Thesis Final

UNIVERSITY OF HARGEISA
HARGEISA SCHOOL OF ECONOMICS

DEPARTMENT OF ISLAMIC BANKING AND FINANCE
THE ROLE OF ISLAMIC BANKING PRODUCTS ON COMMUNITY

WELFARE IMPROVEMENT IN HARGEISA - SOMALILAND
THESIS SUBMITTED TO THE SCHOOLS OF ECONOMICS IN PARTIAL

FULFILLMENT OF THE REQUIERMENT FOR THE AWARD OF
BACHELOR’S DEGREE OF ISLAMIC BANKING AND FINANCE OF
UNIVERSITY OF HARGEISA
SUBMITTED BY:
MUBARAK MOHAMOUD OMAR
USAMA ABDILAHI ABDI
&
DAHER ABDI JAMA
SUPERVISOR:
MR. KHALID ABDI NOUR (BARBARAWI)
JULY 2023
HARGEISA-SOMALILAND
DECLARATION
We hereby declare that this research thesis is our searching except the insights that are clearly
motioned their source {Authors, books and so on}. The aim of this study is for academic
purpose, which is completion of first bachelor’s degree of Islamic Banking and finance from
UNIVERSITY OF HARGEISA.
Mubarak Mohamoud Omar signature…………….

Usama Abdilahi Abdi signature…………….
Daher Abdi Jama signature…………….
Date: July, 2023
ii
APPROVAL
We confirm that the work reported in this thesis was carried out by the candidates under
my supervisor.
Name: MR. KHALID ABDI NOUR (BARBARAWI)
Signature: ……...…………
Date: ….………………
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DEDICATION
We dedicate this thesis to the almighty ALLAH who gave us strength and patient to complete
this study.
Also, to our beloved parents, family and friends due to lovely care, unconditional moral and
material support during our studies. We honored to have them as our parents and we thank them
for giving us the chance to prove and improve us through our life.
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ACKNOLAGEMENT
First, we thank to Allah who deserves to be thanked at any time and every condition in life.
During our research, we enjoyed considerable support from so many groups who are very
important in our life, and they were really cooperative, knowledgeable, creative, and constant
encouragement.
Secondly, we heartily extend a gratitude to our supervisor Mr. Khalid Abdi Nour (Barbarawi)
whose encouragement, guidance and support from the preliminary to the conclusion of the paper
enabled us to develop our study, simply he was an excellent, friendly and high supportive
supervisor.
We would like to express our gratitude to our lecturers of UOH whose names can’t be listed in
here; but they will forever remain in our heart & our mind. Sincere thanks are due to our family,
our mothers and our fathers, brothers and Sisters for their constant financial and moral support
during our study, surely without them we wouldn’t be able to reach this stage.
It is our pleasure to wholehearted thank to our friends who were really the wings &the pillars to
completing our study. Finally, we offer our regards and blessing to all of those who supported us
during the completion of this study.
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ABSTRACT
This study was aimed at establishing the Role Islamic Banking Products on Community Welfare
Improvement in Hargeisa Somaliland, the researchers has chosen 26 June district as specific
geographical location since it is where most of banks are located. Three specific objectives
guided this study which are (I) to explore the essential product packages that Islamic banks
provide community as social welfare in Hargeisa Somaliland; (ii) to analyze the effectiveness of
community welfare programs that Islamic banks render to the vulnerable society in Hargeisa
Somaliland; and (iii) to determine the effect of Islamic banking products on improving the
infrastructure in Hargeisa Somaliland. Using a descriptive research design, the researchers
administered a questionnaire collected from 53 respondents; Slovene's formula· was used to
arrive at sample size.
The researchers used frequency and descriptive statistics with the help of Statistical Package for
Social Science (SPSS) to analyses the Role Islamic Banking Products on Community Welfare
Improvement. The data of these both variables is confidential and was taken from the Islamic
banks in Hargeisa city.
On the basis of the research findings, the researchers suggest that there is a need for
improvement and enhancement welfare packages offered by Islamic banks as there is a
significant impact that Islamic banking products on community welfare improvement.
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Table of Contents
DECLARATION........................................................................................................................................ii
APPROVAL.............................................................................................................................................iii
DEDICATION..........................................................................................................................................iv
ACKNOLAGEMENT..................................................................................................................................v
ABSTRACT..............................................................................................................................................vi
List of Tables...........................................................................................................................................x
CHAPTER ONE.......................................................................................................................................11
INTRODUCTION....................................................................................................................................11
1.1 Background of the Study.......................................................................................................11
1.2 Statement of the Problem.....................................................................................................14
1.3 Research Objectives..............................................................................................................14
1.3.1 General Objectives of the Study..................................................................................14
1.3.2 Specific Objectives.......................................................................................................15
1.4 Research Questions...............................................................................................................15
1.5 Significance of the Study.......................................................................................................15
1.6 The Scope of the study..........................................................................................................16
1.6.1 Geographical scope.............................................................................................................16
1.6.2 Content scope......................................................................................................................16
1.6.3 Theoretical scope................................................................................................................16
CHAPTER TWO......................................................................................................................................17
LITERATURE REVIEW............................................................................................................................17
2.1 Introduction..........................................................................................................................17
2.2 Theoretical Literature............................................................................................................17
2.3 Review of related literature..................................................................................................18
2.3.1 Welfare products of Islamic Banks..............................................................................18
2.3.2 Islamic Banking products............................................................................................23
2.3.3 Islamic Banking products and Improvement of Infrastructure..................................26
2.4 Related Studies.....................................................................................................................27
2.5 Research gaps.......................................................................................................................28
2.6 Conceptual Framework.........................................................................................................29
CHAPTER THREE...................................................................................................................................30
METHODOLOGY...................................................................................................................................30
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3.1 Introduction..................................................................................................................................30
3.2 Area Description.........................................................................................................................30
3.3 Research design....................................................................................................................30
3.4 Target Population.................................................................................................................30
3.5 Sample and Sampling............................................................................................................31
3.5.1 Sample Size...................................................................................................................31
3.5.2 Sampling Procedure.....................................................................................................31
3.5.3 Sample Frame Table....................................................................................................31
3.6 Data sources...............................................................................................................................32
3.6.1 Primary Data Sources.........................................................................................................32
3.6.2 Secondary Data Sources..............................................................................................................32
3.7 Data Collection Instruments.......................................................................................................32
3.7.1 Questionnaire Method................................................................................................................32
3.8 Validity of the Instruments.........................................................................................................33
3.9 Data Gathering Procedure..........................................................................................................33
3.9.1 Before the Administration of the Questionnaires........................................................33
3.9.2 During the Administration of the Questionnaires.......................................................34
3.9.3 After the Administration of the Questionnaires..........................................................34
3.10 Data Analysis............................................................................................................................34
3.11 Ethical Considerations...............................................................................................................35
3.12 Limitations of the study............................................................................................................35
CHAPTER FOUR.....................................................................................................................................36
DATA PRESENTATION, ANALYSIS, AND INTERPRETATION OF RESULTS.................................................36
4.1 Introduction..........................................................................................................................36
4.2 Demographic Information.....................................................................................................36
4.2.1 Gender of the Respondents..........................................................................................36
4.2.2 Marital Status of the Respondents......................................................................................37
4.2.3 Age of the Respondents.......................................................................................................37
4.2.4 Educational Levels of the Respondents..............................................................................38
4.2.5 The Experience of the Respondents....................................................................................38
4.2.6 Banks that Respondents use...............................................................................................39
4.2.7 Position of Respondents......................................................................................................40
4.3 Data Analysis and Presentation.............................................................................................40
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4.3.1 Welfare Products of Islamic Banks....................................................................................41
4.3.2 Effectiveness of Community Welfare Programs................................................................42
4.3.3 Improvement Infrastructure by Islamic Bank...................................................................43
CHAPTER FIVE.......................................................................................................................................46
CONCLUSIONS AND RECOMMENDATIONS...........................................................................................46
5.1 Introduction..........................................................................................................................46
5.2 Summary of the Findings.......................................................................................................46
5.2.3 Improvement Infrastructure by Islamic Banks..................................................................47
5.3 Discussion of the findings......................................................................................................47
5.3.3 Improving Infrastructure by Islamic Banks......................................................................49
5.4 Conclusion.............................................................................................................................49
5.5 Recommendation..................................................................................................................50
REFERENCES...................................................................................................................................52
APPENDIX.............................................................................................................................................56
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List of Tables
table 4.1 gender of the respondents...............................................................................................36
table 4.2: marital status of the respondents....................................................................................37
table 4.3: age of the respondents....................................................................................................37
table 4.4 educational levels of the respondents.............................................................................38
table 4.5 the experience of the respondents...................................................................................39
table 4.6 banks the respondents use...............................................................................................39
table 4.7 distribution of respondents by their position..................................................................40
table 4.8 the likert scale for interpretation of means of islamic banking.......................................40
table 4.9 welfare products of islamic banks...................................................................................41
table 4.10. effectiveness of community welfare programs............................................................42
table 4.11. Improvement infrastructure in islamic banks..............................................................44
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xi
CHAPTER ONE
INTRODUCTION
3.5 Background of the Study
The first modern experiment in Islamic banking was carried out in Egypt clandestinely and
without projecting an Islamic image out of fear that it would be perceived as an expression of
Islamic fanaticism, which was despised by the political authorities. In 1963, Ahmad El Najjar
spearheaded a pioneering effort that resulted in a profit-sharing savings bank in the Egyptian
town of Mit-Ghamr. The bank was well-liked and successful. The trial ran until 1967, when there
were nine such banks operating in the country. During the 1970s, several full-fledged Islamic
banks came into existence in North Africa and the Middle East. Dubai Islamic Bank was
established in 1975; Faisal Islamic Bank of Sudan was established in 1977; Faisal Islamic Bank
of Egypt was established in 1977; and Bahrain Islamic Bank was established in 1979. (Siddiqi
l988).
In Pakistan, partly because of political interests and the emergence of young Muslim economists,
a gradual Islamization of the banking process began in 1979. In the first phase, which ended on
January 1, 1985, domestic banks operated both interest-free and interest-based 'windows'. In the
second phase of the transformation process, the banking system was geared to operate all
transactions based on no interest, with the only exceptions being foreign currency deposits,
foreign loans, and government debts. The gradual pace of transition made it easier for the
Pakistani banks to adapt the new system (Uhomoibhi and Alio, 2012).
Islamic banking made its debut in Malaysia in 2010, but not without antecedents. The first
Islamic financial institution in Malaysia was the Muslim Pilgrims Savings Corporation, set up in
1963 to help people save for the hajj pilgrimage to Mecca and Medina. In 1969, this body
evolved into the Pilgrims Management and Fund Board, or the Tabung Haji, as it is now
popularly known. (Steward, 2008).
In Somaliland, the banking industry has more opportunities to establish Islamic banking for
many reasons: Firstly, Somaliland inhabitants are 100% Muslim, and in Islam Banking free-
from-interest manner is used, as interest is forbidden in Islam. Secondly, no other banks are
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operating with the system. In addition, in the last decade, the economy of Somaliland has been
growing gradually (Mustafa, 2015).
Besides that, Somalilanders are low-income level, so, they need more Investment and more
opportunities to create a small business. Fortunately, Islam banking has a product called Qard al-
Hassan (good loan/benevolent Loans) that allows you to loan money from the bank and invests
in your business, then you return without any extra money; there is no service charge or interest
rate. Another considerable reason is that the Muslim nation hate conventional banks when
introducing Islamic banking in Somaliland, not faced any challenges because no conventional
banks are working here. (Mustafa, 2015).
According to Haron and Shanmugam, 2009 in their paper, the lack of capacity in provincial
governments to plan, implement, monitor, and evaluate service delivery outcomes also hampered
service delivery. Power struggles between government officials and non-profit organization
(NPO) partners also held back the potential benefits that might have been realized by the
partnership model. Additionally, the services provided by NPOs only reached a small population
and did not cover rural and underserved areas. Urban locations are home to a large number of
NPOs.. Lack of institutional capacity, including loss of staff by NPOs to the government,
inadequate numbers of social workers, community development workers, child, and youth care
workers, and paraprofessionals has been a serious impediment (Haron, Shanmugan, 2009).
Much of the welfare spending comes from the Islamic system of zakat, a religious requirement
that individuals and corporations donate to charity 2.5 percent of their wealth the money is paid
to the government and distributed to the needy. Living in Saudi Arabia is like living in a
charitable foundation, it is part and parcel of the way they are made up, and Prince Sultan said,
"if you are not charitable, you are not a Muslim. "Despite those efforts, poverty and anger over
corruption continue to grow, whereby vast sums of money end up in the pockets of the royal
family through a web of nepotism, corruption, and cozy government contracts (SBP 2010).
The main source of welfare for Somaliland's citizens is not international aid, but money sent by
their relatives from abroad. Because of the underdevelopment of the financial sector, money
transfer operators have practically taken on the role of banks. The situation within the country's
banking sector presents a paradox. Officially, there are five banks in Somaliland; Bank of
Somaliland, Dahabshiil International Bank, Darasalam Bank, Amal Bank, and Premier Bank.
The paradox is that the first bank, which is nominally a central bank, plays the role of a
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commercial financial Institution, while the latter is more of a state treasury than a fully-fledged
commercial bank. The main task of the bank of Somaliland is to support the national currency
and fight inflation. To do so, the bank carries out currency interventions, buying considerable
sums in local currency (Shillings) for US Dollars.
This study would be guided by "Islam and the theory of Interest", propounded by Dr. Anwar
Iqbar Quraish, in 1946 as cited from Mohammad, Lahore (1996). The proponent of this theory
presents his ideas on the "place of banking in an Islamic system" and suggests that like public
health and education, the government should sponsor banking as a social product in which the
bank should never pay any interest to account holders nor charge any interest on loans advanced.
The author also suggested that the banks should become partners with businessmen, sharing any
loss that might be incurred. (SBP 2010).
Islamic banking refers to a system of banking or banking activity that complies with Islamic law
(also known as Shariah). The underlying principles that govern Islamic banking are mutual risk
and profit-sharing between parties, the assurance of fairness for all, and those transactions are
based on underlying business activity or assets. These principles are supported by Islamic
banking's core values whereby activities that cultivate entrepreneurship, trade, and commerce
and bring societal development or benefit are encouraged. Activities that involve interest (riba),
gambling (maisir), and speculative trading (gharar) are prohibited. (Mohammed D.A. (2016).
A community is a social unit of any size that shares common values, or that is situated in a given
geographical area (e.g., a village or town) (Barzilai, 2013). It is a group of people who are
connected by durable relations that extend beyond immediate genealogical ties, and who usually
define that relationship as important to their social identity and practice. Although communities
are usually small, "community" may also refer to large groups, such as national communities,
international communities, and virtual communities. (Nadarajah, Haive, and Stead, 2012).
Welfare is defined by Huseyn and Ioannidis (2015) as the good fortune, health, happiness,
prosperity, etc., of a person, group, or organization; well-being: e.g., to look after a child's
welfare; the physical or moral welfare of society. Welfare can also mean the availability of
resources and the presence of conditions required for reasonably comfortable, healthy, and
secure living or it could mean government support for the poor and otherwise disadvantaged
members of society, usually through the provision of free and/or subsidized goods and services
(Kevin, 2013).
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3.5 Statement of the Problem
Despite the many financial institutions in Somaliland springing up, there is a concern
about
the low representation of Islamic banks in the country, which has hampered community welfare
improvement (Central Bank report 2014).
There are low levels of community welfare improvement in Hargeisa, Somaliland (Mohammed
2016). Most of the community members are characterized by having a minimum level of income
for food and clothing, adequate housing, education, and poor health care (Mustafa, 2015). All
these are indicators of low levels of community welfare improvement.
The worsening condition of welfare improvement in the country will affect the standard of living
of the community, which will affect the mortality rate of the people in the country (Haren, 2014).
The low levels of community Welfare improvement in Hargeisa, Somaliland, may be caused by
factors such as lack of government support, the level of the political system in the country as a
whole, a politically unstable atmosphere, a limited number of banks to practice welfare products,
and the unemployment rate, among others (Siddiqi, 2009).
This study is intended to establish the role of Islamic banking products on community welfare
improvement in Hargeisa, Somaliland. The researchers chose Islamic banking because of its
principles of encouraging the community to participate in different welfare product packages that
lead to enhancing the well-being of the society, offering financial products to the needy people,
providing Qard al-Hassan to the disadvantageous population, and contributing to the well-being
of society by facilitating credits and low-cost financing. They will enable the community to
borrow money with no interest and put it in various investments to have welfare improvement.
The researchers determined how Islamic banking products contribute to community welfare
improvement because this study is intended to close the contextual gap that existed previously.
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3.5 Research Objectives
1.3.1 General Objectives of the Study
The main goal of the study is to establish the relationship between Islamic banks and community
welfare.
1.3.2 Specific Objectives
a) To explore the essential product packages that Islamic banks provide thee community as
social welfare in Hargeisa, Somaliland.
b) To analyze the effectiveness of community welfare programs that Islamic banks render to
the vulnerable society in Hargeisa, Somaliland.
c) To determine the effect of Islamic banking products on improving the infrastructure in
Hargeisa, Somaliland.
3.5 Research Questions
a) What are the essential product packages that Islamic banks provide the community as
social welfare in Hargeisa, Somaliland?
b) Describe and analyze the effectiveness of community welfare programs that Islamic
banks render to the vulnerable society in Hargeisa, Somaliland?
c) What is the effect of Islamic banking products on improving the infrastructure in
Hargeisa, Somaliland?
3.5 Significance of the Study
This study would be useful to the residents of Hargeisa on how to engage in Islamic
banking products for better community welfare improvement. The findings of this study will be
useful to managers of Islamic banks on how to emphasize Islamic banking products for the
welfare improvement of communities. It will also be useful to the other members of Hargeisa
Somaliland, such as employees and other support staff, on how to attain welfare improvement.
The researchers expect that this study will yield data and information that will be useful for
understanding the effects of Islamic banking products on community welfare. Future researchers
16
will utilize the findings of this study to embark on Islamic banking products and community
welfare improvement in Hargeisa, Somaliland.
3.5 The Scope of the study

