- PublicationESG readiness of Islamic banks in Malaysia and ESG risk factors integration in their financing portfolioHanis Syahrilla Salim; Saiful Azhar Rosly (INCEIF, 2022)
Sustainable finance involves the practice of integrating environmental, social and governance (ESG) considerations into account in making investment decisions. But little is known about the ESG integration among Islamic banks in Malaysia which leave a gap for this study to investigate. From a survey of 7 respondents from 7 different Islamic banks respondents from both full-fledge and subsidiary Islam banks in Malaysia, it is found that sustainability adoption among Islamic banks in Malaysia is commendable and is at par with the overall financial market but there is still room for improvement on the operations and the oversight functions. The level of awareness is encouraging but Islamic banks are not without their challenges when it comes to implementing ESG within the organisation. In incorporating ESG risk factor into overall Islamic banks' cost of financing, Islamic banks, as well as the conventional counterpart, at this juncture, are taking the soft approach instead of punitive approach by increasing the cost of financing and pricing to the customer through the sustainability risk premium. It is found that the current adoption of sustainability in Malaysia is regulatory driven. Most of the sustainability practices and frameworks in Islamic banks are solely following the directions from BNM guideline and framework. Islamic banks need to take a step back and relook at sustainability as an opportunity to bring Islamic finance to the table to position Islamic banking as the major proponent in environment, social and governance dimension.
- PublicationThe structure of retirement scheme of Singapore Central Provident Fund (CPF): a Shariah analysisMardhiah Mazlan; Mohamed Fairooz Abdul Khir (INCEIF, 2021)
Retirement is placed as one of the top three priorities in many peoples' lives to ensure financial stability as we enter the phase of elderhood. As Singapore moves into a greying population, retirement will be a focus area that concerns every individual. Most Singaporeans will be dependent on the retirement scheme under the care of the Central Provident Fund Board (CPFB) as one of their sources of retirement income. Being in a country with Muslims co-existing within the population, the permissibility of the retirement scheme may need to be assessed to address it's Shariah non-compliance and thus develop a Shariah complaint model to provide a halal source of retirement income for the Muslims in Singapore. Hence, this project paper aims to provide a comprehensive Shariah review of the Central Provident Fund (CPF) retirement scheme in Singapore addressing the different stages from depositing to withdrawal, understanding the awareness of the Muslims in Singapore on the permissibility of this scheme and their concerns, and finally to propose a Shariah compliant retirement scheme. This study will refer to secondary sources to explain a certain concept or to support the views that are laid forth in this research. In addition, primary data collection in the form of a questionnaire will be utilised to understand the awareness among the Muslims in Singapore on the Shariah compliance of the retirement scheme and their comprehension of the returns provided by the CPFB. An analysis of the retirement scheme does show some elements that are prohibited by the Shariah from the depositing, investment, returns and pay-out stage. On top of that, an analysis on the awareness of the Muslims in Singapore regarding the practices of the retirement scheme, many of the respondents were unsure of its Shariah compliance out of which 36% are concerned with its ruling while the other 64% are not. As of today, Majlis Ugama Islam Singapura (MUIS) has issued a fatwa to respond to the interest rate offered by the CPFB which rules it as a gift (hibah) and thus permissible.
- PublicationSukuk default/near default and governance failure: the need for a strong and sound governance framework (the role of Securities Commissions and other regulatory authorities)Mohammed Kabir Adisa; Syed Abdul Hamid Aljunid (INCEIF, 2022)
This study examined the relationship between corporate governance failures in sukuk issuer's company/ originator's company and sukuk defaults/ near defaults thus calling for the attention of Securities commission and other regulatory authorities on the need for sound and vibrant corporate governance framework. There were five (5) celebrated sukuk cases reported outside Malaysia region in 2009 while nine (9) cases of sukuk default were reported in Malaysia same year. The year 2009 was dubbed sukuk default year as there were fifteen (15) reported cases of sukuk defaults out of which nine (9) cases were reported in Malaysia alone (Mohammed Khnifer 2010). It was established that Corporate governance failures among other factors contributed significantly to those sukuk defaults as most of the cardinal points on which sound governance framework rests on were violated by Issuer/Originator companies, which ranges from Full Disclosures and Transparency in all business affairs, corporate governance culture and character to be exhibited by Board members, Independence of Auditors, protection of the interest of all stakeholders i.e not only shareholders as observed in some cases. While some of the companies posited shariah non-compliance of the sukuk transaction as justification to avoid payment on their due obligations however the US & UK Courts came to the rescue of the sukuk holders. While Sukuk holders with respect to Malaysia default cases were lucky by not going through prolong and rigorous court cases by utilizing options of restructuring and other various dispute resolution schemes provided by the Malaysia Regulatory authorities, those sukuk investors in the GCC countries were not that lucky. Hence, all regulators in the industry need to be reviewing their corporate governance code and framework regularly.
