A comparative analysis of financial affordability in Islamic home financing instruments in Malaysia

Purpose – This study aims to compare and contrast the financial affordability of Islamic home financing instruments such as bay’ bithaman ajil and musharakah mutanaqisah (MM) offered by various home financing institutions in Malaysia. Design/methodology/approach – Mathematical simulations were carried out in examining the financial affordability (or lack thereof) of various Islamic home financing by both Islamic commercial banks (ICB) and financial cooperatives (FC). Findings – This study has shown that MM by FC is a workable, more financially affordable option to potential homeowners. Unlike ICB, MM by FC uses rental rates as a benchmarking tool because of its inherent nature of flexibility. Research limitations/implications – MM by FC has the potential to reduce the cost of home acquisition (purchase affordability) and the amount of monthly installments (repayment affordability) of homeowners in Malaysia. Originality/value – This study shows the financial implication of unaffordable Islamic home financing instruments may have on the Malaysian households, which were derived from using official data from various government agencies

Qualitative validation of a financially affordable Islamic home financing model

Purpose - This study aims to validate a potential synergistic venture between cash waqf (Islamic endowment) institutions (CWIs) and financial cooperatives (FCs) in the provision of affordable Islamic home financing (IHF) in Malaysia. Design/methodology/approach - The study adopted semi-structured interviews with ten experts to validate the cash waqf-financial-cooperative-mushārakah mutanāqiṣah (CWFCMM) model. Thematic analysis technique was used to analyse the verbatim texts. Findings - The findings show that the majority of the informants have positive perceptions of the potential of the CWFCMM model to provide financially affordable IHF products in Malaysia. Nevertheless, this study sheds light on the varying degrees of latent issues and challenges that might arise in the implementation of this model. For example, FCs need to practice the correct business model, implement good governance structures and employ the right people. Meanwhile, CWIs need to work on their accountability issues by publishing their audited accounts in mainstream newspapers, much like what is being done by non-governmental organisations such as the widely recognised Malaysian Medical Relief Society (MERCY Malaysia). Research limitations/implications - This study interviewed a small, industry-specific number of informants in generating its findings. Time and budget constraints are some of the limiting factors in carrying out the study. Because of these factors, the generalisation of the study’s findings will be limited. Practical implications - First, the CWFCMM model offers an alternative, financially affordable IHF instrument to low- and middle-income households in Malaysia. Second, the involvement of third-sector institutions such as FCs and CWIs in the provision of IHF will reduce the burden of the government in its spending on home financing solutions for civil servants. Third, this model will harness the potential of waqf-based financing beyond the contemporary limited applications to mosques, graveyards and taḥfīẓ (Qurʾan memorization) schools. Originality/value - This study presents an alternative IHF model that transcends the current institutional framework that is heavily dominated by Islamic commercial banks and government-owned home financing institutions. The study does not focus on a single third-sector institution but on an integration of at least two of them, CWIs and FCs, in implementing the IHF model

Examining the behavioral intention to participate in a Cash Waqf-Financial Cooperative-Musharakah Mutanaqisah home financing model

Purpose – The purpose of this paper is to investigate the Malaysian homeowners’ intention to participate in the Cash Waqf-Financial Cooperative-Musharakah Mutanaqisah (CWFCMM) home financing model using rigorous scale validation procedures. Design/methodology/approach – An adapted questionnaire with 26 items was administered to 382 academic and supporting staffs, postgraduate and undergraduate students in three states in Malaysia. The data were analyzed using exploratory factor analysis and confirmatory factor analysis with SPSS 21 and AMOS 21, respectively. Findings – The results further support the parsimonious nature theory of planned behavior (TPB) with its three original construct of attitude, subjective norm, and perceived behavioral control and an additional construct of perceived cost advantages of the CWFCMM Model. A validated TPB scale with 24 items measured can be proposed to be used as an evaluative tool to assess the level to which the homeowners are interested to participate in the CWFCMM Model. Research limitations/implications – The modified TPB scale would also facilitate the identifications of factors that influence homeowners’ intention to opt for Islamic home financing (IHF) by non-bank Islamic financial institutions such as financial cooperative. Practical implications – The CWFCMM Model aims to harness the potential synergy between third-sector economy players such as waqf and financial cooperatives in offering affordable IHF solution to potential homeowners. Social implications – The CWFCMM Model may enable the Malaysian homeowners to enjoy a more affordable IHF solution, thereby, among others, reducing the purchase and monthly repayment affordability of Malaysians. Originality/value – There is a dearth of Islamic financial services selection studies, especially within the non-banking, Islamic financial services milieu. The CWFCMM Model, which has been developed by the authors, enriches the limited literature on this subject matter. It will also add value to understand how the customers would react to an alternative IHF provide