1.6.1 Geographical scope
The study was carried out among the selected Islamic banking institutions in Hargeisa,
Somaliland, where it concentrated on loan products, deposits and withdrawals products,
financing and investment product customers, employees, managers, and other experts who are
knowledgeable about banking products.
1.6.2 Content scope
The study intended to examine the role of Islamic banking products on community
welfare improvement in Hargeisa, Somaliland, and to determine if there is a significant
relationship. This study examined Islamic banking products in terms of loan products, deposit
and withdrawal products, and financing and investment products. The study also examined
community welfare improvement in terms of welfare products in Islamic banks, the effectiveness
of community welfare programs, and infrastructure improvement.
1.6.3 Theoretical scope
The study was anchored on Islam and Interest Theory, which indicates that the government
should sponsor banking as a social product in which the bank should never pay any loan products
to account holders nor charge any loan products on loans advanced (Jankowicz, 2010). The
theory still shows that the banks should become partners with businessmen, sharing any losses
that might be incurred (Shahin, 2009); banking institutions act as financial intermediaries
between savers and investors; and banks are of significant help in assisting the process of capital
formation and development.
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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter shows theoretical and empirical literature, related studies, and research gap.
2.2 Theoretical Literature
This study based on the theory of Islamic banking is based essentially on the premise that
interest, which is strictly forbidden in Islam, is neither a necessary nor a desirable basis for the
conduct of banking operations, and that Islamic teachings provide a better foundation for
organizing the working of banks. (Uhomoibhi and Alia, 2012; Ghafoor, 2014).
Between investors and savers, banking institutions operate as financial middlemen. They can be
a big aid in the process of assisting capital generation and development. In the early days of
Islam, there was no precedent for modern banks. Even in Western nations, banking has only
recently taken on the form it does today. The traditional method of transferring money from
savers to investors before the development of modern banking was direct finance, in which the
owner of the capital dealt directly with the user of the capital. Since banks perform a useful
product of financial intermediation, they are wholly acceptable in a Muslim society. What is not
acceptable, however, from the shari'ah point of view, is the use of interest rate mechanism in the
process of financial intermediation (Uhomoibhi and Alia, 2012).
For long Muslims, the world over was beset with a dilemma. Islam prohibits the giving and
taking of interest while it looked almost impossible to steer clear of interest in the modern world
where interest played a key role in most financial transactions. An answer to this conundrum has
started to emerge with the modern Islamic revival. Muslim academics have attempted to show
via their theoretical work that, even in contemporary society, it is still possible to manage an
economy without interest. replacement of interest-based banking with interest-free banking has
received the greatest attention in this endeavor (Khan and Bhatti, 2011).
All theoretical research on Islamic banking has been based on the basic principle that, while
interest is prohibited in Islam, trade and profit are permitted. The interest rate mechanism is used
by traditional banking to carry out its function of financial intermediation. Muslim academics
have created a completely alternative banking system that does not employ interest. It relies
18
instead on profit/loss sharing for purposes of financial intermediation (Hijazi, T.S., Hanif, M.,
(2010)).
This theory implies that Islamic banking is that, Islamic can provide the people of Somaliland
with funds at no interest which will enable them to borrow and invest and investment will
improve the earning ability and hence get funds for consumption and this is a way to improve the
welfare of the community through enabling borrowing by the community which enhances
investment and hence improves the welfare of the community through the improved standard of
living. The government, therefore, should look for ways of emphasizing Islamic banking so as
enable the community to borrow loans with no interest to enhance the investment levels and
improve the welfare of the community.
2.3 Review of related literature
This section reviewed the literature regarding Islamic banking and the relationship with
community welfare improvement based on study objectives.
2.3.1 Welfare products of Islamic Banks
Living comfortably, being in excellent health, and having enjoyable work environments
are all prerequisites for welfare (Hornby). Hence, it can be said that welfare products are those
which ensure conditions of good health, and comfortable living and working conditions, which
are generally one's basic needs. Islam sees labour as the main way to make money and
accumulate riches. In light of this, a well-known example may be given here. Recall a beggar
who approached the Prophet Muhammad (PBUH) asking for alms; he was told to bring
everything he had at home. The man had brought a blanket as a result. He was instructed to sell it
by the Prophet (Pbuh) and spend the money on an ax so that he may cut wood from the bush and
sell it at the market to make money. Thus, instead of begging, he could be self-reliant which is a
more dignified life than begging. As a result, in the Islamic way of life, real revenue obtained via
productive and profitable careers (both employment and self-employment) serves as the main
source of funds for the purchase of basics including food, clothing, shelter, home products,
transportation, gasoline, and medicines. Iqbal (2014) Islamic banks, as a part of the Islamic
economic system, are being operated with the objective to implement the economic and financial
principles of Islam. "The objective of Islamic banking is not only to earn profit, but also to do
19
good and bring welfare to the people" According to Islam, money, income and property belong
to Allah and this wealth is to be used for the good of the society (IBBL 1995, p.7).
Thus, the Quran establishes the general principle of generous welfare spending while
encouraging sacrificial levels of spending perhaps for social crises and for conditions demanding
high financial support, Islamic banks take care of others through Qard Hasan (benevolent loan)
financing transactions. It also mobilizes Zakat resources.
2.3.1.1 Mobilization of Zakat
Three different types of accounts were operated in Mit-Ghamr, Egypt, from 1963 to 1967
as part of a groundbreaking experiment that put the principles of Islamic banking into practice. A
zakat account was one of them. The zakat account attracted the stipulated amount of zakat for
redistribution amongst the poor (Ausaf Ahmed, op cit, p.21). Since Islamic banks follow the
rules of The Islamic Shariah, they have to pay zakat on their resources (capital assets, etc.) which
paved the way for the mobilization of financial resources for the needy and poor. "An Islamic
bank accumulates its zakat in the zakat fund and distributes amongst the poor as per Islamic
Shariah" (Hussain, op cit).
According to the research made by (Nazmul Hoque 2021), there is a significant change in the
institutionalization of zakat after the establishment of a zakat management institution, Centre for
Zakat Management (CZM), in 2008 by the private initiative. Currently, CZM is the leading zakat
management organization in Bangladesh (Islam and Salma, 2020). To develop awareness
regarding collective distribution of zakat among the general people and business community,
CZM has been organizing annual zakat fair at various places in Bangladesh since 2012
(https://czm-bd.org/ accessed, 10 December,2021). Following in the footsteps of the CZM, a few
private groups also collect zakat funds and distribute them to various poor individuals. However,
all sorts of social works cannot be funded by zakat, as it is payable to eight sectors only such as
poor needy, zakat administrator, for Islamic propagation, for freeing the slave, debtors, those on
the way of God and wayfarer (Quran, 9:60). Therefore, there is a chance of violation of religious
instructions, Shariah, while funding the social causes by the zakat fund. In this regard, the
endorsement system from Islamic scholars/clerics before sponsoring social works by zakat fund
can ensure Shariah compliance and thereby promotion of social causes by zakat fund can be
ensured.
20
In order to reap the multifaceted benefits of zakat for society, Islamic scholars are attempting to
internalize and propagate the visionary message of it. As a part of this initiative, the concept of
business zakat or corporate zakat has been conceived by the scholars (Al-Qardawi, 1999; Abdul
Rahman, 2007; Sabiq, 1985; Muhammad, 1980; Saadet al.,2020) and institution (MASB, 2006)
though not widely promoted yet in the Muslim societies. Accordingly, empirical evidences of
business zakat are scanty and confined in the context of very few countries such as Pakistan
(Ahmad and Haqq, 2021), Malaysia (Nooret al., 2017) and Indonesia (Alfitr and Samarinda,
2017). Under these circumstances, this research is under taken to explore the current status and
future prospect of business zakat in ensuring the well-being of the underprivileged in the context
of Bangladesh.
The study reveals that around 35% of sample entrepreneurs use business zakat fund for fully and
partially financing their social projects. It also suggests that the average yearly business zakat
fund per business is close to 144 million BDT (about US$1.7 million). The findings highlight
that there is a promising prospect of business zakat to be used to enhance well-being of the
underprivileged people of society. It is a creative step and an additional contribution to the
literature of Islamic finance to investigate and promote corporate zakat. It contributes greatly to
the poverty alleviation movement in the sense that Muslim business entrepreneurs will now find
their business zakat fund readily available for financing their social projects aimed at ensuring
the well-being of the impoverished. The findings of this research can be used as a guide to
promote business zakat to finance social programs aimed at ensuring the well-being of the
underprivileged of all societies particularly of Muslim countries representing one-fourth of the
world population.
2.3.1.2 Qard al- Hasan (benevolent loan)
Since interest on all kinds of loans is prohibited in Islam, a loan, which is to be given
under the Islamic principle, has to be, by definition, a benevolent loan (Qard al-Hasan), i.e., a
zero-interest loan. It must be granted out of compassion in order to alleviate the financial
hardships brought on by a lack of funding in the face of extreme need. Given that banks are
businesses focused on making a profit, it would seem that there is little room to use this strategy.
Islamic banks, however, also serve a societal purpose. Hence, they make provisions to provide
Qard al-Hasan besides engaging in income-generating activities.
21
However, practices differ in this respect. "Some banks provide the privilege of interest-free loans
to the holders of investment accounts at the bank. Some other banks have the provision to
provide interest-free loans to needy students and other economically weaker sections of society.
Yet, some other banks provide interest-free loans to small producers, farmers, and entrepreneurs
who are not qualified to get financing from other sources. The purpose of these interest-free
loans is to assist them in becoming financially independent or to assist in raising their incomes
and standard of living" (Ausaf Ahmed 1992, p.86).
Islamic banks of Pakistan provide Qard al-Hasan loans without product charges (Ibid) Islamic
banks can charge the cost of disbursement, account maintenance, and recovery of these Qard al-
Hasan loans, though they cannot realize excess profits. The method and schedule of repayment
of these loans are determined at the time of funding the request. However, the bank must keep in
mind what is convenient to its customers (Hussain 1996, p.95).
Thus, the Quran establishes the general principle of generous welfare spending while
encouraging sacrificial levels of spending perhaps for social crises and conditions demanding
high financial support.
Thus, Islam calls for the meeting of the basic needs of the poverty groups through welfare
products, which might include, 1) Care for others; and 2) Zakat.
1) Care for others: According to Siddiqi (1995, pp. 2–3), caring for others or acting in a
helpful manner is a further principle of Islamic economic behavior. In order to guarantee
survival, it restrains the inherent self-interest of humans. Given that one serves the Master by
taking care of His people, it is a logical byproduct of trusteeship. The Prophet, peace be upon
him, said: "Mankind is God's dependents, so the most beloved of people in the Sight of Allah
are those who do good to His dependents." (Mishkat, Bab-al-Shafqah we'll-Rahmah 'ala-
Khalq).
2) Zakat: Zakat is one of the five pillars of Islam. In a broad sense, it is only for social welfare
purposes as specified by the Quran: "The Zakat is (meant) only for the poor and the needy,
those who collect the tax, those whose hearts are to be won over, for the freeing of human
beings from bondage, for the relief of those overwhelmed by debts, for the cause of God (all
priority social needs), and for the wayfarer: (this is) an ordinance from God and God is all-
knowing, Wise"[9:60].
22
Aisha (2020). The importance of zakat in encouraging social welfare and economic sustainability
has been extensively researched in contemporary literature. Zakat is regarded as one of the most
significant religious institutions for Muslims since it enables the wealthy and powerful to rid
themselves of hunger by donating a portion of their riches to the less fortunate. Therefore, Zakat
redistributes income and wealth, plays an important role in poverty alleviation, and contributes to
social welfare Haq (Ibid, p.179) mentioned, that "the first verse on Zakat [73: 20] was revealed
in the early Meccan period signifying the importance of welfare expenditures in the Islamic
scheme of life. Since the Muslims were a relatively small group without formal installations,
Zakat was given privately, without specific rules or rates. It was essentially used for two
purposes: to assist the indigent and the poor and to buy the freedom of those, in slavery or
bondage. In the initial Madanian period, Zakat was given both privately to needy individuals and
families as well as to the state.
2.3.1.3 Corporate Social Responsibility of Banks
The term "corporate social responsibility," or CSR, can be used to describe businesses in almost
any sector. It's a form of self-regulation where companies hold themselves responsible for their
operations and work to improve society as a whole. Corporate Social Responsibility (CSR) is not
an unfamiliar idea, claims EMC (2005).
Companies have always, to some extent, tried to acknowledge the responsibility towards the
community. Epps (1996) and Berad (2011) argue that CSR has attracted worldwide attention and
acquired a new meaning in the global economy. The emergence of globalization and
international trade, which has been reflected in greater company complexity and new demands
for better transparency and corporate citizenship, has led to an increase in interest in CSR in
recent years. It embraces the 'triple bottom line and requires attention to be paid to economic,
environmental, and social impacts. EMC (2005) argues that CSR is essentially about business'
contribution to sustainable development and how best to maximize that contribution
There is no single way that organizations can practice social responsibility. They might choose to
focus their efforts on one or several areas, which can include the environment, sustainability, the
local community, or low-income communities, diversity, and inclusion.
CSR can also mean not supporting industries and initiatives that harm society, such as the big oil
and tobacco industries.
23
Banks play a significant role in economic development (e.g., Levine, 2005, Djalilov and Piesse,
2011). Banks, as financial intermediaries, significantly impact society while implementing their
primary functions such as pricing and valuing financial assets, monitoring borrowers, and
managing financial risks (Scholtens, 2009). Since the majority of bank assets come from
depositors (i.e., society), not from shareholders, banks are required to provide feedback to the
community more often compared to other industries (We and Shen, 2013).
The economic literature discovered two main approaches to the CSR definition study:
1. CSR as philanthropy. Social initiatives are identified as actions of funds transfer in favor of
the individual or non-governmental organization and act as one of the means of optimizing
the tax burden.
2. CSR can be categorized as a marketing or business strategy. CSR is defined in the first
instance as a business strategy that considers how CSR may affect the efficacy and efficiency
of the banking industry.
Husted and Salazar (2006) compare instances of generosity (altruism), compelled egoism,
and strategy while analyzing the scenario where businesses are maximizing profits while
achieving social performance. Their analysis demonstrate that it is better for businesses to act
strategically than to be pressured into making CSR investments. A positive correlation between
CSR and bank performance indicators (return on asset (ROA), return on equity (ROE), return on
sales, market share) was obtained by McGuire et al. (1988), Orlitzky, Schmidt, and Rynes
(2003), McWilliams and Siegel (2000), Roman et al. (1999), Mohammad (2012), and others.
However, experts like Aupperle et al. (1985), and Moskowitz (1972) substantiated the
negative correlation between CSR and financial performance. When looking at indicators like
share prices and dividends, the negative cohesiveness was inherent. According to Alexander and
Buchholz's (1978) research, the fact that these indicators are random variables explains why
there is a negative link between CSR and financial performance.
Thus, this paper aims to investigate
(1) the nature of the link between corporate social responsibility and bank performance and the
motive of banks to engage in corporate social responsibility
(2) whether this is different during stable (2002-2005) and turbulent (2008-2012) periods.
24
2.3.2 Islamic Banking products
Islamic banking refers to a system of banking or banking activity that complies with
Islamic law (also known as Shariah). Islamic banking is founded on the guiding principles of
fairness for all, mutual risk and profit sharing between parties, and transactions based on core
company operations or assets.
A type of banking based on Islamic principles is known as Islamic banking. In essence, Islamic
banking is based on profit sharing and forbids the payment and receipt of interest. Islamic banks
place a strong emphasis on producing returns on investments using "Shariah" approved
investment strategies. Islamic banking's primary ideals, which promote activities that foster
entrepreneurship, trade, and commerce and bring about societal progress or benefit, support these
concepts. Activities that involve interest (riba), gambling (maisir) and speculative trading
(gharar) are prohibited. (Mohammed D.A. (2016).
2.3.2.1 Loan products
Siddiqi (2010) found out that Islamic banks do not charge interest rates and consumer
loans are unattractive since there is no profit to be derived in the form of interests on the loans.
Hence, Islamic banks deliberately avoid consumer lending. Islamic researchers e.g., have tried to
excuse the Islamic banks. While recognizing the need for such interest-free loans I benevolent
loans qard al-Hassan, especially for meeting basic needs, they seem to think it is the duty of the
community and the State through its treasury Baitul mal to cater for these basic needs.
Downplaying the role of Islamic banks in providing consumer loans, they suggest that Islamic
banks give limited overdraft facilities without interest instead. They also consider a portion of
bank loanable funds being set aside for consumer loans, provided repayment will be guaranteed
by the State. This, they reckon, will minimize the risks involved in consumer lending (Nasib,
2012).
Estes (2004) indicated that Islamic banks provide small loans to people who need capital to start
a small business and become self-employed to help them build a sustainable future and welfare
refers to a set of specialized programs and products designed to meet the income security, social
products and related needs of persons who are unable to provide for their own basic needs. The
assumption mostly made of all Islamic banks loans is that the intervention will change household
welfare with regards to access to more income in a way that led to achievement of higher
25
household consumption of goods and services and overall socio-economic well-being. In order to
assess improvement of household welfare as a result of Islamic banks loan acquisition, there are
various variables such as; household income, Women empowerment (Gender), improved
education, healthcare, Poverty reduction, number of small business and consumption according
to the Human Development Report (2005).
2.3.2.2 Deposit and withdraw products
An Islamic bank is a deposit-taking banking institution whose scope of activities includes

