ESSENTIAL NOTES ON MODELING RENTAL RATE FOR ISLAMIC HOME FINANCING IN INDONESIA

Homeownership hitherto remains a formidable work in every country. Rental rate that comprises house and rental price is an arduous factor to determine just price to own the home. This study at-tempts to unveil some essential notes for Islamic bank in undertaking rental rates for Islamic mort-gage financing in Indonesia. By employing the qualitative approach of pedigree on Islamic mortgage financing, this study found some pertinent elements such as the rental price of residential housing, macroeconomics variables, and its heterogeneity and homogeneity factors are among the essential notes to undertake by relevant stakeholders in determining rental rate. The novelty of this study can be considered as the one that initiated to an exploration of rental rates as an alternative element in Islamic home financing in Indonesia. This study implies government policy to consider rental rate mechanism as a new approach to derive just Islamic home financing in Indonesia. In addition, Is-lamic banks will incorporate this approach as part of their pricing component in determining Islamic home financin

Optimizing Hajj Finance in Indonesia: The Role of Wakalah Contract

In response to the surge of Hajj registrants in Indonesia, efficient and transparent management of Hajj funds has become imperative. This necessitates a more proactive role from the government to ensure adherence to both state regulations and Sharia principles when employing Wakalah contracts for efficient Hajj fund management. This study aims to clarify the legal framework surrounding Wakalah contracts to enable their more effective implementation and optimize Hajj fund management within both Sharia and state legal contexts. This research employs a juridical-normative method, where data is analyzed and interpreted systematically, logically, and critically, using a normative approach and drawing from relevant regulations, doctrines, legal principles, and other supplementary materials. The findings indicate that integrating Sharia principles into Wakalah contracts alongside a robust legal framework can maximize benefits for Hajj congregations and promote cost-effective fund management. Additionally, collaboration between Islamic banking institutions and Hajj regulators can facilitate process simplification and address existing challenges. Through its meticulous methodological approach, this research offers a deeper understanding of benefit ownership, Wakalah principles, and relevant legal and Sharia aspects. Its unique contribution lies in its focus on the value of benefit ownership, a comprehensive examination of legal and Sharia considerations, and the development of a practical framework for enhancing Hajj financial management in Indonesia.==============================================================================================================ABSTRAK – Optimalisasi Dana Haji di Indonesia: Peran Akad Wakalah. Dalam menghadapi lonjakan pendaftar haji di Indonesia, pengelolaan dana haji yang efektif dan transparan menjadi sangat penting. Hal ini menuntut pemerintah untuk lebih proaktif dalam memastikan penggunaan akad wakalah dalam pengelolaan dana haji sesuai dengan aturan agama dan negara. Penelitian ini bertujuan untuk membuka cakrawala hukum syariah dan negara tentang implementasi akad wakalah yang lebih efektif sehingga pengelolaan dana haji dapat lebih optimal. Data penelitian dikumpulkan dari sumber-sumber sekunder, seperti peraturan perundang-undangan, doktrin fikih, asas-asas hukum Islam, dan bahan pelengkap lain yang relevan. Menggunakan metode yuridis-normatif, data dianalisis dan ditafsirkan dengan pendekatan normatif dan disusun secara sistematis, logis, dan kritis. Hasil kajian menunjukkan bahwa integrasi prinsip syariah dalam kontrak wakalah, ditambah dengan kerangka hukum yang tepat, dapat memaksimalkan manfaat bagi jamaah haji dan mempromosikan pengelolaan yang efisien biaya. Hal ini karena wakalah dapat memberikan keleluasaan bagi nazir untuk mengelola dana haji secara profesional dan transparan. Selain itu, kolaborasi antara lembaga perbankan syariah dan regulator haji dapat mengatasi tantangan dalam hal regulasi, SDM, dan teknologi. Penelitian ini memberikan pemahaman yang mendalam tentang kepemilikan manfaat, prinsip wakalah, dan aspek hukum dan syariah yang relevan melalui metode yang cermat. Kontribusi unik dari penelitian ini terletak pada fokusnya pada nilai kepemilikan manfaat, wakalah, dan penelusuran yang komprehensif terhadap aspek hukum dan syariah, sehingga menawarkan kerangka kerja praktis untuk meningkatkan manajemen keuangan haji di Indonesia

Determinants of Islamic Performance Ratio in Islamic Banks with Return on Assets as Moderating Factor

