PurposeThe primary objective of this paper is to identify and compare the collateral imposition practices among Islamic banks in Indonesia to serve micro, small and medium-sized enterprise (MSME) clients and explore the experiences and perceptions of MSME entrepreneurs pertaining to collateralisation in MSME financing.Design/methodology/approachThis study was carried out by implementing a case study research strategy. The data was gathered primarily through the interview by utilising purposive uncontrolled quota sampling. The interview was conducted using semi-structured interview questions by targeting the two sides of Islamic financial inclusion: the Islamic banking industry (supply-side) and the MSME segment (demand-side).FindingsThis paper implies that the collateral provision is indeed an obligatory requirement for MSME to access regular financing in an Islamic bank, preferably the immovable type that consists of land and property. Subsequently, although the Islamic banks offer non-collateralised financing, their disbursement is still relatively scant and limited. Furthermore, despite the collateral issues, most MSME entrepreneurs positively perceive the bank’s collateralisation practice, indicating their awareness and understanding of the collateral purpose and function to access the financing facility.Research limitations/implicationsThis paper merely observed six Islamic bank institutions and 22 MSME units in urban and rural areas in Indonesia using a case study approach. Therefore, the empirical findings and case discussions were limited to those around the corresponding Islamic banks and MSME participants.Practical implicationsBy referring to the several disclosed issues associated with the collateral imposition practices, this paper presents several recommendations that might be considered by the policymakers and the Islamic banking industry to enhance the realisation of MSME Islamic financial inclusion from the collateral implementation aspect, and thereby, facilitating more inclusive growth for the MSME industry.Originality/valueThis paper is unique since the paper attempts to analyse and compare the collateral imposition practices and its perception from the two distinct sides of Islamic financial inclusion that were represented by Islamic banks and MSMEs in Indonesia by including different types of Islamic banks and different segments of MSME in their diverse business sector within the urban and rural locations.

PurposeThe purpose of this study is to critically analyze the Financial Compensation Funds being accumulated by Islamic Banks of Bangladesh in credit-based transactions. In this connection, due to the evolved liquidity crisis amidst the COVID-19, industry opinions are observed that suggest including the compensations or the donation funds directly into the bank's income account. But the Sharīʿah does not permit it. Such alternative proposals of using compensation or donation fund during crises are scrutinized under Sharīʿah principles to come to a logical conclusion.Design/methodology/approachThe approach followed in the study is textual and discourse analysis through descriptions of ideal Sharīʿah-compliant methods for handling late payment of credit and comparison with the industry practices.FindingsIt is observed that there are conceptual gaps in the industry as is reflected in the Islamic Banking Guideline of Bangladesh. The funds collected from the debtor due to late payment are named as compensation (Ta‘wīḍ) whereas the nature of the transaction is a donation (Tabarru'). The misconception can lead to various Sharīʿah non-compliant activities later with the funds. The proposals brought out in the industry to use such compensation/donation funds during a crisis are a consequence of this. The proposals of using such funds for banks' purposes in any situation are not supported by Sharīʿah principles and are against the Islamic banking philosophy.Originality/valueThe study is very relevant to the current crisis of COVID-19 in the domestic Islamic Banking Industry and also instrumental for the future guidance to stick to the Sharīʿah principles in managing compensation or donation funds by the Islamic Banks.

PurposeThe purpose of this paper is to propose a model of the Islamic sovereign wealth funds (ISWFs) based on Islamic finance principles to modify the precarious image of SWFs from Muslim countries. The Shariah laws are the cardinal direction for this study.Design/methodology/approachThe authors applied a qualitative research technique that consists of three approaches: exploratory case study approach to critically examine and rank the existing status of SWFs; descriptive analysis; and content analysis to present a model of ISWFs in comparison of conventional SWFs.FindingsThe authors propose a model of the “Islamic Sovereign Wealth Funds” based on four key pillars: the major Shariah principles; the Islamic corporate governance framework; the Islamic transparency and disclosure framework; and the Islamic corporate social responsibility framework. Furthermore, the authors argue that the potential effect of the ISWFs on Islamic finance and economy will be positive.Research limitations/implicationsThe model is an initial work and idea to convert SWFs from Muslim countries into ISWFs, which required an in-depth policy review by governments.Practical implicationsThe findings of the paper are useful for policymakers and governments of the Muslim countries to overcome the issues and criticism on SWFs by converting them in ISWFs.Originality/valueThis paper contributes to the literature related to Islamic finance and sovereign wealth fund by presenting a first model of ISWFs for Muslim countries.