all currently known banking activities, excluding borrowing and lending on the basis of interest
(Iqbal, 2011). On the liabilities side, it mobilizes funds on the basis of a mudarabah or wakalah
(agent) contract. It can also accept demand deposits which are treated as interest-free loans from
the clients to the bank. On the assets side, it advances funds on a profit-and-loss sharing or a
debt-creating basis, in accordance with the principles of the Shariah. It plays the role of an
investment manager for the owners of time deposits, usually called investment deposits. In
addition, equity holding as well as commodity and asset trading constitute an integral part of
Islamic banking operations. An Islamic bank shares its net earnings with its depositors in a way
that depends on the size and date-to-maturity of each deposit. Depositors must be informed
beforehand of the formula used for sharing the net earnings with-the bank (Khan and Bhatti,
2011).
Alio (2012) found out that deposits in Islamic banks are collected from savers under both type of
institutions for reward irrespective a bank is operating under conventional system or Islamic
system. The agreement on reward is where the division lies. While deposits made under the
Islamic system are accepted through the Musharaka and Mudaraba, where rewards are flexible,
the conventional system rewards are fixed and predetermined. In conventional banking, the
return on long-term deposits is higher while the return on short-term deposits is lower. The same
profit-sharing technique is used in Islamic banking with depositors. Higher weight for profit
sharing is assigned to long-term deposits being available to bank for investing in longer term
projects yielding superior returns and lower weight for short-term deposits which cannot be
invested in long term projects (Hijazi, 2010).
26
2.3.2.3 Financing and Investment products
Islamic finance refers to how businesses and individuals raise capital in accordance with
Sharia, or Islamic law. It also describes the kinds of investments that fall within the purview of
this system of law. Islamic finance is a distinct type of socially conscious investment. Even
though both types of institutions (Islamic banking and Conventional banking) are providing
financing to productive channels for reward. The difference lies in financing agreement.
Conventional banks are offering loan for a fixed reward while IFI is cannot do that because they
cannot charge interest. IFI is can charge profit on investments but not interest on loans. In
conventional banking three types of loans are issued to clients including short term loans,
overdrafts and long-term loans. Islamic banks cannot issue loans except interest free loans (Qard
al Hassan) for any requirement however they can do business by providing the required asset to
client (Hanif, 2010).
Sinclair (2001) noted that with Islamic banks, poor people are given an opportunity to change
their lives with capital. One of the major reasons for social and economic inequality is financial
exclusion. Poor and disadvantaged people have no access to capital and financial products,
especially affordable credit (Whyley and Brooker, 2004). Islamic banking is concerned with
much more than refraining interest; it is a system that aims at making positive contribution to the
fulfillment of the socio-economic objectives. Islamic banks may emulate the existing model of
Islamic banks practices, the activities must be carried out in ways which do not conflict with the
principles of Islam. Islamic banking has the same purpose as conventional banking except that it
operates in accordance Islamic rules on transaction (Kimpson & Whyley, 2000).
Indeed, microfinance is widely acclaimed as a new innovative approach to alleviate poverty
(Robinson, 2001). Microfinance institutions receive money by way of deposits and interests
which is lent or used to finance business in form of loans or facilities to micro-small enterprises
and low-income households, deposit taking and also non-deposit taking (Microfinance
institutions Act, 2006). Microfinance industry in Kenya has grown over the past two decades in
response to lack of access to formal financial products for most of Kenya's poor people. The
World Bank has recognized microfinance programmed as an approach to address income
inequalities and poverty (Microcredit Summit, 2004).
27
2.3.3 Islamic Banking products and Improvement of Infrastructure
Malik (2007) noted that concentrating investment in infrastructure by Islamic banks is

