INCEIF Knowledge Repository (INCEIF University)
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The impact of bank-specific and macroeconomic determinants for Islamic bank's performance: the empirical study of GCC countries
No full textStudies of Islamic banks' profitability are an important tool towards improving performance, evaluating bank operations and determining management plan to help in increasing the chance for the banks to survive in competitive markets. The robust growth in financing and investment activities across most jurisdictions in various real sectors has helped Islamic banks to record generous asset growth rates in their balance sheets. However, the returns become subdued during the financial crisis of years of 2008-2009, reaching lows of ROA 0.74% and ROE 6.16% in 2009 (IFSB, 2014). Over the last twenty years, market conditions in banking sector have undergone extensive changes on both demand and supply sides ..
Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models
No full textAlthough sukuk has been dominating the Malaysian capital market, the motivations of the firms issuing sukuk or conventional bonds remained largely unexplored. Using the partial adjustment model, we make the initial attempt, to test a firm's target debt optimizing behavior and secondly, to find the firm specific determinants of target debt ratio using a sukuk or conventional bond issuance 3 dataset. Our sample consists of 120 conventional bonds and 80 sukuk issuers from 2000 to 2012. We employ two recent dynamic panel data estimators, 4 which resulted in three major findings. Firstly, our results provide stronger support for trade-off view based on a firm's optimizing behavior among sukuk and conventional bond issuers, however with different issuance motives. Secondly, issuers of partnership-based sukuk and convertible bonds closely follow the pecking order view, in which the former is chosen based on firms facing a higher information asymmetry cost. Finally, while both exchange-based sukuk and straight bond issuers align towards a particular target, only firms with higher sales growth prefer the former. Reinforced by industry insights, our findings evidence that the sukuk offers bring unique “benefits” to corporate issuers unlike those of the conventional bonds
Collusion between Islamic law of inheritance and conventional distribution law
No full textIslam acknowledges the right of individuals to own wealth and rights of community members and family to get a portion of the wealth. The distribution of wealth is through the system of Charity, Zakat, Hibah and Inheritance (Fara’id/ Mirath). As large numbers of Muslims reside in non-Muslim countries, they have to accept the Civil Law as the paramount law of the country. As such, the distribution of inheritance has caused controversies and fervent debates over the years when the Civil Law takes precedence over Shariah law. Consequently, the problem statement of this paper is to identify the different issues and restrictions in wealth distribution faced by Muslims and reverts living in Muslim and non-Muslim countries in upholding the Islamic Inheritance Law and how those issues are resolved. The objectives of this paper include to provide a better understanding of Islamic Inheritance Law; its current situation and practice standards on Muslims living in Muslim and non-Muslim countries; to understand the difficulties faced by Muslims in applying Fara’id due to the restrictions imposed by Civil/ Common law and finally, to suggest the harmonisation of estate distribution under the Islamic Inheritance Law and Civil/ Common Law. The findings of this paper have suggested that wills are being widely used in cases on intestacy. The wills can be accepted in full or even challenged depending on the circumstances such as one of the beneficiaries was left out. Once the will is challenged the cases are subjected to adjudication in the civil courts of the country. Challenges could be in the form of validity of a will on the grounds of incapacity, fraud, broken promises and non-performance of a contract. Under civil rule, an illegitimate child or even a live-in partner has a right to make a claim. There is actually no iron clad protection for Muslim in non-Muslim countries in practising Islamic law of inheritance. The only avenue would be the beneficiaries among themselves consented to abide by the Islamic law of inheritance
Indicators of takaful awareness among Kuwaitis
No full textThis research examines the awareness of takaful among Kuwaitis. It endeavours to determine any significant differences and conformities between demographic variables and the four aspects of awareness concerning general information, the features of takaful, Shari'ah compliances, and motives of takaful. The research adopted a quantitative research design. Descriptive, T-test, ANOVA, and Discriminant analyses were employed to analyse the data collected via questionnaires. The research sample consisted of a total of 640 Kuwaitis from which 52% of the participants have not heard of takaful despite the existence of 14 takaful operators in Kuwait. More than 60% of the participants were unsure as to how their contributions would be invested. They were particularly concerned whether it be Shari'ah compliant or not. In addition, two-thirds of the respondents were unaware that they were eligible to receive part of the surplus, if any