- PublicationSpearheading corporate sustainability transformation in banking industry: case study of CIMB Group (CIMB Bank Malaysia and CIMB Niaga Indonesia)Firmanshah Shidiq Wardhana; Syed Abdul Hamid Aljunid (INCEIF, 2021)
Sustainability issues, like growing inequality and the deterioration of natural livelihood make the transformation to a more sustainable economic system increasingly desirable and emerging. Moreover, the world is now dealing with unstoppable effects of global warming such as rising sea level, extreme temperature inclination, unpredictable flooding, scalable wildfire, and social economic problems such as income inequality, multidimensional poverty, difficulty in accessing basic education as well as health facilities. Thus, sustainable development calls for integration of the triple-bottom line namely environmental protection, economic empowerment and social inclusion to all sectors of society including the corporate sector and their relevant organisations, commonly phrased as corporate sustainability transformation and ESG integration. Moreover, organisations are increasingly being reminded that their policies and practices are likely to contribute to heightened social disparity and environmental degradation. They have started to adopt and transition to fundamental elements of sustainability into their business practices either as compliance or as stewardship beyond compliance. They also understand the need to drive business change, advocate for policy shifts towards sustainability, develop fine-tuned sustainable business model innovation and exemplary ESG standards by implementing holistic corporate sustainability transformation as their core organisational strategies and guiding principles. This study is an attempt to investigate and assess how the drivers of change theory introduced by Burke and Litwin shapes the dynamics and implementation of corporate sustainability transformation in the last four years at CIMB Group. This paper employs the case study approach to validate and verify the actual findings linked to the theories and concepts. Primary data were gathered through a series of in-depth interviews with Sustainability, ESG Integration and Islamic banking experts from both CIMB Malaysia and CIMB Niaga Indonesia. Secondary data is also undertaken to substantiate the research findings by way of employing content analysis through publicly available CIMB Group sustainability-related information.
- PublicationThe potential applications of artificial intelligence to impact the zakat distribution managementWan Nuriqlima Wan Mohd Noor; Kinan Salim (INCEIF, 2022)
Artificial intelligence is transforming the world in every way of life and zakat institutions must expand the operational management leveraging on advance technology development. The objective of this study is to provide potential applications of artificial intelligence in enhancing the distribution operational management of zakat institutions. The research has used Lembaga Zakat Selangor as a case study. This paper deliberates on the current technology development in zakat institution as well as the impediment towards the adoption of the advance technology and propose potential application of artificial intelligence to the zakat institutions. The results identify that Lembaga Zakat Selangor is venturing into the adoption of artificial intelligence in their operational distribution management however still at the early stages. Hence, the suggestion of the implementation of artificial intelligence from the study is aligned with Lembaga Zakat Selangor to resolve the key pain points in their Digitalization Journey and with hope this research could be benefit for the rest of the zakat institutions and solution provider to further evolve the social finance industry with advance technology development.
- PublicationThe role of zakat in poverty alleviation in Afghanistan: opportunities and challengesMojeeb Rahman Wahaj; Magda Ismail Abdel Mohsin (INCEIF, 2021)
Afghanistan is a country with 99.99% of Muslim population and more than half of Afghans living below the poverty line. Nevertheless, there is a good number of rich people who are living in the same community as the poor Afghans live in, with such a great opportunity for zakat to be used as poverty reduction mechanism, poverty is a never-ending phenomenon in the country. This paper aims to find out how Afghans can use zakat to control poverty in the country and what are the challenges and opportunities in zakat collection and distribution processes. This study is based on qualitative and quantitative approaches. For quantitative analysis, primary data collected from Afghans is analysed to find out the major challenge facing zakat in Afghanistan today, also to examine the current zakat practice in the country and how Afghan can revive zakat institution, while for qualitative method articles, reports and case studies publish on similar topic in Malaysia, Indonesia and Bangladesh.
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