extremely important for the attainment of the main development targets, namely
industrialization, urbanization, and trade promotion to get over the shortage of development
capital in countries. Deciding the priorities of investment in infrastructure sectors is also
important. Good infrastructure helps to raise productivity and lower costs in the directly
productive activities of the economy. Shahin (2009) asserted that insufficient capital for
infrastructure development could be supplemented with foreign capital such as foreign aid, loan,
and foreign direct investment, hence confirming that Islamic banking products are important in
this case (Meezan Bank, 2011).
Steward, M. (2008) noted that it is important that Islamic banking products include aid that goes
not only to the poorest countries but also to the poorest people within recipient countries. And
the greater part of the aid budget is devoted to rural development and the social infrastructure,
rather than to industrial development, fundamental research, railways, urban housing, etc. The
greater proportion of Islamic banking products such as aid goes directly to the poor. Kocher
Lakota and Yi (2006) presented evidence supporting endogenous growth models using time
series data for Saudi Arabia, together with various policy variables including the infrastructure to
show that no policy variable permanently raises the economic growth rate other than aid from
Islamic banking (Amato, 2012).
Bellalah (2009) emphasized that balanced investment in all industries is efficient for
infrastructural development in developing countries. Bokhari (2007) insisted that a balanced
investment policy is impossible because developing countries are always suffering from a
shortage of capital. Therefore, it is important to decide the priorities of investment in industries
and sectors and to
concentrate investment on infrastructural development in the early stage of development (EIIouz,
2009).
2.4 Related Studies
Ariff (2012) found out that Islamic banks lend money without interest but cover the
expenses by levying a service charge not exceeding the proportionate cost of the operation,
28
excluding the cost of funds and provisions for bad and doubtful debts. Prospective borrowers are
always required to pay this charge on each application, regardless of the amount required, the
term of the loan, or whether the application is granted or rejected (Meezan Bank, 2011).
Some scholars have put forward economic reasons to explain why interest is banned in Islam. It
has been argued, for instance, that interest, being a pre-determined cost of production, tends to
prevent full employment (Khan, 2011); Ahmad (2013). In the same vein, it has been contended
that international monetary crises are largely due to the institution of interest (Khan, 2013) and
that trade cycles are in no small measure attributable to the phenomenon of interest. Others have
argued that interest is not very effective as a monetary policy instrument even in capitalist
economies and have questioned the efficacy of the rate of interest as a determinant of saving and
investment (Ariff, 2012).
Duan (2012) found out that Islamic banks act as a mudarib that manages their funds to generate
profits. Since they are not entitled to interest income from the productive utilization of their
deposits, the profits generated are then shared with them. Profit-sharing ratios and the modes of
payment vary from place to place, from bank to bank, and from time to time, depending on
supply and demand conditions. Profits are provisionally declared every month in Malaysia,
quarterly in Egypt, on a half-yearly basis in Bangladesh and Pakistan, and on an annual basis in
Sudan (Weber, 2012).
Ali (2013) observed that deposits in Islamic banks are treated as shares and accordingly their
nominal values are not guaranteed. In the same vein, both shareholders and depositors are
residual claimants to Islamic banks' profits (AAOIFI, 2009). The current or demand deposit
account, as in the case of conventional banks, gives no return to the depositors. It is essentially a
safe-keeping alwadiah or wadiah arrangement between the depositors and the bank, which
allows the depositors to withdraw their money at any time and permits the bank to use the
depositors' money. As in the case of conventional banks, cheque books are issued to the current
account deposit holders (Warde, 2010).
2.5 Research gaps
The researchers identified the following gaps in the previous researcher's literature which
need attention. The findings in the previous study, conducted by Mohamed Omar (2011), about
Islamic banking and the success of elected banks in Mogadishu Somalia, indicate that in
29
reviewing the literature, the study looked at only Islamic banks aspects without looking at the
aspects of the success of the banks, therefore, there is a content gap identified in the previous
researcher's literature. In the previous study, conducted by Mohamed Omar (2011), about Islamic
banking and the success of elected banks in Mogadishu Somalia, the researcher failed to come up
with a good theory that could guide the study, therefore, a theoretical gap has been identified in
the previous researcher's work which also needs serious attention. There is also a contextual gap
to which the current researchers need to put more attention. This study, therefore, is intended to
bridge the theoretical, content, and contextual gaps in the previous researcher's literature.
3.5 Conceptual Framework
Islamic Banking Products Community welfare Improvement
 Welfare products of Islamic banks

