has significantly impacted various sectors, including tourism. The convergence of halal tourism and digital innovation offers unprecedented possibilities. However, how the fusion between modern technologies and halal tourism can enhance Muslim travellers’ experiences is still not clear. It is crucial to understand the dynamics of amplification through digital avenues, focusing on convenience, accessibility, and cultural enrichment. Simultaneously, the multifaceted ramifications of digital mechanisms and platforms on Muslim travellers’ journeys are poorly understood. Hence, the current study aims to understand Muslim travellers’ preferences and expectations regarding digital innovations in halal tourism. Moreover, it also aims to gain a holistic understanding of their experiences with digital tools in the industry. To achieve the objectives, the study adopts the methodology of reviewing existing literature from various sources. The study provides useful insights into digital innovations. For example, halal-conscious travellers can find comprehensive information on digital platforms; Halal food delivery apps make halal food easy to get. In addition, Muslim travellers can better connect with their destinations through virtual tours of historical landmarks and Indigenous customs using Augmented Reality (AR). At the same time, halal-conscious travellers benefit from an intricate web of experiences, recommendations, and insights woven through online forums, social media groups, and travel blogs. Hence, this study is significant in highlighting the connection between halal tourism and the digital resurgence and the transformative power of technology in enhancing Muslim travellers’ experience. Practical insights for stakeholders in the overlapping fields of halal tourism and technology are explored, including the effects of digital enablers on accessibility, cultural engagement, and community nexus. Furthermore, the findings encourage the development of strategies to cater to the evolving aspirations of travellers seeking Muslim-friendly products and services in the digital era.

Challenges of Collecting Zakat on Digital Assets

Sadiya Jalal — 2024-06-01

This paper aims to investigate the challenges associated with collecting Zakat on Bitcoin, one of the digital assets in Malaysia. The study is qualitative as interviews were conducted with Zakat officers, Chief Executive Officer f MAIPs Perlis, Muftis, Scholars, and experts. The study identifies key challenges. Firstly, limited knowledge among the general population complicates determining whether specific digital assets are Zakatable. Additionally, the study highlights that technological infrastructure deficiencies hinder the efficient management of digital assets for Zakat purposes. The findings also reveal that the challenge of credit risk arises from the unpredictable nature of digital asset prices, leading to uncertainties in when to liquidate digital assets (Bitcoin) after receiving Zakat. Note that regulatory uncertainty due to the absence of clear guidelines impacts the establishment of standardized procedures. The digital assets are unstable since they are not properly regulated by Bank Negara. It was discovered that the challenge is also related to security concerns related to cybersecurity risks, including hacking and unauthorized access, which pose significant threats to Zakat funds collected as digital assets. It is expected that the findings of this research will educate Muslims on Zakat's obligations to digital assets. It will also inform policymakers, regulators, and stakeholders, guiding future initiatives and policies to foster compliance, transparency, and security in collecting Zakat from digital asset holdings.

Factors Influencing the Audit Quality of the Municipalities

Husni Ibrahim Asad Rabaiah — 2024-06-01

The study aims to analyze the Audit Quality (AQ) factors that were perceived to be necessary by the accountants and internal auditors in municipalities of Palestine. A survey of 309 accountants and internal auditors from 155 Palestinian municipalities was conducted. The questionnaire data was statistically analyzed using Smart PLS3 software. The study discovered that auditor ethics, independence, and competence were the most significant elements in determining AQ. Meanwhile, Internal Auditing (IA), Accounting Basis (AB), and the Laws and Regulations (LR) have a moderate effect. However, the least crucial factors were Audit Fees (AF) and Audit Firm Size (AFS). The study is limited by the survey questionnaire method’s general limitations and the perceptions of accountants and internal auditors. It offers evidence on AQ from Palestine, helps the audit firms distinguish their marketing and service delivery strategies, and understands the AQ aspects sought by those clients. Moreover, the study provides the municipal councils and the regulators of the municipalities with greater knowledge on how to select the best auditors and maintain internal control measures, notably IA and the use of the accrual basis in accounting procedures. Since the findings are generally consistent with previous studies, more emphasis can be placed on the effectiveness of municipal internal control.

