Islamic Banking Services and Community Welfare Improvement in Hargeisa Somaliland

ABSTRACT This study was aimed at establishing the relationship between Islamic banking services and welfare improvement to the community in Hargeisa Somaliland, three specific objectives guided this study and these were To establish the relationship between Islamic banking services and improvement of quality of life among community members in Hargeisa Somaliland.To examine the relationship between Islamic banking services and poverty alleviation among community members in Hargeisa Somaliland. To determine the relationship between Islamic banking services and improvement of infrastructure in Hargeisa Somaliland.Using a descriptive correlational design, the researcher administered a questionnaire to 114 respondents; Slovene's formula· was used to arrive at sample size. Data analysis using means revealed that; the Islamic banking services in Hargeisa Somaliland was rated satisfactory (mean=2.86), confirming that the Islamic banking services has provided effective financial services through not charging interest on loan services, having favourable deposits and withdraw services and effective financing and investment services to the community members in Hargeisa Somaliland, whereas the community welfare improvement in Hargeisa Somaliland was found to be satisfactory (overall mean=3.01), hence confirming that the Islamic banking services system has contributed to the community welfare through improving on the quality of life, poverty alleviation and infrastructural improvement in Hargeisa Somaliland. The researcher concluded that: effective Islamic banking services highly contribute to the improvement in quality of life among community members in Hargeisa Somaliland, unfavourable Islamic banking services increase on the poverty levels and unfavourable Islamic banking services increase it; and Islamic banking services significantly affect the community welfare improvement in Hargeisa Somaliland. The researcher recommended that these Islamic banks to consider past payment history of client as a means of avoiding occurrence of risk, these Islamic banks should 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, these selected Banks in Hargeisa Somaliland should make sure that they introduce electronic accounts which can used by clients for payment of the variety of Shari'a compliant finance services, the Islamic banks should also provide education services to even the disadvantaged populations in Hargeisa Somaliland as a way of improving the community welfare, and they should always support research and product design experiments to encourage poor people to adopt and actively use digital financial services.

TABLE OF CONTENTS

DECLARATION ....................................................................................... i

APPROVAL .............................................. ............................................. ii

DEDICATION ....................................................................................... iii

ACKNOWLEDGEMENT ......... ...... ........................................................... iv

TABLE OF CONTENTS ........................................................................... v

ABSTRACT .......................................................................................... ix

CHAPTERONE ................................................................................ l

INTRODUCTION ............................................................................. 1

1.0 Introduction .................................................................................... 1

1.1 Background of the Study ................................................................. 1

1.1.1 Historical Perspective .................................................................... 1

1.1.2 Theoretical Perspective ................................................................. 6

1.1.3 Conceptual Perspective .................................. ............................... 7

1.1.4 Contextual Perspective ..... ............. ............................................... 8

1.2 Statement of the Problem .............................................................. 11

1.3 Purpose of the Study ................................................. .................... 12

1.4 The objectives of the Study ........................................................... 12

1.5 Research Questions ....................................................................... 12

1.6 Hypothesis ................................ ................................................... 13

1. 7 The Scope of the Study ................................................................. 13

1.7.1 Geographical Scope .................................................................... 13

1.7.2 Content Scope ........................................................................... 14

1.7.3 Theoretical Scope ............................................................ ........... 14

1.7.4 Time Scope ................................................................................ 15

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1.8 Significance of the Study .................. .. ............. ............................ 15

1.9 Definition of Operational Terms ................................ ..................... 16

CHAPTER TWO ••••••.•••.••••••••..•••••••••••••••••••.••••••..•••••.••••••••••••••••••••.• 18

LITERATURE REVIEW .................................................................. 18

2.0 Introduction ..................... ............................ ................................. 18

2.1Theoretical Review ......................................................................... 18

2.2 The Conceptual Framework ........................................................... 20

2.3 Review of related literature ........ .................................................... 23

2.3.1. Relationship between Islamic banking and quality of Life ............. 23

2.3.2. Relationship between Islamic banking services and poverty

alleviation ............................... ...................................... ...................... 24

2.4 The relationship between Islamic banking services and improvement

of infrastructure .. ... ............................................................................. 25

2.5 Related studies .................... ......................................................... 26

2.6 Research gaps ................................... ........................................... 31

CHAPTER THREE .......................................................................... 32

METHODOLOGY ........................................................................... 32

3.0 Introduction ............................................... ......... ... .... ................... 32

3.1 Research design ........... ............................... .................................. 32

3.2 Study Population .. ..................... .................................................... 32

3.3 Sample size ................................................. .. ..... .. ... ..................... 33

3.4 Sampling procedure ...... .. .................................. .. .......................... 33

3.5 Data sources ................. .............. ................................................. 34

3.5.1 Primary data sources .................................. .... .......... .................. 34

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3.6 Data collection instruments ............................................................ 34

3. 7 Validity and Reliability of the Instruments .......... ............................. 35

3.7.1 Validity of the instrument.. .......................................................... 35

3.7.2 Reliability of the instruments ....................................................... 36

3.8 Data Gathering Procedure ............................................................. 36

3.8.1.Before the administration of the questionnaires ........................... 36

3.8.2. During the administration of the questionnaires .......................... 37

3.8.3 after the administration of the questionnaires .............................. 38

3. 9 Data Analysis ..................................................... ........................... 38

3.10 Ethical Considerations ................................................................. 39

CHAPTER FOUR ............................................................................ 40

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF

RESULTS ...................................................................................... 40

4.0 Introduction ... .......... ..................................................................... 40

4.1 Profile of respondents ............................................................ ....... 40

4.2 Islamic banking services ................................................................ 42

4.4 Objective one; relationship between Islamic banking services and

quality of life ..................................... ................................................. 48

4.5 Objective two; effect of Islamic banking services on poverty alleviation

......................................................................................................... 49

4.6 Objective three; relationship between Islamic banking services and

improvement of infrastructure ................................ ............................. 50

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CHAPTER FIVE ............................................................................. 51

DISCUSSIONS, CONLUSIONS AND RECOMMENDATIONS .......... 51

5.0 Introduction .................................................................................. 51

5.1 Discussions ................................................................................... 51

5.2 Conclusions .................................................................................. 56

5.3 Recommendation .......................................................................... 58

5.4 New knowledge acquired ................................................... ............ 59

5.5 Areas for further research .............................................................. 59

REFERENCES ................................................................................ 60

APPENDIX IV ...................................................................................... 66

RESEARCH INSTRUMENT .................................................................... 66