 Loan Products
 Effectiveness of community
 Deposit and withdraw products
welfare products
 Financing and Investment products
 Improvement the infrastructure
The conceptual framework indicates the independent and dependent variables in the topic
under investigation and their relationship on one another. The independent variable is Islamic
banking products while the dependent variable is community welfare improvement. Islamic
banking affects community welfare improvement in terms loan products, deposit and withdraw
products and financing and investment. The study also examined community welfare
improvement in relation to welfare products provided by Islamic banks, effectiveness of
community welfare programs and improvement the infrastructure. The functions of Islamic
banks are: to collect deposits from the people on profit-and-loss sharing basis; to provide all
necessary banking products to its customers; to finance those projects which generates
employment; to allocate financial resources (financing).
30
CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter provides the overview of research methodology adopted, design, target
population, sample size, sampling techniques, data sources, research instruments, validity and
reliability of the instrument, data gathering procedure, data analysis.
3.2 Area Description
This study were conducted in Hargeisa, which is capital city of Somaliland. Hargeisa is
one of the most population and largest city in Somaliland, all the administration offices of the
banks stay in Hargeisa that can be easily go the branches of banks and select purely on basis for
this study.
3.3 Research design
Research design provides an overall guidance for the collection and analysis of data of a
study (Churchill1979). The study used descriptive correlational design; this design enabled the
researchers to determine the degree of the relationship between Islamic banking and community
31
welfare improvement in Hargeisa Somaliland. It dealt with the relationship between variables,
testing of hypothesis and development of generalizations and use of theories that have universal
validity. It also involved events that had already taken place and were related to present
conditions (Kothari, 2009).
3.4 Target Population
The target population of this study comprised 60 respondents who consisted of a bank
selected from 26 June district in Hargeisa Somaliland. These respondents comprised members of
the Dahabshiil Bank stakeholders in Hargeisa, with a total of 18 members, 16 of the Dara Salama
Bank Stakeholders in Hargeisa, 16 stakeholders from Premier bank, and 9 stakeholders from
Amal bank in Hargeisa.
3.5 Sample and Sampling

3.5.1 Sample Size
The sample size for this study comprised of 53 respondents who is selected from the target
population of 60 in 26 June district in Hargeisa Somaliland. The Slovene’s formula and
Purposive sampling technique was used to select respondents from the customer member. At
using Slovene’s formula of sample size computation which states that;
n= N/1+N (e) 2 where N=

n= sample size 60/1+60(0.05) ^2
N= population size 0 = 60/1+60(0.0025)
e= level of significance = 60/1+0.15
e= 0.05 or (0.05) ^2 = 0.0025 = 60/1.15= 53
3.5.2 Sampling Procedure
To select the sample of 53 respondents out of 60 target population, the Purposive

sampling technique was used to select respondents from the community members. In this
technique, the respondents were selected depending on the purpose or interest of the researcher.
The researchers were used as an inclusion or exclusion criteria in that the respondents to be
32
considered should only be those who reside in Hargeisa, therefore, the inclusion criteria here
were residents and customers of these selected banks.
3.5.3 Sample Frame Table
Table 3.3 indicates the population and sample size

N Islamic Banks Population Sample
O
1 Dahabshiil Bank 18 16
2 Darasalam Bank 16 14
3 Premier Bank 16 14
4 Amal Bank 10 9
Total 60 53
Source: Primary data (2023)
3.6 Data sources
The researchers were used both quantitative and qualitative methods to make sure that all the
important and relevant information for the study was utilized.
3.6.1 Primary Data Sources
The primary source of data was obtained through a questionnaire. Several questioning
techniques were used to cause primary data from interviewees. Questions that were used in the
research was include close and open-ended questions the solely major supply of information
would be banks in 26 June district in Hargeisa Somaliland.
3.6.2 Secondary Data Sources
The literature regarding the effect of Islamic Banking Products and Community Welfare
Improvement were reviewed from different research studies. Articles and from internet
documents.
33
3.7 Data Collection Instruments
These are the tools that the researcher was employ in trying to bring the primary data from the
field. The questionnaire was selected to accomplish this goal.
3.7.1 Questionnaire Method
Questionnaires by definition mean a set of printed questions addressed by the researchers to

the respondent for him or her to answer and after answering return the questionnaire to the
researchers. The questionnaires were administered personally by the researchers to the
respondents and collected after a time interval. The questionnaires comprised both open-ended
and closed-ended questions that required the respondents to answer all the questions to the best
of their knowledge. The questionnaires were used because they are cheap and quicker, they cover
many respondents, they are free from interview bias, and give accurate information since
respondents take their time to answer the questions. However, they have the disadvantage of
non-despondence.
3.8 Validity of the Instruments
Validity is the degree to which results obtained from the analysis of the data represent the
phenomenon under study. This study looks at three kinds of validity: face validity, content
validity, and construct validity. Face validity was ensured by giving the questionnaires to two
experts to check whether the questions are relevant to the contents. Content validity was ensured
by subjecting the researcher’s devised questionnaires on Islamic banking and community welfare
improvement in Hargeisa Somaliland that consisted of all the elements of the concept of Islamic
banking and community welfare improvement. To determine the content validity, the content
validity index was determined first where the instrument was redesigned with questions about
the content such as very relevant, relevant, somewhat relevant, and not relevant.
The instrument was given to two experts to tick against these questions and give their answers
according to their perception of the relevance of the content. Then the content validity index
(CVI), will be calculated as follows;
CVI= Number of questions very relevant, relevant, and somewhat relevant/total number of
questions. The CVI should be 0. 7 and above for the instrument to be proved as having real
content validity.
34
3.9 Data Gathering Procedure
3.9.1 Before the Administration of the Questionnaires
 An introduction letter was obtained from the college on higher degrees and Research for
the researcher to solicit approval to conduct the study from respective Community leaders
in Hargeisa Somaliland.
 When approved, the researchers visited the different villages in Hargeisa, and then the
Purposive sampling technique was used to select the respondents from the stakeholders of
the banks from the community members to arrive at the minimum sample size.
 The respondents were explained about the study and were requested to sign the Informed
Consent Form.
 Reproduced more than enough questionnaires for distribution.
 Select research assistants assisted in the data collection; brief and orient them to be
consistent in administering the questionnaires.
3.9.2 During the Administration of the Questionnaires
 The respondents were requested to answer completely and not to leave any part of the
questionnaires unanswered.
 The researchers and assistants emphasized retrieval of the questionnaires within five days
from the date of distribution.
 On retrieval, all returned questionnaires were checked if all questions are answered.
3.9.3 After the Administration of the Questionnaires
The data gathered was edited, encoded into the computer, and statistically treated using the
Statistical Package for Social Sciences (SPSS).
3.10 Data Analysis
The study used simple tables and frequency counts (frequencies and percentages) to
analyze the profile of respondents. Similarly, the mean was used to analyze the extent of Islamic
banking and community welfare improvement in Hargeisa Somaliland.
35
The following mean range was used to arrive at the mean of the individual indicators and
interpretation: The frequency and percentage distribution were used to determine the
demographic characteristics of the respondents. The mean was applied for the extent of Islamic
banking products and the level of community welfare improvement.
An item analysis illustrated the strengths and weaknesses based on the indicators in terms of
mean and standard deviation. From these strengths and weaknesses, the recommendations were
derived. The following mean ranges were used to arrive at the mean of the individual indicators
and interpretation as cited by Amin, (2012):
Table 3.9 The Likert scale for interpretation of means of Islamic banking
Mean Range Response Mode Interpretation
3.26-4.00 Strongly agree Very satisfactory
2.51-3.25 Agree Satisfactory
1.76-2.50 Disagree Unsatisfactory
1.00-1.75 Strongly disagree very unsatisfactory
3.11 Ethical Considerations
To ensure confidentiality of the information provided by the respondents and to ascertain the
practice of ethics in this study, the following activities were implemented by the researchers:
 Seek permission to adopt the standardized questionnaire on community participation in a
written communication to the author.
 The respondents and Hargeisa Somaliland were coded instead of reflecting the names.
 Requested the respondents to sign in the Informed Consent Form
 Acknowledged the authors cited in this study and the author of the standardized
instrument through citations and references.
 Presented the findings in a generalized manner.
3.12 Limitations of the study
Conducting this research, there were some challenges and constrains which face the
researchers during the field or collecting the data. Also, there were some financial sectors which
refuse to give the researchers on their data, because they strictly keep their data quite secret.
36
Conversely, the research limitations were including research design particularly taking sample
size, which was needed more time to investigate those individuals who can representative for
target population and provide the accurate data and size of them.
However, the researchers were put in place mechanisms to tackle these potential limits. The
strategies would include convincing the financial sector that the profile of their clients will be
used only for academic purpose.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS, AND
INTERPRETATION OF RESULTS
1
2
2.1 Introduction
This chapter presents the presentation of data, analysis, and interpretation. The chapter is
based on the study topic “the Role of Islamic banking products on community welfare
improvement” The study was based on the research objectives that included, exploring the
essential product packages Islamic banks provide community as social welfare, to analyzing the
effectiveness of community welfare programs that Islamic banks render to the vulnerable society
and to determine the effect of Islamic banking products on improving the infrastructure. The data
analysis and interpretation were based on the research questions as well as research objectives,
the presentation is divided into two parts. The first part presents the respondents' profile or
demographic information, while the second part deals with the presentation, interpretation, and
analysis of the research objectives. below are the data presentations and analysis of the research
findings.
37
3.5 Demographic Information
The demographics include the gender of respondents, age, marital status of respondents,
academics, work experience, bank of respondents, and position of respondents at Islamic Banks
in Hargeisa, Somaliland.
4.2.1 Gender of the Respondents
The respondents were asked to identify their gender. This was necessary to determine which
gender is larger in Islamic banks in Hargeisa the distribution of respondent’s Gender was
summarized in table 4.1
Table 4.1 Gender of the respondents
Category Frequency Percentage %
Male 35 66
Female 18 34
Total 53 100.0
The results in table 4.1 showed that the presentations were that on the gender of respondents,
majority of the respondents were Male who constituted (66%) of the total respondents while the
female was (34%). The findings imply that the respondents were both male and female. hence
implying a gender gap in selected employees of Islamic banking products in Hargeisa
Somaliland.
4.2.2 Marital Status of the Respondents
The respondents were also asked to indicate their marital status. This was essential to see the
different perspectives of the respondents. Table 4.2 summarized their response Distribution of
Respondents by Marital Status.
Table 4.2: Marital Status of the Respondents