Transforming Halal Training Through Gamification and Immersive Technology to Empower Talents

Adlin Masood — 2024-06-01

With a 4-year Compound Annual Growth Rate (CAGR) of 7.5%, the Halal economy is estimated to reach US$2.8 trillion by 2025. To obtain and retain Halal certification, businesses must guarantee that their workers are knowledgeable and skilled. Implementing Halal-toyyiban in businesses can be complex, especially when the manufacturing entities are owned and managed by non-Muslims. Therefore, developing a Halal training programme is crucial. The main challenge is ensuring that trainees can retain and recall what they have learned, ultimately changing their work culture and mindset. To address this challenge, corporate Halal training programmes must include built-in learning retention elements, such as gamification through games. Gamification can enhance employee engagement and safety awareness, reduce training costs, and lower learning curves. Moreover, recent technological advancements in Augmented Reality (AR), Mixed Reality (MR), and gamification enhance user experience and performance in various domains. AR and MR are viable options as they can include aspects of the current environment in real-time and present a combination of the virtual world and reality. This study explores the viability of AR and MR gamified Halal training to empower Halal workers for businesses’ sustainability and expansion. The study reviews and analyses published literature from bibliographic and other acknowledged sources. Consequently, the authors discovered that while AR and gamification have been used extensively, combining both to enhance experiential learning and immersive experience is in its infancy. The findings suggest that leveraging these options can lead to future-oriented Halal training that improves experiential and immersive learning and is accessible anytime and anywhere.

Issues and Challenges in Shariah Audit Practices in Malaysian Shariah-Based Sectors

Muhammad Iqmal Hisham Kamaruddin — 2024-06-01

This study aims to examine the current issues and challenges in implementing Shariah audit practices in several Shariah-based sectors in Malaysia, namely, Islamic financial sector, Islamic Capital Market (ICM), Islamic cooperative, public Shariah-based and Public Trust Entity (PTE). Furthermore, based on the findings, several future strategies are proposed to enhance Shariah audit practices. In this study, a series of Focus Group Discussions (FGD) was employed, and 124 participants from 76 Shariah-based institutions were involved through five FGD sessions. This study discovered that each Shariah-based sector has different issues and challenges in implementing Shariah audit practices due to the current Shariah governance and assurance practices in respective sectors. Thus, three main strategies were proposed that can be used to bring Shariah audit practices to another level for these Shariah-based sectors. This includes nurturing Shariah governance and assurance, developing specific Shariah audit scopes based on the uniqueness of each Shariah-based sector, and enhancing the professionalisation of Shariah auditors. Note that this study is considered a pioneering study in identifying the issues and challenges in implementing Shariah audit practices in various Shariah-based sectors. It also contributes by proposing the main strategies to enhance Shariah audit practices as a next step in the future.

Mapping Blockchain Adoption Challenges

Naharudin Saadan — 2024-06-01

The evolution of the Internet has shifted from centralised to decentralised systems, particularly after the financial crisis in 2008. The Internet disrupts traditional financial systems and the consequent shift towards Blockchain Technology (BCT) for more transparent and accountable business practices. It outlines BCT’s origins and transformative potential in various domains. Thus, this study aims to investigate challenges in BCT adoption in various domains. This study adopted a bibliometric analysis based on the data obtained from the Scopus database. Based on the keywords used, which are related to BCT adoption in the article title, the study obtains 229 documents for further analysis. Various tools have been employed, such as Microsoft Excel to conduct the frequency analysis and VOSviewer for data visualisation analysis. This study reports the results using standard bibliometric indicators such as publication year, document type, source type, source title, languages, subject area, keywords analysis, geographical distribution, authorship, active institutions, and citation analysis. The analysis reveals that studies on BCT integration with the Internet of Things (IoT) suggest the highest cites followed by BCT adoption challenges. Since 2021, there has been a rapid accumulation of citations, highlighting the ongoing relevance and interest in BCT across diverse fields. Indonesia leads in academic contributions to BCT, while the United States excels in citation impact. Notably, China, Australia, Jordan, and Malaysia are interested in adopting BCT in Asia. In Europe, the United Kingdom stands out alongside Romania and Belgium for their commitment to the study as well. Prominent authors and keywords highlight BCT’s integration with IoT and supply chain. Findings underscore global academic engagement with BCT challenges and applications, offering a foundation for future research on practical hurdles, regulations, and technological intersections. Blockchain is just one of many IR4.0 technologies that will enhance governance when coupled with Artificial Intelligence (AI) and Big Data Analytics. Future research should focus deeper on practical challenges, regulations, and intersections of BCT with other technologies, building upon the findings of this analysis.