The plan of the Indonesian government that wants to make Indonesia the center of the world's Islamic economy and finance must be supported by all stakeholders. Therefore, as one of the vital elements in the Islamic financial ecosystem, Islamic banks need to have an excellent performance to increase the trust of the national and international community. In addition, Islamic banks with different operational principles from conventional banks should have different performance measurements compared to performance measurements from conventional banks.The purpose of this study is to analyze the factors that can potentially affect the Islamic Performance Ratio (IPR). These factors include independent variables consisting of financing, the distribution ratio (Financing to Deposit Ratio-FDR), labor cost ratio (LCR), promotion cost ratio (PCR), financing quality ratio (Non-Performing Financing-NPF), ratio distribution of financing to micro, small and medium enterprises (MSMEs) and Return on Assets (ROA). Furthermore, to determine the relationship between financial performance indicators in conventional banks (ROA) with financial performance indicators and social performance in Islamic banks (IPR), ROA becomes a moderating variable.The results of this study show that FDR has a positive and significant effect on IPR, LCR has a negative and insignificant effect on IPR, PCR has a positive and significant effect on IPR, NPF has a negative and significant effect on IPR, MSMEs have a positive and significant effect on IPR, ROA has a positive and significant effect on IPR, and ROA has a positive and significant effect on IPR. Significant to the IPR. Whereas the ROA variable as a variable that moderates the relationship of these independent variables to IPR results in that ROA moderates the effect of ROA positively and significantly on IPR, ROA moderates the effect of LCR negatively and significantly on IPR, ROA moderates the effect of PCR positively and significantly on IPR. Also, ROA positively and significantly moderates the effect of MSMEs on IPR

Analysis On the Effect of Educating Customer, Service Fairness, Customer Satisfaction and Loyalty: A Study on Islamic Bank in Indonesia

The low level of market share of Islamic banks continues in Indonesia despite having a large potential customer base as the most populated Muslim country in the world. This study analyses two factors related to marketing of Islamic banking in Indonesia, namely educating customers and service fairness. This research was conducted in Jakarta with a sample of 200 people. This study employs Structural Equation Model (SEM) using AMOS software. The study found that service quality has a significant and positive impact on customer satisfaction but does not have a significant impact on customer loyalty. The study also found that educating the customer has a negative significant impact on customer satisfaction, which means that as more customers learn about Islamic banking, the higher their dissatisfaction. Furthermore, educating the customer also has no significant effect on customer loyalty. This study shows that Islamic banks in Indonesia have not been able to build the loyalty of its customers. Based on the findings of this study, it is recommended that Islamic banks in Indonesia should re-evaluate and improve their marketing strategies primarily in terms of educating their customers

Rental index rate as an alternative to interest rate in Musharakah Mutanaqisah home financing

Purpose This paper aims to propose a new pricing alternative called Rental Rate Index (RR-I) that captures the true value of property to be used by Islamic banks in Musharakah Mutanaqisah (MM) contract for home financing. Design/methodology/approach By formulating a profit rate based on Rental Index (RI) and House Price Index (HPI), the proposed rate eliminates conventional profit rate benchmarking, and, at the same time, suggests a fair, equitable and sustainable financing.This new RR-I (measured by RPI/HPI) enables computerization of the MM system in home financing to be easily implemented.A financial simulation is developed to demonstrate the feasibility of this newly proposed rate. Findings This newly proposed RR-I is found to be more stable, having less fluctuations, resilient to macroeconomic conditions and yet comparable to the conventional interest rates, without depending on them. It can also be regarded as a rate that is fair and sustainable to both the customer and the bank, as it measures the actual rate of return to both parties in MM contract.Research limitations/implications The paper confines one contract, namely, MM, as it is claimed to be more Shariah-compliant than others.Practical implications The finding also sheds some light on the recommendation by Bank Negara Malaysia, which is to consider RR that is more indicative of the actual rental price while taking into account the competitiveness of the product. (BNM, 2007). Social implications This paper wreaks customer patronage in selecting the contract of home financing.Originality/value This paper attempts to resolve the issue of benchmarking RR to the conventional interest rate in the MM contract. Studies conducted on this issue via simulation approach are meager

Macroeconomic shocks, fragility and home financing in Malaysia: can rental index be the answer?