Category Frequency Percentage (%)
Single 29 54.7
Married 24 45.3
Total 53 100.0
38
On the marital status of the respondents, the findings were that the majority of the respondents
were single 54.7% of respondents, and married 45.3% of the respondents. The findings reveal
that responses were attained from responsible respondents since the majority are single.
4.2.3 Age of the Respondents
Respondents were asked to indicate their age to enable the researcher to determine which age is
greatest in these banks they responded as summarized in Table 4.3
Table 4.3: Age of the Respondents

Category Frequency Percentage
18-30 years 22 41.5
31-40 years 26 49.1
41-50 years 5 9.4
Total 53 100.0
The results in this table showed that the majority (49.1%) of the respondents in this study's
sample were aged between 31-40 years. This implied that the majority of respondents in this
sample were in their middle adulthood age. These were followed by those between 18-30 years
of age constituting (41.5%), while (9.4%) were aged between 41-50 years.
4.2.4 Educational Levels of the Respondents
The respondents were asked to indicate their educational level. Education was related to the
demographic characteristics of the respondent. Table 4.4 summarized the results distribution of
the educational level of the respondents.
Table 4.4 Educational Levels of the Respondents.

Diploma 1 1.9
Bachelor’s Degree 32 60.4
39
Master's Degree 16 30.2
PHD 4 7.5
Total 53 100.0
The results in this table indicated the education characteristics of respondents; the majority of the
respondents were for bachelor's degrees constituted 60.4 % of the respondents, master's degrees
followed by 30.2% of the respondents, and Ph.D. had 7.5% of the respondents. and only
Diploma holders 1.9% of the total respondents as their highest academic qualifications.
4.2.5 The Experience of the Respondents
The respondents were also asked to indicate their years of experience. This was essential to know
the experience of respondents and to identify the behavior of some personalities due to aspects of
origin and behavior. Table 4.5 summarized their response.
Table 4.5 The Experience of the Respondents

Below 2 years 10 18.9
3-5 years 27 50.9
6-8 years 15 28.3
9years and above 1 1.9
Total 53 100.0
Concerning working experience, the results in this table denoted that majority of respondents had
an experience of 3-5 years (50.9%), these were followed by 6-8 years (28.3%), followed by
(18.9%) who had dealt with Islamic banking products for not more than two years and only
(1.9%) had an experience for 9 years and above, implying that majority of these bank’s staff in
Hargeisa are highly experienced with Islamic banking products.
40
4.2.6 Banks that Respondents use
The respondents were asked to identify their banks. This was necessary to determine which
banks are mostly financed and helped the disadvantaged people distribution of respondents by
their work. Table 4.6 summarized their response.
Table 4.6 Banks the Respondents use

Dahabshiil Bank 16 30.2
DaraSalam Bank 14 26.4
Premier Bank 14 26.4
Amal Bank 9 17.0
Total 53 100.0
Table 4.6 shows the banks that respondents use. The majority which (30.2%) of the respondents
were Dahabshiil Bank employees while (26.4%) of the respondents were employees of
Darasalam bank and (26.4%) of the respondent were employees of premiere bank while only
(17.0%) of the respondents are employees of Amal Bank, which implies the majority of
respondents were employed in Dahabshiil bank.
4.2.7 Position of Respondents
The respondents were also asked to indicate their position in the banks. This was essential to see
the different perspectives of the respondents. Table 4.7 summarized their response
Table 4.7 Distribution of Respondents by their Position

Corporate Manager 2 3.8
Department Manager 15 28.3
Officer 11 20.8
Senior Staff 25 47.2
Total 53 100.0
41
Table 4.5 shows the distribution of respondents. The level of employment shows the majority
(47.2%) of the respondents were senior staff while (28.3%) of the respondents were department
managers and (20.8%) were officers and (3.8%) were corporate managers this shows that the
majority of Islamic Banks employees were the senior staff.
3.5 Data Analysis and Presentation
There are a total of 12 questions respondents were required to rate controlling each of the
items on the level of these variables and ticking the relevant numbers in the table. Their
responses were analyzed using SPSS's summary statistics showing the means and standard
deviations, as indicated in the table.
Table 4.8 The Likert scale for interpretation of means of Islamic banking
Mean Range Response Mode Interpretation
3.26-4.00 Strongly agree Very Satisfactory
2.51-3.25 Agree Satisfactory
1.76-2.50 Disagree Unsatisfactory
1.00-1.75 Strongly disagree very unsatisfactory
4.3.1 Welfare Products of Islamic Banks
The first- third objectives of the study were to explore the essential product packages that
Islamic Banks provide community as social welfare in Hargeisa city. The questions were set by
using the Likert scale in evaluating respondents' levels of disagreeing and agreeing. Thus, the
questionnaire of which was scaled from 1: 4 one to four where 4 strongly agree, 3 = agree 2
=disagree, and 1 = strongly disagree.
Table 4.9 Welfare Products of Islamic Banks
Statement Mean Std. Deviation Interpretation
The Islamic banks provide Qard Al-Hassan
(benevolent loan) to the disadvantaged population 3.42 0.4974 Very Satisfactory
in your community.
During loan payment (payment installments) you
can make more money from the same bank 2.70 1.0845 Satisfactory
(refinance)
The finance and investment activities of this bank
3.09 .6283
occur to the Islamic Community's best-practices Satisfactory
Islamic banks contribute to the well-being of 3.11 .6403
42
society by facilitating credits and low-cost Satisfactory
financing for your community.
Average 3.08 .7126 Satisfactory
The findings on this table of welfare products of Islamic banks in Hargeisa city reveal
that different responses were provided and an average response denotes a 3.80 mean, standard
deviation of 0.7126 implying Satisfactory, the responses are a result of the collection of
questions answered and responded to as shown below.
It was established on the question, the Islamic banks provide Qard al-Hassan (benevolent loan)
to the disadvantageous population in your community, where the mean was 3.42, and the
standard deviation of .4975 was interpreted as very satisfactory Thus, as a result of this response
we can say that the Islamic banks always provide loan products (Qard al-Hassan) to a
disadvantageous population in the community.
To investigate the loan payment in the banks the researchers of this study asked the Islamic
banks During loan payment (payment installments) if they can take more money from the same
bank (refinance) and the result showed the mean was 3.42, the standard deviation of .4975
interpreted as satisfactory Thus, for this exhibition we can trace that During loan payment
(payment installments) you can take more money from the same bank (refinance) because the
majority of the respondent was satisfied that the needy people can take more money during
payment installment, also we can say this product quality dimension (Accessibility) can greatly
influence the customer satisfaction of Islamic banks product provider.
To know whether the financing and investing activities of the banks are shariah-compliant or not
we asked the respondents and the outcome showed the mean was 3.09, the standard deviation of
0.6283 interpreted as satisfactory, which means the financing and investing activities of Islamic
banks under shariah. Therefore, these activities dimension also has a great influence on customer
satisfaction in the product provider as Islamic banks.
The researchers of this study asked the respondents if the banks contribute to the well-being of
society by facilitating credits and low-cost financing to the community and respondents replied
showed the mean was 3.11, the standard deviation of 0.6403 interpreted as satisfactory, as a
result, implying this tells that Islamic bank product provider has great emphasis to the well-being
of the community by facilitating their credit and low-cost financing dimension comparing other
dimensions.
43
4.3.2 Effectiveness of Community Welfare Programs
The second objective of this study was to analyze the effectiveness of community welfare
programs that Islamic banks render to the vulnerable society, in this section the researchers will
cover answers to questions asked by respondents to see the effectiveness of community welfare
packages. The answers to this objective were summarized in the table below by using mean and
standard deviation.
Table 4.10. Effectiveness of Community Welfare Programs
Islamic banks have a formal policy regarding
CSR, which complies with local law, industry 3.26 .8122 Very Satisfactory
requirements, and international standards.
This bank has never knowingly invested in
companies involved in gambling, alcoholic
3.28 .7691 Very Satisfactory
beverages, or non-halal transactions related to
other products.
Financial products provided by the Islamic
2.98 .9705
banks contribute to the establishment of SMEs Satisfactory
Qard Al-Hassan financial product provided by
Islamic banks to the community is sufficient 2.13 1.1100 Unsatisfactory
and helps to achieve its purpose
The findings on this table effectiveness of community welfare programs in Hargeisa city
reveal that different responses were provided and an average response denotes a 2.91 mean,
standard deviation of 0.9154 implying Satisfactory, the responses are a result of the collection of
questions answered and responded to as shown below.
According to the finding, the Islamic banks have a formal policy regarding CSR, which complies
with local law, industry requirements, and international standards had an average mean of 3.26,
the standard deviation of 0.8122 indicating Satisfactory, Thus, the majority of the respondents
confirmed that the Islamic banks have a formal policy regarding CSR.
The study finding was that this bank has never knowingly invested in companies involved in
gambling, alcoholic beverages, or non-halal transactions related to other products The responses
were with the mean of 3.28, the standard deviation of 0.7691, interpreted as very satisfactory,
44
which means that the Islamic banks have never invested non-halal products as the majority of the
respondents were mentioned.
It was also established that concerning that financial products provided by the Islamic banks
contribute to the establishment of SMEs, the responses were with the mean of 2.98, the standard
deviation of 0.9705, interpreted as satisfactory According to this it can be said that the Islamic
banks have fully contributed financial products to the establishment of SMEs, also to participate
the well-being of the community by enhancing their standard of living.
This question was asked Islamic banks if the Qard Al-Hassan sufficient for the beneficiaries and
their responses were describing that mean the mean of 2.13, the standard deviation of 1.1100,
interpreted as Unsatisfactory. Therefore, according to this response, we can say that the Qadri
AL-Hassan provided by the Islamic banks is not sufficient for the community, and also does not
help the community to achieve their different purpose.
4.3.3 Improvement Infrastructure by Islamic Bank
The third objective of this study was to determine the effect of Islamic banking products on
improving the infrastructure, The researchers have asked different questions relating to this issue
and the answers of respondents were presented in the table below while analysis will be
exhibited below table.
Table 4.11. Improvement Infrastructure in Islamic Banks