The Adoption of Ar-Rahnu and Financial Wellbeing of Microentrepreneurs in Malaysia

There is an urgent call for a potential justification on how and to what extent customers (microentrepreneurs) of Ar-Rahnu institutions in Malaysia are successfully driven their living standards from B10 (hardcore poverty) to B40 (low income). This study classified Ar-Rahnu’s adoption factors into three categories, namely, Shari’ah governance, uniqueness of Ar-Rahnu, and efficiency. 150 questionnaires were distributed to micro-entrepreneurs that used Ar-Rahnu and analysed using SmartPLS 3.0. Based on the results, it shows that Shari’ah governance has a low correlation and insignificant relationship towards Ar-Rahnu adoption. Stated differently, it means that customers find Shari’ah-compliance requirements not as important and it does not get in their way of getting instant cash from Ar-Rahnu. The other two constructs, namely as uniqueness and efficiency, have positive relationships with Ar-Rahnu adoption. It shows a significant and positive relationship with the Ar- Rahnu financing output. Unlike previous studies within the body of knowledge that mainly focuses on the adoption factors of Ar-Rahnu, this study went a step further by addressing the after-effect or impact of Ar-Rahnu adoption towards customers’ wellbeing, especially in terms of financial wellbeing and have found positive results

Nexus between Islamic microfinancing and financial wellbeing of micro-entrepreneurs during the Covid-19 pandemic in Malaysia

Islamic microfinance is expanding and penetrating its potential market over the globe. Access to credit or financing, especially during the COVID-19 pandemic, is vital for micro-entrepreneurs in climbing the socio-economic ladder that will contemporaneously increase their household income. In Malaysia, most of the MEs can hardly access financing from formal financial institutions due to poor credit rating, having zero to little collateral, income instability, small loan amounts, and high transaction costs. Alternatively, MEs approach Islamic microfinance institutions for their financing solution. Therefore, this study intends to investigate how far the utilization of Islamic microfinancing by MEs could enhance their quality of life. One hundred seven (107) usable questionnaires were analysed via the Structural Equation Modelling (SEM) AMOS using IBM® SPSS and found that both investment and expansion factors played key roles in affecting the financial wellbeing of the micro-entrepreneurs. The results lend credence to the positive effect of Islamic microfinance products may have on MEs and indirectly support the long-term economic development for MEs. This study deliver implication to various angles. In practical part, it opens the eyes of micro-entrepreneurs to opt for the right path (expansion and investment) to achieve financial wellbeing. Government (regulators) can enhance the ability of Islamic microfinancing as a tool towards financial wellbeing and in theoretical part, this study deepens the scope of Schumpeter’s theory by inculcate this theory with Islamic finance scope of study

Games and Audiovisuals of Non-Communicable Diseases as Health Promotion, Green Technology for Women Workers

Some of the millions of Indonesian migrant workers who live and work in Malaysia are there illegally and do not have health insurance. If they get sick, their access to health services is limited because the Indonesian JKN system is unable to protect their health. Limited facilities and infrastructure make them vulnerable, so they are more susceptible to disease, especially if the pattern of clean-living behavior is lacking, nutritional intake is low, and the body’s biological condition is not good. in addition to poor sanitary conditions and working environments, a heavy workload, malnutrition, and a lack of guaranteed protection. The implementation of health development includes efforts that must be carried out in an integrated and sustainable manner. This service aims to make TKI independent in maintaining their health while working in Malaysia. Residents’ knowledge from the results of the post-test after the presentation of the material shows an increase in knowledge, so that the percentage of “good” knowledge becomes 91%. The resulting attitude variable also increased from 52% to 70%. The behavior variable increased from 65% to 91% good behavior, so bad behavior decreased

