The Potential of Qualitative Social Research in Islamic FInance

Last Thursday, I conducted a Research Workshop on Qualitative Research for the researchers of ISRA. If we examine the past literature on Islamic finance, there are many quantitative theoretical and empirical research such as on performance and efficiency, consumer behaviour, managerial aspects of Islamic financial institutions etc. have been undertaken and published. There are also many `Qualitative Textual Research' in Islamic finance especially on Shariah and legal issues. However, there are very few research that have been done using `Qualitative Social Research' in Islamic finance.

The nature of Qualitative Social Research' can be summed up as follows:

“Data consist of descriptions and accounts provided by participants in the research site, together with the researcher’s observations on activities and interactions and the context in which they take place. Data must be collected over an extended period of time so that processes can be recorded…The researcher, in general, does not seek to test prior hypothesis. Rather he, or she seeks to theorize through the data in an inductive manner. Analysis of the data is itself an emergent process. The researcher seeks gradually to develop empathy with the data, to understand what they tell of participants’ realities and the process through which they unfold. The researcher must constantly construct alternative interpretations until he or she is satisfied that the representation is a faithful account. Interpretations must be grounded  in context and consistent with the chronological ordering of events and interactions. Finally, the results must be represented in such a way that the reader can independently judge their credibility." (Dent, J, 1991. “Accounting and Organizational Culture”, Journal of Accounting Organizations and Society)

The usefulness of Qualitative Social Research is normally to assist researchers in discovering personal experiences and values such as religious conviction, behavior, culture etc. It is also useful to uncover and understand what lies behind the complex human, organizational or societal phenomenon. Qualitative data can give intricate details of the phenomenon and help to develop new research hypotheses/propositions. Another strength of this type of research is the richness and in-depth research findings.

The Qualitative Social Research can be utilised in Islamic finance in a variety of ways such as:

• Understanding the Shari’ah, the managerial, marketing or/and accounting issues and practices in IFIs
• Corporate and organizational culture in IFIs
• Culture of Shari’ah compliance in different types of IFIs
• Shari’ah compliance from the different views of stakeholders
• Corporate and Shari’ah governance in IFIs

ISRA Research Fellow & New Research Initiative

From 15th May 2014, I have been appointed as Research Fellow by the International Shari'ah Research Academy on Islamic Finance (ISRA). The position is on a part-time basis and I will spend at least 1 working day in ISRA. I will be involved as principal researcher in at least 1 research project and I will also be involved in other activities to enhance research function including conducting research workshops in relevant areas.

Here, I provide a synopsis of the research project that I will be heading at ISRA:

Research Title: "The Application of Intangible Assets in Islamic Financial Industry: An Islamic Accounting Perspective"

 Recent study by ISRA (i.e. Bouheraoua et. al., 2013) on the “Shariah Issues in Intangible Assets and their Application in Islamic Finance Institutions” has raised a number of pertinent issues. The study has critically discussed the emerging issues on intangible assets especially recognition and measurement; financing and trading; and zakat. The study has found that (i) there is an issue of gharar in the identification and determination of intangible assets; (ii) it is generally permissible to finance and trade intangible assets except in the trading and exchange of receivables, options and futures; (iii) zakat is obligatory on intangible assets if the intention is to trade them. However, the study has not really delved into accounting issues on intangible assets from an Islamic perspective. The study has reviewed only briefly the issues of accounting recognition. However, there are many other pertinent issues such as accounting measurement and financial reporting which have not been properly dealt with. As the Islamic financial industry is evolving with many related issues on intangible assets, there is an urgent need to extend the above study. This proposed study will examine the accounting issues of intangible assets from the Islamic (Shari’ah) perspective. Three pertinent accounting areas of concern to be examined are namely accounting recognition; accounting measurement; and financial reporting. This study aims to contribute towards a better understanding of accounting for intangible assets from an Islamic perspective. The study will also enhance the application of intangible assets in the Islamic financial industry and ensure that all the requirements are properly governed by the Shari’ah precepts.