Islamic banks have always contributed funds for
setting up both education and health facilities in 3.11 .6978 Satisfactory
your community.
Islamic banks have always contributed funds to Satisfactory
2.72 .7436
construct bridges and railways in your community.
Islamic banks have always contributed funds to Satisfactory
2.92 .9167
dams and roads in your community.
Islamic banks offer financial assistance for the
resilience efforts of the drought-affected 3.42 .8189 Very Satisfactory
communities.
45
The findings on this table on the effect of Islamic banking products on improving the
infrastructure of Hargeisa city reveal that different responses were provided and an average
response denotes a 3.04 mean, standard deviation of 0.7943 implying Satisfactory, the responses
are a result of the collection of questions answered and responded to as shown below.
The study findings also found that Islamic banks have always contributed funds for setting up
both education and health facilities in your community, the responses were according to the
mean of 3.11, the standard deviation of .6978, interpreted as satisfactory. Therefore, this means
that the Islamic banks always contributed funds to their community by facilitating their
education and health products. as well as these products can allow the vulnerable society to
become healthy and educated people, also this can contribute to the increased of level customer
satisfaction of Islamic banks as product providers.
The reply of Islamic banks has always contributed funds to construct bridges and railways in
your community the respondent's average mean was 2.72, the standard deviation of 7436,
interpreted as satisfactory implying that the majority of banks confirmed that they contribute
fund to construct the bridges and railways in the community, hence it can be said; there is the
good condition of this products it can be led more development in our community.
To obtain the result on whether the Islamic banks contribute funds to dams and roads, the
researchers of this study asked the respondents this statement and their replies were mean was
2.92, the standard deviation of .9167, interpreted as satisfactory. Therefore, according to these
outcomes of the respondents; reveals that the majority of the Islamic banks contribute funds to
dams and roads in their community, besides the construction of dams and roads the banks may
participate in improving social welfare, hence it can be said the quality of this product is
excellent.
Finally, the responses gathered from Islamic banks offer financial assistance for the resilience
efforts of the drought-affected communities the mean of 3.42 was attained, and a standard
deviation of 0.8189, was interpreted as very satisfactory Thus, in seeing this result it can be
visualized that the Islamic banks offer financial assistance that appropriate to the drought-
affected communities.
46
CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
The research investigated the topic “the role of Islamic banking products on community
welfare improvement in Hargeisa, Somaliland”. Data were collected from four Islamic banks in
Hargeisa Somaliland and analyzed by using SPSS and reported in chapter four by using tables.
This chapter will introduce the findings that have been got from this research, discussion,
conclusions, and recommendations we are putting forward presenting what has been learned
from this research.
47
1
2
3
4
5
5.1
5.2 Summary of the Findings
This study was set to establish the role of Islamic banking products on community
welfare improvement in Hargeisa Somaliland, three specific objectives guided this study and
these were (I) to explore the essential product packages that Islamic Banks provide community
as social welfare in Hargeisa Somaliland, (ii) to analyze the effectiveness of community welfare
programs that Islamic banks render to the vulnerable society in Hargeisa Somaliland; and (iii) to
determine the effect of Islamic banking products on improving the infrastructure in Hargeisa
Somaliland.
The finding of this study was to investigate the role of Islamic Banks products and community
welfare improvement in Hargeisa in selected banks especially Dahabshiil, Darasalam, Premier,
and Amal Bank in this research, the results were collected from 53 respondents; corporate
managers, department managers, officers and senior staff at those Banks. Descriptive, Analytical
methods were used in this study. Both managers, officers, and senior staff were used to
investigate to find out whether there is a remarkable role of f Islamic Banks' products and
community welfare improvement in Hargeisa.
The study findings on the performance of social welfare packages provided by Islamic banks.
Having an average of 3.80 means, a standard deviation of 0.7126 implies a Satisfactory Majority
of the respondents confirmed that the Islamic banks provide essential product packages to the
community as social welfare.
According to the study findings on the effectiveness of community welfare programs that Islamic
banks render to the vulnerable society in Hargeisa Somaliland. An average response denotes a
48
mean of 2.91, a standard deviation of 0.9154 implying a satisfactory majority of the respondents
were confirmed with the statements that the effectiveness of welfare programs that Islamic banks
offer to the disadvantageous society.
5.2.3 Improvement Infrastructure by Islamic Banks
The study findings on the effect of Islamic banking products on improving the infrastructure in
Hargeisa Somaliland. Its average mean was 3.04 mean, standard deviation of 0.7943 implying a
Satisfactory Majority of the respondents were satisfied with the statements about the effect of
Islamic banking products on improving the level of infrastructure.
3
3.1
3.2
3.5 Discussion of the findings
There is a positive and significant relationship between Islamic banking products and
social welfare packages in Hargeisa Somaliland, hence concluding that effective Islamic banking
products highly contribute to the improvement in social welfare among community members in
Hargeisa Somaliland. This finding is in line with Iqbal (2014) Islamic banks, as a part of the
Islamic economic system, are being operated with the objective to implement the economic and
financial principles of Islam. "The objective of Islamic banking is not only to earn profit, but also
to do good and bring welfare to the people" According to Islam, money, income and property
belong to Allah and this wealth is to be used for the good of the society (IBBL 1995, p.7)
It was mentioned earlier that welfare product might include care for others and Zakat. Islamic
banks take care of others through Qard Al Hasan (benevolent loan) financing transactions. It also
mobilizes Zakat resources. according to the findings Aisha (2020). Much recent literature has
studied the role of Zakat in establishing social welfare and economic sustainability. It is believed
that Zakat is among the most important systems for Muslims: indeed, it enables the wealthy and
rich to purify their hearts from greed by giving a part of their wealth to the needy. Therefore,
Zakat redistributes income and wealth, plays an important role in poverty alleviation, and
49
contributes to social welfare. Their analyses show that it is wiser for the firms to behave
strategically than to be coerced into investing in CSR. A positive correlation between CSR and
bank performance indicators (return on asset (ROA), return on equity (ROE), return on sales,
market share) was obtained by McGuire et al. (1988), McWilliams and Siegel (2000), Roman et
al. (1999), Mohammad (2012), Orlitzky, Schmidt and Rynes (2003) and others.
Effectiveness of community welfare programs that Islamic banks render to the vulnerable
society in Hargeisa Somaliland has a significant impact on the society, hence concluding
Majority of respondents of the researcher clarified that welfare programs make enhancement or
improvement to the well-being of the society, also Islamic banking products that rendered to the
society reduces the poverty through offers Qard al Hassan, zakat and by facilitating credits and
low-cost financing.
This finding is line with Sinclair (2001) who noted that with Islamic banks, poor people are
given an opportunity to change their lives with welfare programs. Whyley and Brooker (2004)
connoted that poor and disadvantaged people have no access to capital and financial products,
especially affordable credit. Islamic banks may emulate the existing model of Islamic banks
practices, the activities must be carried out in ways which do not conflict with the principles of
Islam, Islamic banking has the same purpose as conventional banking except that it operates in
accordance Islamic rules on transaction. Islamic banking is concerned with much more than
refraining interest, it is a system that aims at making positive contribution to the fulfillment of
the socioeconomic objectives. Estes (2004) noted that Islamic banks provide small loans to
people who need capital to start a small business and become self-employed to help them build a
sustainable future. In order to assess improvement of household welfare as a result of Islamic
banks loan acquisition, there are various variables such as; household income, Women
empowerment (Gender), improved education, healthcare, Poverty reduction, number of small
business and consumption according to the Human Development Report.
5.3.3 Improving Infrastructure by Islamic Banks
There is a positive and significant relationship between Islamic banking products and
improvement in infrastructure in Hargeisa Somaliland, hence concluding that effective Islamic
50
banking products improve the level of infrastructure in Hargeisa Somaliland and ineffective
Islamic banking products reduce it, also the researchers concluded that Islamic banking products
significantly effect on the level of infrastructure since the majority of respondents agreed with
this statement, and the loan products, financing, and investment aspect accounted for the biggest
influence on improving infrastructure in Hargeisa Somaliland.
According to the Malik (2007) noted that concentrating investment in infrastructure by Islamic
banks is extremely important for the attainment of the main development targets, namely
industrialization, urbanization, and trade promotion to get over the shortage of development
capital in countries. Deciding the priorities of investment in infrastructure sectors is also
important. Good infrastructure helps to raise productivity and lower costs in the directly
productive activities of the economy. Shahin (2009) asserted that insufficient capital for
infrastructure development could be supplemented with foreign capital such as foreign aid, loan,
and foreign direct investment, hence confirming that Islamic banking products are important in
this case (Meezan Bank, 2011).
3.5 Conclusion
This section concluded this study in line with the objectives of this study and took into
account the solutions to research problems. The main purpose of this study was to know the role
of Islamic banking products on community welfare improvement in Hargeisa, Somaliland. From
the analysis made through different questions, we knew that there is a significant relationship
between Islamic banking and community welfare improvement. The main problems that this
research was There are low levels of community welfare improvement in Hargeisa Somaliland.
Most of the community members are characterized by having a minimum level of income. The
worsening condition of welfare improvement in the country will affect the standard of living of
the community which will affect the mortality rate of the people in the country, and there is a
limited number of banks that Practice community welfare improvement, all these are indicators
of low levels of community welfare Improvement. So, the analysis emphasized the presence of
these problems and the need for its solutions in Hargeisa, Somaliland.
Thus, to summarize the solutions to these problems; firstly, the researchers intended this study
to establish the role of Islamic banking products on community welfare improvement in Hargeisa
Somaliland. Secondly, the researchers chose Islamic banking Because of its principles of
51
encouraging the community to participate in different welfare products packages that lead to
enhancing the well-being of the society, offering financial products to the needy people,
providing Qard AL-Hassan to the disadvantageous population, to contribute the well-being of
society by facilitating credits and low-cost financing and they will enable the community to
borrow loans and put them into various investments to have welfare improvement. Lastly, most
solutions to these problems are in hands of Islamic banks to improve must close the contextual
gap that was existing previously between them.
To conclude The Islamic banking products in Hargeisa Somaliland were rated satisfactory
conclusion is that the Islamic banking products have provided effective financial products
through not charging interest on loan products, having favorable poverty alleviation, and
effective financing and investment products system to the community members in Hargeisa
Somaliland. The community welfare improvement in Hargeisa Somaliland was found to be
satisfactory, hence concluding that the Islamic banking products have contributed to the
community welfare through improving the ser, poverty alleviation, and infrastructural
improvement in Hargeisa Somaliland.
3.5 Recommendation
I. The researchers recommend to the management of these Islamic banks consider the past
payment history of the client as a means of avoiding the occurrence of a risk.
II. The researchers recommend to the management of these Islamic banks to make sure that
during loan payment clients can't take more money on the same loan (refinance) but a
client can take a new loan on the same bank
III. The researchers recommend the management of these selected Islamic Banks in Hargeisa
Somaliland to make sure that the five Cs of credit such as character, capacity, conditions,
collateral, and capital of applicant are been reconsidered.
IV. The researchers recommend to the management of the Islamic banks to enhance the
amount of loan products (Qard Hassan) offered to the vulnerable society which is not
sufficient and does not help them to achieve their purposes.
V. The Islamic banks should provide education products to even the disadvantaged
populations in Hargeisa Somaliland as a way of improving the community welfare. The
52
Islamic banks should always support research and product design experiments to
encourage poor people to adopt and actively use digital financial products.
VI. Islamic banks in Somaliland especially in the capital city Hargeisa have to improve their
products and products as world-class banks and at the same time Islamic so it is very
important to make Islamic banking in line with good intentions like poverty alleviation,
youth development, and management of wealth between rich and poor.
53
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56
University of Hargeisa
Department of Islamic Banking and Finance
RESEARCH INSTRUMENT
We are Mubarak Mohamoud Omar, Daher Abdi Jama, and Usama Abdilahi Abdi. We are
students at the University of Hargeisa undertaking a bachelor degree in Islamic Banking and
Finance. We are undertaking research which is entitled: "Islamic Banking Products and
Community welfare improvement" You have been selected to participate in this study to obtain
your participation and views regarding this topic. There are no good or wrong answers, but your
honest participation in answering the questions will assist and contribute to this study, and the
information you provide will be treated confidentially.
Thank you in advance
57
APPENDIX
Section A: Demographic characteristics of Respondents.
Kindly tick () in front of your appropriate answer
1. Age
a) 18-30 years (______)
b) 31-40 years. (______)
c) 41-50 years. (______)
d) 51 years and above. (______)
2. Gender
a) Male. (______)
b) Female. (______)
3. Level of education qualification
a) Secondary. (______)
b) Diploma. (______)
c) Bachelor’s Degree. (______)
d) Post Graduate (______)
4. Number of years of experience
a) Below 2 years. (______)
b) 3-5 years. (______)
c) 6-8 years. (______)
d) 9 years and above. (______)
5. Your Bank
a) Dahabshil Bank (______)
b) Dara Salam Bank (______)
c) Premier Bank (______)
d) Amal Bank (______)
6. Your Position
a) Corporate Manager (______)
b) Finance Officer (______)
c) Departmental Officer (______)
58
d) Senior Staff (______)
OBJECTIVE 1: TO EXPLORE THE ESSENTIAL PRODUCT PACKAGES THAT
ISLAMIC BANKS PROVIDE COMMUNITY AS A SOCIAL WELFARE
Direction 1: Please write your rating on the space before each option that corresponds to your
best choice. Kindly use the scoring system below:
Response Mode Rating