Purpose: This study aims to investigate the interactions among macroeconomic variable shocks, banking fragility and home financing provided by conventional and Islamic banks in Malaysia. Identifying the causes of financial instability and the effects of macroeconomic shocks can help to foil the onset of future financial turbulence. Design/methodology/approach: The autoregressive distributed lag bound-testing cointegration approach, impulse response functions (IRFs) and forecast error variance decomposition are used in this study to unravel the long-run and short-run dynamics among the selected macroeconomic variables and amount of home financing offered by both conventional and Islamic banks. In addition, the study uses Granger causality tests to investigate the short-run causalities among the selected variables to further understand the impact of one macroeconomic shock to Islamic and conventional home financing.Findings:This study provides evidence that macroeconomic shocks have different long-run and short-run effects on amount of home financing offered by conventional and Islamic banks. Both in the long run and short run, home financing provided by Islamic banks is more linked to real sector economy and thus is more stable as compared to home financing provided by conventional banks. The Granger causality test reveals that only gross domestic product (GDP), Kuala Lumpur Syariah Index (KLSI)/Kuala Lumpur Composite Index (KLCI) and house price index (HPI) are found to have a statistically significant causal relationship with home financing offered by both conventional and Islamic banks. Unlike the case of Islamic banks, conventional home financing is found to have a unidirectional causality with interest rates.Research limitations/implications This study has focused on analyzing the macroeconomic shocks on home financing. However, this study does not assess the impact of financial deregulation and enhanced information technology on amount of financing offered by both conventional and Islamic banks. In addition, it is not within the ambit of this present study to examine the effects of agency costs and information asymmetry.Practical implications: The analysis of cointegration and IRFs exhibits that in the long run and short run, home financing provided by Islamic banks are more linked to real sector economy like GDP and House Prices (HPI) and therefore more resilient to economic vulnerabilities as compared to home financing provided by conventional banks. However, in the long run, both conventional and Islamic banks are more susceptible to fluctuations in interest rates. The results of the study suggest that monetary policy ramifications to improve banking fragility should focus on stabilizing interest rates or finding an alternative that is free from interest.Social implications: Because interest plays a significant role in pricing of home loans, the potential of an alternative such as rental rate is therefore timely and worth the effort to investigate further. Therefore, Islamic banks can explore the possibility of pricing home financing based on rental rate as proposed in this study. Originality/value: This paper examines the unresolved issues in Islamic home financing where Islamic banks still benchmark their products especially home financing, to interest rates in dual banking system such as in the case of Malaysia. To the best of the authors’ knowledge, studies conducted in this area are meager and therefore is imperative to be examined

Contemporary Shariah and Legal Pertinent Issues in Cash Waqf Mechanism using Peer To Peer (P2p) Platform in Indonesian Islamic Economics

The remarkable growth of financial technology wreaks significant impact to the liquidity of Islamic financial industry. Cash waqf now is perceived as the right instrument to ameliorate the issue of liquidity amid modest effort of financial industry in Indonesia. Cash waqf using P2P (Peer to Peer) platform model now is becoming the untapped potential of business beside social responsibility. However, there are some issues as cash waqf integrated with P2P platform that might lead to another phenomenon of shariah compliance in financial technology. In view of this backdrop, this paper aims to unveil the issue of shariah compliance in contract that used to disburse cash waqf funds using P2P platform model. Second, this paper also deciphers some legal issues that might occur that contrary to the existing law. The paper finds that since the existing regulation including Fatwa considered as general, there is possibility that the practice of P2P shariah deviate from Shariah tenet and wreak some legal issues. In the event of default payment, late charges and early settlement not clearly regulated and no standard. This paper also finds that no such governance standard, risk management, shariah compliance and code of ethics oThe contract inherent in this platform model shall be in line with the tenet of Shariah principles and not only comply with existing regulation. This paper implies that more cash waqf will be generated through this platform model as it is easier and more practical. In addition, financial industry will adhere strictly to shariah compliance aspect as their concern.

EXPLORING ZAKAT'S ROLE IN PROMOTING SOCIAL INCLUSION AND JUSTICE FOR AR-RIQOB

Isu krusial mengenai inklusi sosial melalui pemanfaatan zakat, khususnya dalam konteks meningkatkan keadilan bagi kelompok ar-Riqob, yaitu masyarakat yang berada dalam situasi kurang beruntung. Tujuan dari penelitian ini adalah analisa zakat dapat menjadi sebuah strategi yang berhasil menciptakan kesadaran sosial dan mencapai keadilan bagi komunitas ar-riqob. Untuk mengkaji, menganalisis, dan membandingkan bidang-bidang yang dipelajari oleh para peneliti di bidang inklusi sosial melalui pemanfaatan zakat, penelitian ini menggunakan teknik kualitatif dalam bentuk penelitian kepustakaan untuk mensurvei literatur lebih dari 30 makalah yang relevan dengan inklusi sosial dalam konteks meningkatkan keadilan bagi kelompok ar-Riqob melalui pemanfaatan zakat.. Survei ini mencakup rekomendasi dan saran serta beberapa karya teoretis selain penyelidikan empiris dan analisis komparatif. Sedangkan hasil penelitian ini adalah zakat memiliki potensi besar sebagai alat yang dapat membantu mewujudkan inklusi sosial bagi ar-riqob. Namun, dalam implementasi dibutuhkan upaya bersama dari berbagai pemangku kepentingan dan kerja sama erat antara pemerintah, lembaga filantropi, dan masyarakat sipil untuk memastikan distribusi zakat yang efektif dan transparan