INCEIF Knowledge Repository (INCEIF University)
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Social capital and financial market development
No full textIn the 1990s, institutions became an important area of focus when investigating the process of financial development and the success or failure of financial reforms. This was partly a consequence of many developing conuntries that had liberalized their financial systems to realize the expected benefits from such reforms
Risk management, derivatives and Shariah compliance
No full textDespite the impressive growth of Islamic Banking and Finance (IBF), a number of weaknesses remain. The most important of this is perhaps the lack of shariah compliant risk management tools. While the risk sharing philosophy of Islamic Finance requires the acceptance of risk to justify returns, the shariah also requires adherents to avoid unnecessary risk-maysir. The requirement to avoid maysir is in essence a call for the prudent management of risk. Contemporary risk management revolves around financial engineering, the building blocks of which are financial derivatives. Despite the proven efficacy of derivatives in the management of risk in the conventional space, shariah scholars appear to be suspicious and uneasy with their use in IBF. Some have imposed outright prohibition of their use. This paper re-examines the issue of contemporary derivative instruments and shariah compliance. The shariah compatibility of derivatives is shown in a number of ways. First, by way of qualitative evaluation of whether derivatives can be made to comply with the key prohibitions of the sharia. Second, by way of comparing the payoff profiles of derivatives with risk sharing finance and Bai Salam contracts. Finally, the equivalence between shariah compliant derivatives like the IPRS and Islamic FX Currency Forwards with conventional ones is presented
Handbook of Asian sovereign bond markets: yield & risk
No full textThis book is on the pricing of sovereign debt in 17 bond markets across Asia: from Japan in the Far East and Israel in West Asia. The 17 markets include the very large bond market of Japan, which ranks equal among the largest five markets namely in the UK, the USA, Germany and Switzerland. Sovereign debt overhang is allegedly destabilizing the world economy from October 2011, since when the then Eurozone crisis transformed into government debt overhang crisis. This book is about the economics of how the sovereign debts are rated, priced and sold on the basis of perceived risk by investors buying and selling debt instruments. Developed economies' debt burden as a percentage of national income has risen over 25 years from about 40 percent of GDP to the current figure of about 80 percent largely as a result of profligate government spending. So governments are now overhung with loans. One aim of this book is to highlight the sovereign debts of some 17 important economies in Asia, happily none of them seriously as sick as the ones in EU. One clear lesson from this research effort is that the bond markets are quite clever in pricing different risk levels of sovereign debts in Asian countries
Are Islamic stock markets integrated globally? Evidence from time series techniques
No full textThis study attempts to investigate the issue of integration of Islamic equity markets (i) not only whether these markets are moving together or not (ii) but also whether the permanent and temporary components of these markets are moving together or not. Our evidence tends to indicate that these selected Islamic markets are bound together by one cointegrating relationship with the Euro zone Islamic equity market being the most leading one and the U.K. Islamic equity market being the follower. Beveridge-Nelson (BN) time series decomposition analysis reinforces the integration by indicating that both the permanent and transitory components of all these Islamic equity indices tend to move almost together leading to further integration of the Islamic equity markets. Finally, the study tends to suggest that the financial crises did affect the investments in Islamic Equity markets. The findings of this study are also consistent with the Shariah views of economic and financial integration and have strong policy implications
Developments in Islamic capital markets
No full textThe growth of Islamic capital markets is a direct effect of the growth of the Islamic banking industry. The need for liquidity management for Islamic banks and takaful operators drove a number of countries such as Malaysia, Kuwait and Bahrain to introduce sukuk to facilitate management of assets by Islamic financial institutions. Growth is also attributed to growing awareness of, and demand for investing in accordance with Shari'a principles. In more recent times, growth is attributed to the globally low interest rates, the weakening US Dollar over the past 25 years, and the sub-prime mortgage crisis in the west prompting investors to seek alternative investments
Defense spending - economic growth nexus in selected OIC countries: a long-run causality analysis
No full textThis paper investigates the long run Granger causality between defense spending and economic growth for 20 selected Organization of Islamic Countries (OIC) by employing the Error-Correction Model (ECM) framework using annual data for the period 1960 to 2005. defense spending (milex) is measured using the ratio of defense spending to gross domestic product (GDP); while economic growth (rgdpc) is proxy by the real GDP per capita. The results of our study indicated that one way long run Granger causality was found running from economic growth to defense spending for Burkina Faso, Indonesia, Kuwait, Saudi Arabia, Sudan, Togo and Turkey. On the other hand, one way long run Granger causality was found running from defense spending to economic growth was found for Iran, Mauritania and Nigeria. However for the rest of the OIC countries, the results suggested no relationship between defense spending and economic growt