Time series analysis of the impact of consumption and energy use on environmental degradation: evidence from Malaysia
No full textThe purpose of this study is to explore the long-run relationships and short-run dynamic interactions between environmental degradation (proxied by carbon dioxide, CO2 and the independent variables of consumption (proxied by income level or gross domestic product, GDP per capita) and energy use in Malaysia over the period 1971 to 2008, using time-series analysis. The multivariate cointegration methodology is applied in this study to establish the possible causal relations between the variables concerned. The cointegration test and the vector error correction model display the evidence of a positive long-run relationship between consumption and environmental degradation while energy use is negatively related to environmental degradation. The long-term elasticity coefficients of the exploratory variables on environmental degradation display relationships that are theoretically grounded. There is evidence that consumption and energy use have a dominant influence in forecasting environmental degradation variance through further innovation analysis using variance decompositions. The study concludes with an examination of policy implications of the findings
The next financial crisis and how to save capitalism
No full textThe financialization of the economy has brought a number of interrelated problems which have contributed to growing income and wealth inequality. Askari and Mirakhor assert that it is time to make a bold change by putting our financial house in order and on a better path, advocating for a fundamental reform of the financial system
The role of human capital in economic development of the earliest Islamic period
No full textThe purpose of this paper is to provide explanation for the economic development of the earliest Islamic state. It focuses on the role of human capital as the most important element of this model and focuses on four dimensions of development of human personality in Islam: the incentive structure, rules of behavior, institutions and policies. A review and analysis of the measures and policies that Prophet of Islam and his successors adopted are made to arrive at the underlying economic model of development. The major finding is the role of human capital in the development of the economy at that time. The contribution of the paper is to identify the critical role of education and skills for the development of the economy at present
Towards enhancing Islamic banking: a proposed comprehensive legal and regulatory framework for Somalia with special reference to the Malaysian experience
No full textA good financial sector is an important requirement in any country in achieving economic growth. Withour proper regulations, a financial sector will not be deemed productive. The Somalia Federal Government has identified the development of the banking sector as one of the six crucial factors for reviving the country's economy. Hence, the federal government has allocated more than $2.5 million to regulate this sector. The Central Bank of Somalia Act 2011 states that all the banks should comply with Shariah laws, as Somali society being one hundred percent Muslim. However, with the absence of any Islamic bank regulations in Somalia, it enables the country to develop or adopt any regulation that is deemed workable ..
Risk-sharing versus risk-transfer in Islamic finance: an evaluation
No full textSome recent writings on Islamic finance have resuscitated the old ‘no risk, no gain’ precept from the earlier literature in the wake of current financial crisis. They argue that the basic reason for the recurrence of such crises is the conventional interest-based financial system that subsists purely on transferring of risks. In contrast, Islam shuns interest and promotes sharing of risks, not their transfer. The distinction is used to make a case for replacing the conventional system with the Islamic; for that alone is thought as the way to ensuring the establishment of a just and stable crisis free economic system. Islamic banks have faced the current crisis better than the conventional is cited as evidence. The present paper is a critique of this line of thought. It argues that risk-sharing is not basic to Islam. It encourages profit sharing of which sharing of risk is a consequence not the cause. The paper concludes that the case is for reform, not for replacement, of the current debt dominated system marked with increasing duality
Do Malaysian horizontal mergers and acquisitions create value?
No full textThis article examines the value-added phenomenon of Malaysian horizontal merger and acquisition activities (M&A) in the long run for the period 1994–2010. In this regard, this article used economic value-added (EVA) approach and cost-efficiency approach (stochastic frontier analysis (SFA)) to investigate synergistic benefits. The findings suggest that bidder firms experience no significant improvement in operating and financial efficiencies in the long run. Specifically, the operating performance of bidder firms deteriorated after the merger exercise, whereas the target firms had no significant improvement in operating performance over the same period. In summary, the findings suggest no synergistic gains from horizontal mergers in Malaysia. These findings imply that the long-run performance of firms in the horizontal mergers or acquisitions is driven by other motives rather than synergistic gains