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Foundations of risk-sharing finance: an Islamic view
No full textBefore the inception of the Islamic finance industry (IFI), there was what could be called a 'market failure' in the conventional financial system: significant unmet demand for Shari'a-compliant financial products. IFI grew out of conventional finance to meet this demand. Muslim scholars writing since the 1970s emphasized that Islamic finance was about risk-sharing (or profit/loss-sharing) contracts (see Siddiqi, 1985)
On the stability of an Islamic financial system
No full textIn an Islamic economy, the financial sector functions to support the real sector. There are no interest rate based debt instruments. Financial assets are based on risk and return sharing and are contingent claims. Real as well as monetary forces determine the rate of return. As in traditional general equilibrium theory, there is a price system comprised of a real rate of return to capital and a price level of commodities that simultaneously clears asset and commodity markets. An Islamic financial system is shown to be stable, namely the economy evolves from short-term equilibrium to a stable long-term equilibrium
Economics and morality from an Islamic perspective
No full textEconomics is often viewed as amoral but not immoral. It is concerned with an important question: how households, businesses and countries and even the entire planet should be managed to live within their resources. Economic theory treats this as a problem of constrained maximization, which is subject to technical solutions focused on the optimal use of scarce resources
Research on Islamic banking in Malaysia: a guide for future direction
No full textAlthough not a near equivalent of conventional banking in terms of size, the global Islamic banking industry has grown a very rapid pace in the last three decades. Malaysia has been at the forefront of this development since early 1980s and has earned a reputation of a global hub for Islamic banking. Since its inception, much research has been carried out in this area but there is no systematic documentation of research findings in Islamic banking., though much focus has been on aspects of efficiency and performance vis-a-vis the conventional counterparts. This warrants our relooking at the research - both theoretical and empirical - in different areas of Islamic banking in Malaysia, as to provide a road-map for the structured long-term development of the industry in consonance with country's global leadership position in Islamic banking. This paper surveys and analyses the published worked on Islamic banking in Malaysia with the goals of evaluating their contribution and usefulness to various stakeholders and charting the future directions for research that could sustain Malaysia's global leadership position in Islamic banking
Causality of personal bankruptcy in Malaysia
No full textThe Insolvency department (MdI) statistical releases indicate total bankruptcy cases as at September 2013 is 251,209 bankrupt filed (The Star, 2013) and recent bankruptcy record exhibits that the declared bankrupt cases are getting younger as comparing to past years record which worries by Bank Negara. The increase in personal bankruptcy case reflects erosion in credit evaluation process and this has lead the banks to be cautious and to tighten their lending process and loan approval. The purpose of this research study is to examine the causality factors towards personal bankruptcy in Malaysia. The concept of financial numeracy has emerged recently in personal financial management to explain the antecedents and consequences of financial numeracy. The result found significant on the mediation factors on financial numeracy and financial management outcome effects towards personal bankruptcy. Hence, the mediation outcome also found support on this research proposed theoretical framewor
Financing economic growth with stability from Islamic perspective
No full textEvidence has been mounting that the interest-based debt financing regime is under increasing distress. Evidence also suggests that the financial crises, whatever title they carried - exchange rate crisis or banking crisis – have been debt related crises in essence. At present, data suggest that the debt-to-GDP ratio of the richest members of the G-20 is expected to reach 120% mark by 2014. There is also evidence that out of securities worth US$ 200 trillion in the global economy, no less than three-fourth represent interest-based debt. It is difficult to see how this massive debt volume can be validated by the underlying productive capacity of the global economy. This picture becomes more alarming considering the anemic state of global economic growth. There is great uncertainty with regard to interest rates. Although policy-driven interest rates are at near-zero level, there is no assurance that they will not rise as the risk and inflation premia become significant. Hence, a more serious financial crisis may be in the offing and a general collapse of asset prices may occur. This paper argues that the survival of the interest-based debt regime is becoming less tenable, as is the process of financialization that has accompanied the growth of global finance over the last four decades. The above has resulted in an unprecedented increase in economic risks; generating (adverse) non-linearities in system’s behavior. Such a behavior is nothing but a demonstration of the verse, “Allah obliterates riba ….” of the Qur’an. As a result, the search is on for a paradigm shift towards a less volatile and more resilient financing regime. The paper proposes risk sharing based Islāmic financing as suitable alternative and also demonstrates empirically its better growth and stability characteristics by using advanced dynamic heterogeneous panel techniques
Islamic finance: the structure-objective mismatch and its consequences
No full textThis paper raises the issue of an initial structure-objective mismatch in the launching of Islamic finance. The abolition of interest and promotion of growth with equity were goals of the conceived system. These goals expressed a long run vision to improve the condition of the Muslim communities across the world. However, the organizational form adopted for Islamic finance was of the existing commercial banks which provided essentially short-term loans on interest to trade industry and commerce. The choice thus involved an intrinsic mismatch between the structure and objectives of Islamic finance. The mismatch did carry some advantages, but on a more important side it exposed Islamic finance to commitments and influences which could not mostly align well with the goals the pioneers had in mind. Note that in focus here is not the reversal of the mismatch but its consequences that have forced the nascent Islamic system to convergence and competition with the mature conventional finance the West dominates. It is not the ground realities that are being adapted to Shari�ah norms; it is the norms that are being stretched to limit for meeting the demands of the conventional system. Ordinary Muslims who hoped to benefit from Islamic financing remain unattended. Thus, what Islamic finance can or cannot change will depend on where its ongoing integration with the conventional system leads it to. Currently, most merits claimed for the Islamic system defy evidence. The basic reforms financial systems require in the face of current crisis are the control of credit, leverage lure, and speculation. Islamic finance is in principle better equipped to achieve these ends
Islamic banking and finance: an integrative approach
No full textThis book is written to meet the needs of undergraduate students studying business and economics, though parts of it may be useful for students further along the learning curve. Apart from students, the book can also be used by professionals to refresh and update their knowledge and understanding of the subject, to help them carry out their responsibilities more efficiently. In addition, this book provides a comprehensive presentation of topics, including theoretical foundations financial instruments, banking operations, risk management, takaful, and issues relating to the law, regulation and governance.
Available in physical copy only (Call Number: HG 187.4 H344
Islamic wealth management and financial advisory: a study guide
No full textThis study guide should become handy to anyone who is interested to learn the various spectrum of Islamic wealth management as it provides a step-by-step process in constructing a holistic financial plan through the use of case studies. It is a quick and easy guide on the area of wealth management, covering both theoretical and practical aspects. The guide features a question and answer format with example and illustrations, where appropriate to show how it works in practice
Islamic norms, Excel time value formula and housing finance models
No full textThis chapter adds to the series of writings on Islamic home financing presented and published by the author on the subject of compounding versus and Islamic Shari'ah-consistent requirement for computation to avoid continuos compounding. It spells out certain normas Islamic banks must observe in home financing, and demonstrates that the conventional time value formula in Excel does not the stated norms.
Available in physical copy and ebook (Call Number: HG 3368 A6 R595L