The aim of this paper is to study the screening methodologies, as practiced by the mainstream Islamic stock market indices (ISI), through their application on the Moroccan All Shares Index (MASI). Thus, the possibility of providing the Casablanca stock exchange with its own Sharī‘ah-compliant stock index will be studied. First, the specific processing to construct ISI will be explained. Then, the screening is performed based on the methodological rules set by the mainstream ISI. The use of screens, as recommended by these indices’ Sharī‘ah committees, leads to different decisions about rejection or acceptance of stocks in the constructed index. This leads, in turn, to a plurality of ISI even when created using the same starting investable universe. Finally, compliance strategies were presented and applied to the MASI.

Ethical finance and Islamic finance are the two important topics in the post global financial crisis market environment and in the context of sustainable development goals and circular economy. If Islamic finance is inherently ethical finance, then what remains the difference between the two is an interesting theme for investigation. Islamic finance is governed by universal and divine legal and moral principles and standards related to economic transactions. Contemporary Islamic financial practices are however, strongly criticized for giving precedence to legal forms over ethical substance and for the rising gap between moral ideals and practical realities. Ethical finance is a conscious human effort to reform finance and it embraces environmentally, socially and morally conscious practices. In this paper we select two banks, namely Islami Bank Bangladesh Limited (IBBL) and Triodos Bank. We perceive that the first is an ideal Islamic Bank and the second is an ideal Ethical Bank. We undertake an analysis of the content of balance sheet disclosures of the two banks and try to gauge the similarities and divergences in their business principles and practices. The analysis uncovers that the current practices of IBBL may far exceed other Islamic banks in terms of financial inclusion, microfinance, gender balance, SME financing and green banking while still being financially stable and profitable. However, Triodos Bank has some significant lead over IBBL regarding ethical practices since it only promotes sustainable businesses. If Triodos Bank exceeds IBBL in ethical expectations as we conclude, then it is far ahead of other Islamic banks in such comparison. The implication of our conclusion is that Islamic banking needs ethical reform and this can be benchmarked with Triodos Bank’s business model. For Islamic banks the correct approach would be to strike the right balance between ethics, moral standards, Sharī‘ah compliance and profitability. The Islamic banking model has in-built features to ensure Sharī‘ah compliance, and this can be enhanced through adopting sound ethical practices as well as dedicating efforts towards being environmentfriendly. The paper attempted to present some considerations which if present in Islamic banks would take them away from the criticism of being only forprofit in motivation. Triodos has balanced its for-profit and not-for-profit motivations letting the later to lead the first.

This study explores research trends in Western literature about Zakāh, which is considered to be an equivalent, to a certain degree, to a charity in the Christian tradition. The study is based on a sample of considerable studies in English and French, collected over a period of eighty one years (1934-2015). The preliminary results highlight three important implications. These are: (1) the multiplicity and the diversity of the conceptualization of Zakāh beyond the purely moral, juristic, discursive and literalistic approaches which seem to be dominating research trends in the Arab-Muslim world; (2) the predominance of theoretical studies over applied ones. (3) Zakāh as a valuable resource is perceived; according to some treatises as an instrument of power from the geo-economics view-point.

The present paper is an attempt to correct Timur Kuran on various issues related to the genesis of Islamic economics.It demonstrates that "Islamic economics" is not a product of twentieth century.The term may be new but its origins go back to early period of Islam.Its evolution up to the present state of a distinguished discipline can be divided into six distinct phases.The paper argues that the modern Islamic economics was never a sectarian subject.Nor was it developed for Muslims' identity and protection purpose.Scholars of different regions and of diverse affiliations promoted it and its propounders aimed at the well-being of all.