The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia

Small and Medium-Sized Enterprises (SMEs) businesses face challenges securing financing for both capital and operating expenditures. As a result, SMEs tend to utilize personal loans and credit card facilities to fund their businesses. The difficulty in securing financing for SMEs was due to various...

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Main Author:	Abdul Aziz, Ahmad Mustafa Al-Malhuki
Format:	Thesis
Language:	English
Published:	2022
Subjects:	HG Finance
Online Access:	http://eprints.utm.my/108273/1/AhmadMustafaAl-MalhukiPAHIBS2022.pdf.pdf
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id	my-utm-ep.108273
record_format	uketd_dc
spelling	my-utm-ep.1082732024-11-06T02:44:24Z The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia 2022 Abdul Aziz, Ahmad Mustafa Al-Malhuki HG Finance Small and Medium-Sized Enterprises (SMEs) businesses face challenges securing financing for both capital and operating expenditures. As a result, SMEs tend to utilize personal loans and credit card facilities to fund their businesses. The difficulty in securing financing for SMEs was due to various reasons, one of which was the lack of understanding of key determinants in credit evaluation for financing approval. Another issue is that Islamic Bank has been criticized for replicating conventional banking practices in credit evaluation. Islamic banking’s risk appetite is similar to conventional banking, while principally Shariah banking should promote a risk-sharing spirit. There is a dearth of research that examined the behavior of Islamic banks towards SMEs in Malaysia, especially in credit evaluation on financing. Additionally, not much research in Islamic banking discussed the credit evaluation process, but much attention was given to the issues of Shariah-compliant products. Thus, this research explores how Islamic banking evaluates SMEs’ credit standing based on character, ability, means, purpose, amount, repayment, and insurance (CAMPARI) credit evaluation model, and whether Maqasid Shariah is being considered throughout the credit evaluation process. With a single case-study approach, this qualitative research conducted eleven semi-structured interviews with the subject-matter experts from the chosen Islamic developmental bank. The data of the interviews from various respondents were coded and interpreted through thematic analysis using computer-aided qualitative analysis software called NVIVO. The research reveals that the credit evaluation approach in ABC Bank is much different from other commercial banks due to its mandated role to assist the SME sector. For the Maqasid Shariah's consideration, the officers believe that purpose of financing and the nature of business are the only core Shariah concerns when evaluating the financing applications. As a result of the research findings, a framework called Maqasid Financing Program has been developed, together with a credit evaluation template, which will help the Islamic banks to evaluate credit applications based on Maqasid Shariah. The research has significant theoretical and practical contributions through the embedment of Maqasid Shariah into the CAMPARI evaluation model and the pragmatic proposed framework that can be applied to credit practice. 2022 Thesis http://eprints.utm.my/108273/ http://eprints.utm.my/108273/1/AhmadMustafaAl-MalhukiPAHIBS2022.pdf.pdf application/pdf en public http://dms.library.utm.my:8080/vital/access/manager/Repository/vital:154382 phd doctoral Universiti Teknologi Malaysia Azman Hashim International Business School
institution	Universiti Teknologi Malaysia
collection	UTM Institutional Repository
language	English
topic	HG Finance
spellingShingle	HG Finance Abdul Aziz, Ahmad Mustafa Al-Malhuki The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia
description	Small and Medium-Sized Enterprises (SMEs) businesses face challenges securing financing for both capital and operating expenditures. As a result, SMEs tend to utilize personal loans and credit card facilities to fund their businesses. The difficulty in securing financing for SMEs was due to various reasons, one of which was the lack of understanding of key determinants in credit evaluation for financing approval. Another issue is that Islamic Bank has been criticized for replicating conventional banking practices in credit evaluation. Islamic banking’s risk appetite is similar to conventional banking, while principally Shariah banking should promote a risk-sharing spirit. There is a dearth of research that examined the behavior of Islamic banks towards SMEs in Malaysia, especially in credit evaluation on financing. Additionally, not much research in Islamic banking discussed the credit evaluation process, but much attention was given to the issues of Shariah-compliant products. Thus, this research explores how Islamic banking evaluates SMEs’ credit standing based on character, ability, means, purpose, amount, repayment, and insurance (CAMPARI) credit evaluation model, and whether Maqasid Shariah is being considered throughout the credit evaluation process. With a single case-study approach, this qualitative research conducted eleven semi-structured interviews with the subject-matter experts from the chosen Islamic developmental bank. The data of the interviews from various respondents were coded and interpreted through thematic analysis using computer-aided qualitative analysis software called NVIVO. The research reveals that the credit evaluation approach in ABC Bank is much different from other commercial banks due to its mandated role to assist the SME sector. For the Maqasid Shariah's consideration, the officers believe that purpose of financing and the nature of business are the only core Shariah concerns when evaluating the financing applications. As a result of the research findings, a framework called Maqasid Financing Program has been developed, together with a credit evaluation template, which will help the Islamic banks to evaluate credit applications based on Maqasid Shariah. The research has significant theoretical and practical contributions through the embedment of Maqasid Shariah into the CAMPARI evaluation model and the pragmatic proposed framework that can be applied to credit practice.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Abdul Aziz, Ahmad Mustafa Al-Malhuki
author_facet	Abdul Aziz, Ahmad Mustafa Al-Malhuki
author_sort	Abdul Aziz, Ahmad Mustafa Al-Malhuki
title	The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia
title_short	The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia
title_full	The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia
title_fullStr	The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia
title_full_unstemmed	The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia
title_sort	role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in malaysia
granting_institution	Universiti Teknologi Malaysia
granting_department	Azman Hashim International Business School
publishDate	2022
url	http://eprints.utm.my/108273/1/AhmadMustafaAl-MalhukiPAHIBS2022.pdf.pdf
_version_	1818646936846073856

The role of maqasid shariah in the credit evaluation by islamic bank for small and medium-sized enterprises in Malaysia

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