Unleashing the ar-Rahnu as a micro-financing instrument for micro-entrepreneurs in Malaysia

The purpose of this paper is to compare the Islamic micro-financing and Ar-Rahnu. Using the content analysis approach, the paper examines the reports of micro-financing provided by Bank Negara Malaysia and comparing the rate with Ar-Rahnu. To validate the content analysis facts and to reveal the actual behavior and perception of micro-entrepreneurs towards ArRahnu, this study also conducted in-depth interview. The results show significant advantages of Ar-Rahnu as a better option as compared to the Islamic micro-financing as Ar-Rahnu has the lowest pricing charges, offer higher margin and lesser procedures required. In fact, ArRahnu also have skilled employees reflected to their customer satisfaction and updated with the current technology of innovation (fintech). This paper’s contribution to the literature is by including a comparison between the products within the Islamic financial system setting. Besides, in term of methodology, this study used multiple approaching techniques of qualitative method which are content analysis and in-depth interview

Islamic home financing instruments in Malaysia: the emerging issue of financial (Un)affordability

This study compares and contrasts Islamic home financing instruments such as bay bithaman ajil and musharakah mutanaqisah (MM) by Islamic commercial banks, government-owned home financing institution and financial cooperative. Mathematical simulations were carried out in examining the purchase- and repayment-affordability of Islamic home financing instruments by the above-mentioned providers. We have shown that Islamic home financing instruments by Islamic commercial banks are an unaffordable option for most Malaysians, even vis-à-vis the conventional home loan. Although government-owned home financing institution provides the cheapest option for homeowners, it is, however, restricted to civil servants. MM by the financial cooperative, on the other hand, is a workable, more financially affordable option to potential homeowners. The reason for this is that, unlike Islamic commercial banks, MM uses rental rates as a benchmarking tool which is more flexible as well as more responsive to its member-customers’ specificities of localities and types of homes. As a result, it may reduce the cost of home acquisition (purchase-affordability) and the amount of monthly instalments (repayment-affordability) by homeowners in Malaysia

SHARĪʿAH-COMPLIANT FINTECH USAGE AMONG MICROENTREPRENEURS IN MALAYSIA: AN EXTENSION OF UTAUT MODEL

Fintech has been beneficial to the financial services industry and has markedly enhanced financial inclusivity. While the fintech has already made its mark, there has been somewhat limited use of sharīʿah-compliant fintech (such as P2P lending, crowdfunding, wealthtech, e-wallets) by Muslim microentrepreneurs (MEs) in Malaysia.  Hence, this study examines the factors that affect sharīʿah-compliant fintech usage and its effect on income sustainability via an extended Unified Theory of Acceptance and Use of Technology (UTAUT). One hundred sixty-five (165) questionnaires were distributed to Muslim MEs who are users of sharīʿah-compliant fintech. This study reveals that performance expectancy and facilitating conditions have positive and significant effects on the use of sharīʿah-compliant fintech. The extended relationship of sharīʿah-compliant fintech adoption and income sustainability also presents a significant and positive relationship in which sharīʿah-compliant fintech has the potential to increase and, more importantly, sustain MEs’ income level

Why the ‘one-size-fits-all’ subsidy structure of Tabung Haji no longer works and how to move forward

The original, novel idea behind Tabung Haji’s establishment was to help Malaysian Muslims save for hajj. However, throughout the years, the subsidy amount for hajj pilgrims has proven to be ever-increasing. As a case in point, for the 2020 hajj season, a first-time hajj pilgrim needs only pay RM9980 out of RM22,900 of the original costs. Stated differently, Tabung Haji subsidises more than half (56.42 per cent) of the total cost. As with any subsidy, the main question is, where do we find the money? For instance, the governments of Muslim majority nations such as Pakistan and Indonesia used to directly subsidise their hajj pilgrims but have recently stopped doing so. Moreover, Tabung Haji is a business entity, which understandably needs to generate profit that will then be used to subsidise hajj pilgrims. Consequently, this paper aims to examine the (un)sustainability of the existing subsidy structure and suggest a way forward. Due to its politically sensitive nature, instead of eliminating the subsidy, the authors used data from the Household and Basic Amenities Survey 2019 to mathematically simulate a regressive subsidy structure for firsttime hajj pilgrims