Correlation between crude oil prices and sukuk index: evidence from Dow Jones Citygroup Sukuk Index
No full textThe recent surge in demand for Shariah compliant instruments alongside the launch of Dow Jones City group Sukuk Index in 2006 has further catalyzed the increase in the number of issuance of global Islamic Sukuk. Saudi Arabia, UAE and Qatar have become major issuers of global Sukuk which are highly demanded by investors. The normal rationale given behind such behavior might be the religious commitments to involve in riba free investments. However, it is worth testing that is it only religious commitments that are driving the demand or there may be some other factors contributing to this surge. Realizing that the majority of global Sukuk issuance is from the oil exporter countries, one such factor could be the price of crude oil. The relationship between crude oil prices and global Sukuk Index is not much covered in the literature as the facility has just started gaining attention in global capital markets. Insufficient data and the lack of reliable benchmarks for global Islamic Sukuk performances add further to the difficulties. While being impaired by such limits, this study will attempt to find out the possibility of any impact of oil prices on the global Sukuk returns and hence their issuance. The aims are achieved using advanced wavelet techniques. Our results, based on discrete wavelet, showed that there turned out to be noticeable correlation between the heave in global Sukuk issuance and the crude oil prices on more times than not
Was Shari'ah indeed the culprit?
No full textOver the centuries, there is no doubt that the leading civilization of the world of Islam. It is well-known achievements in science and philosophy. Islam 's effective economic / financial. The success of Medieval and on how to establish institutions to borrow taken by these institutions in the West it is now well documented. But this is to create a clear contrast to the early success, is considered one of the most underdeveloped regions of the world still in the Islamic world. Timur Kuran , the tough stance of the Islamic inheritance law, and Muslim legal scholar, is an obstacle to the development of the company form and the company founded by the Muslims as a result of it is bound to be small-scale and short-term argued. [English
Issues of form and substance in Islamic banking and financial transactions
No full textThere is growing criticism levelled against Islamic banking and financial products where industry critics argue that Islamic banks' deposit and finance products are the eaxt replicas of their conventional counterparts in substance. The difference, they contend, is only in the "form" where some English terms are replaced by Arabic ones. They contend that the gift (hibah) given by Islamic banks to their wadi'ah account holders and profit share given to the mudharabah investment account holders resemble interest which conventional banks give to their savings account holders
Le Modele de la finance cooperative au sein de la finance Islamique - quelles perspectives pour le Maroc: cas de l'experience de Ansar - Royaume Uni
No full textIn view of the heightened interest in Islamic Finance (IF) of some of the countries in the Middle East, in particular Morocco, which is currently initiating the promulgation of new laws on IF, it is thought to be timely to present in this paper the model of Cooperative Finance (CF) based on the system of mutual investment that is in line with Shariah. It is hoped that this model can be considered for integration within the new Moroccan legal framework. This approach provides alternatives to banking credit or financing that are in strict compliance with the legal Islamic Finance principles. Moreover it encourages solidarity within civil society or between groups of people demonstrating generosity because of the employment of the philosophy that is essentially based on cooperative principle. Of course, implementing economic structures to embrace the efforts of people with Islamic ethics and sensitivity to finance goods and services based on the cooperative spirit is a real challenge in IF. However, models relying on CF solutions have been implemented, in small scales, for nearly 25 years worldwide (Ansar-UK, Lariba-USA, Qurtuba Canada, etc.). It would make sense to integrate and develop such solutions in a significant industrial scale in Morocco. The purpose of this paper is to articulate the experience of ANSAR-UK as one of intermediate or transient solution before the implementation of monetary policy along the principles of Islamic finance. Specifically, we will present two types of financial products used by AFG structure: (i) Interest free credit facility (Qard Hasan) and (ii) Mutual housing finance model which can be studied for implementation in Morocco. The challenge is to bring out the principles of mutual aid and solidarity which lies at the heart of the IF system that meets with the requirements of the existing Moroccan legal and legislative system. Like ANSAR-UK, we hope this model can be extended to other products such as financing educational products, SMEs, SMIs, business services, etc. based on ethical principles and sharing of profits and losses at a certain level of risk