How Financial Risk Affects Indonesia Sovereign Sukuk Market Development

Faturrahman Fachsandy — 2024-06-01

Global bond market attention is starting to witness very interesting developments in the development of Sukuk. However, the academic literature on the determinants of the development of the Sukuk market is still new and very limited. Using the Vector Autoregression (VAR)/Vector Error Correction Model (VECM) method, this study examines how the financial risk component influences the development of the Indonesian sovereign Sukuk market. Data was collected from Bank Indonesia and Indonesia’s Directorate General of Financing and Risk Management on the External Debt Statistics database for ten years from 2013Q1-2023Q1. The results of this study indicate that the foreign Debt Service Ratio (DSR) and Exchange Rate (EXC) significantly affect the development of the sovereign Sukuk Market. The foreign DSR has a negative effect, while the EXC positively affects the development of the sovereign Sukuk market. Meanwhile, the ratio of foreign debt to Gross Domestic Product (GDP) has an insignificant effect on the development of the sovereign Sukuk Market. The findings advocate policymakers in Indonesia on the importance of strengthening financial stability and regulating the issuance of Sukuk in accordance with the associated financial risks to develop the Sukuk market properly.

Defining Inheritance Risk Management as A New Concept Towards Sustainability of Family Businesses

Abdulbasit Lutfy A. Al Obaidy — 2024-06-01

This study investigates the relationship between success, Inheritance Risk Management (IRM), and sustainability in family businesses. This paper is based on a quantitative approach. The population includes family-owned businesses located in Abu Dhabi that have been in operation for at least two generations. The study sample consisted of family-owned business members. However, this paper focuses only on measuring variables and testing hypotheses for the proposed measurement. Due to the complexity of the model, Smart PLS-4 was used. Through an analysis of empirical data and theoretical frameworks, the research explores the direct and mediated relationships between these key variables. The findings underscore the critical role of success in driving effective risk management practices within family enterprises. Furthermore, the study highlights the significance of IRM in promoting the sustainability and resilience of family businesses over time. The results reveal a direct positive correlation between success and sustainability, emphasizing the importance of achieving and maintaining success for long-term viability. Additionally, the mediating role of IRM underscores its crucial contribution to the overall sustainability of family businesses. The study identifies various challenges in managing inheritance risks and ensuring the continuity of family enterprises, including maintaining family control, balancing family and operational responsibilities, succession planning, grooming successors, and respecting family elders. By addressing these challenges and leveraging IRM strategies, family businesses can navigate uncertainties and capitalize on opportunities, ensuring continued success across generations. These findings provide valuable insights for strategic decision-making and resource allocation in family enterprises, guiding efforts to enhance governance structures, succession planning, and risk mitigation practices. In addition, this research contributes to advancing our understanding of the complexities surrounding family businesses and underscores the importance of proactive risk management and strategic planning for long-term sustainability.

The Best Investment Scenario for Hajj Fund Management in Indonesia

Dina Fitrisia Septiarini — 2024-06-01

The Hajj Fund Management Agency (Badan Pengelola Keuangan Haji [BPKH]) is an institution responsible for managing Hajj funds in Indonesia. Through the investment mechanism, the BPKH’s benefit value can reduce the burden of prospective pilgrims in covering the cost of organizing the Hajj pilgrimage (Biaya Penyelanggaran Ibadah Haji [BPIH]). This study examined the combination of optimal portfolio construction in two situations, namely, without using regulatory restrictions and with government regulatory restrictions. The results of a linear programming approach with the Markowitz method revealed that investment allocation without regulatory restrictions forms an optimal portfolio to maximize Sharpe with a moderate scenario. Likewise, investment allocation based on regulations forms a portfolio with the same goal, namely maximizing the Sharpe ratio. This is in accordance with BPKH’s investment characteristics, which consider acceptable levels of return and risk, as well as BPKH’s risk profile, namely low to moderate. This research is expected to be useful for BPKH, especially in compiling investment portfolios to produce the optimal value of benefits and create sustainability in Hajj finance.

The Application of Value-Based Intermediation Through Waqf in Islamic Banking

Mohd Izuwan Mahyudin — 2024-06-01

The Islamic financial industry has experienced an exponential transformation that has contributed greatly to the national economic growth. Malaysian Islamic finance is considered one of the most comprehensive Islamic financial systems in the world. Bank Negara Malaysia (BNM) has introduced a new concept of Value-Based Intermediation (VBI). This banking practice focuses on profit and supports social values for a sustainable economy, community, and environment. This study discusses the involvement of Bank Muamalat Malaysia Berhad in waqf development, focusing on business activities in line with VBI. This qualitative study applied document analysis and semi-structured interviews and found that Bank Muamalat Malaysia Berhad is an Islamic banking institution that bases its existence on commercial profits and is able to implement activities related to waqf development, such as cash waqf collection and waqf project financing consistent with VBI.