Strongly Disagree (SD) 1
Disagree (D) 2
Agree (A) 3
Strongly Agree (SA) 4
Welfare products of Islamic Banks 1 2 3 4

The Islamic banks provide Qard Al-Hassan (benevolent loan) to disadvantageous
populations in your community.
During loan payment (payment installments) you can make more money from the same
bank (refinance)
Finance and investment activities of this bank occur in accordance with the Islamic
Community best-practices.
Islamic banks contribute to the well-being of society by facilitating credits and low-cost
financing for your community.
OBJECTIVE 2: TO ANALYZE THE EFFECTIVENESS OF COMMUNITY WELFARE

PROGRAMS THAT ISLAMIC BANKS RENDER TO THE VULNERABLE SOCIETY
Disagree (D) 2
Agree (A) 3
59
Effectiveness of Community Welfare Products 1 2 3 4
Islamic banks have a formal policy regarding CSR, which complies with local law,
industry requirements, and international standards.
This bank has never knowingly invested in companies involved in gambling, alcoholic
beverages, or non-halal transactions related to other products.
Financial products provided by the Islamic banks contribute to the establishment of SMEs
Qard Al-Hassan financial product provided by Islamic banks to the community is
sufficient and helps to achieve its purpose
OBJECTIVE 3: TO DETERMINE THE EFFECT OF ISLAMIC BANKING PRODUCTS

ON IMPROVING THE INFRASTRUCTURE

Disagree (D) 2
Agree (A) 3
Infrastructural Improvement 1 2 3 4
Islamic banks have always contributed funds for setting up both education and health
facilities in your community.
Islamic banks have always contributed funds to construct bridges and railways in your
community.
Islamic banks have always contributed funds to dams and roads in your community.
Islamic banks offer financial assistance for the resilience efforts of the drought-affected
communities.
60

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Thesis Final

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UNIVERSITY OF HARGEISA

HARGEISA SCHOOL OF ECONOMICS

THE ROLE OF ISLAMIC BANKING PRODUCTS ON COMMUNITY

THESIS SUBMITTED TO THE SCHOOLS OF ECONOMICS IN PARTIAL

Mubarak Mohamoud Omar signature…………….

Name: MR. KHALID ABDI NOUR (BARBARAWI)

3.5 Background of the Study

3.5 Research Questions

3.5 Significance of the Study

3.5 The Scope of the study

1.6.2 Content scope

1.6.3 Theoretical scope

2.2 Theoretical Literature

2.3 Review of related literature

2.3.1 Welfare products of Islamic Banks

2.3.1.1 Mobilization of Zakat

2.3.1.2 Qard al- Hasan (benevolent loan)

2.3.1.3 Corporate Social Responsibility of Banks

2.3.2.1 Loan products

2.3.2.2 Deposit and withdraw products

An Islamic bank is a deposit-taking banking institution whose scope of activities includes

Malik (2007) noted that concentrating investment in infrastructure by Islamic banks is

2.4 Related Studies

2.5 Research gaps

3.5 Conceptual Framework

Islamic Banking Products Community welfare Improvement

 Welfare products of Islamic banks

3.2 Area Description

3.3 Research design

3.4 Target Population

3.5 Sample and Sampling

n= N/1+N (e) 2 where N=

3.5.2 Sampling Procedure

To select the sample of 53 respondents out of 60 target population, the Purposive

3.5.3 Sample Frame Table

Table 3.3 indicates the population and sample size

3.6.1 Primary Data Sources

3.6.2 Secondary Data Sources

3.7.1 Questionnaire Method

Questionnaires by definition mean a set of printed questions addressed by the researchers to

3.9.3 After the Administration of the Questionnaires

3.10 Data Analysis

3.11 Ethical Considerations

3.12 Limitations of the study

4.2.1 Gender of the Respondents

4.2.2 Marital Status of the Respondents

Table 4.2: Marital Status of the Respondents

4.2.3 Age of the Respondents

Table 4.3: Age of the Respondents

4.2.4 Educational Levels of the Respondents

Table 4.4 Educational Levels of the Respondents.

4.2.5 The Experience of the Respondents

Table 4.5 The Experience of the Respondents

Table 4.6 Banks the Respondents use

4.2.7 Position of Respondents

Table 4.7 Distribution of Respondents by their Position

3.5 Data Analysis and Presentation

4.3.1 Welfare Products of Islamic Banks

4.3.3 Improvement Infrastructure by Islamic Bank

Table 4.11. Improvement Infrastructure in Islamic Banks

5.2.1 Welfare Products of Islamic Banks

5.2.2 Effectiveness of Community Welfare Programs

5.2.3 Improvement Infrastructure by Islamic Banks