ARI Research with Impact - Part 1: Governance & Shariah Compliance

One is often reminded to embark on research that produces "good impact".  But what exactly is meant by "Research with Impact"?.  According to the Economic and Social Research Council (ESRC) which is based in UK, Economic and societal impact is the demonstrable contribution that excellent social and economic research makes to society and the economy, and its benefits to individuals, organisations and/or nations.  Bearing this in mind, the Accounting Research Institute (ARI) is deliberate in making a difference in its research contributions.  In addition to the basic needs to produce good quality academic papers, postgraduate scholars and innovation in the niche research Islamic Financial Criminology, ARI collaborate with its respective stakeholders to create both social and economic impacts. For its 2015-2017 grants cycle, the first research cluster relates to Governance & Shariah Compliance.   There are four main projects under this cluster: (i) Corporate Waqaf, (ii) Islamic Microfinance and Social Enterprise, (iii) Shariah Audit, and (iv) Islamic Economics.

Basically, researchers examine existing products and explore innovative ideas that can sustain and propel the Islamic Finance sector to greater height. One of the research projects that have shown positive impacts to the community is our Islamic Microfinance & Social Enterprise.  We explored existing business model and saw a gap that could retard the sustainability of this business. Traditionally, the business model will involve only two main players: the entrepreneurs themselves and the micro-credit financiers (financial institutions, microfinance agencies, non-profit organisations).  The responsibility to ensure business progress and sustainability lies with the entrepreneurs.  More often than not, they lack exposure, business skills and linkage to the full supply chain, hence resulting in business failure.

 As a result of that, micro-credit entrepreneurs have problems with loan repayment and other multiplier effects.  The Accounting Research Institute (ARI) introduces a more sustainable microfinance model by introducing three additional important elements.  First is the need to get a supplier(s) that can supply raw materials in bulk at relatively low price.  Second, ARI researchers provide training programs - financial management, ethics, integrity, business plan, governance and marketing.  Third, is to find a buyer or group of buyers who can buy the finished products.  By having this complete supply chain mechanisms for the microfinance business model, the entrepreneurs only need to focus on producing high quality products.  Since this is a business arrangement, there will be contractual agreements that must be observed by all parties in the supply chain framework.