INCEIF Knowledge Repository (INCEIF University)
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Competition, diversification, and stability in the Indonesian banking system
No full textWe examine the impact of competition and portfolio diversification on banking stability for conventional and Islamic banks in Indonesia. We find that the Islamic banking sector is less stable, when compared to the conventional banking sector. Competition in the banking sector reduces stability, while diversification enhances it. We find that competition negatively impacts the Islamic banks, but diversification has no impact on these banks. An interesting finding is that competition and diversification complement each other in enhancing the stability of the Indonesian banking sector. These findings carry an important policy implication for the banking sector of Indonesia
Mechanisms to handle default cases in Islamic banking: the Malaysian approach
No full textThis research investigates how Islamic banking institutions control default cases and the mechanisms they employ in handling such cases with reference to Malaysian Islamic banking regime. It was conducted on an exploratory design that employed doctrinal approach. Data were sourced from relevant statutes, regulatory guidelines, policy documents and established practices among Islamic banking institutions as well as academic texts that pertain to default cases. The data were examined with legal reasoning and qualitative analysis. The research finds that Islamic banks are prone to default cases and provide internal and external mechanisms to handle such cases in their operations. Though Islamic banks statutorily have wider scope than conventional ones, both banks are subject of the same framework in matter of credit risk regulations in Malaysia. The fusion of technology within procedures and governance mechanisms of dealing with default cases offers distinct benefits for Islamic banks in Malaysia. Analysis and reasoning in this research are restricted to the Malaysian Islamic banking regime only due to legal peculiarities among Islamic finance jurisdictions. Likewise, the research is confined to legal and regulatory perception of default cases only and could be furthered onto perceptions of other stakeholders in debt-recovery process. Again, subjective interpretation is inevitable in the analysis of some cases considered. This research contributes towards default cases literature in relation to Islamic banks and offers to fill research gaps therein. The research assists in understanding default control mechanisms employed by Islamic banks in Malaysia and stands to impart lessons to other jurisdictions thereon
Islamic finance education in the era of Industrial Revolution 4.0 (IR 4.0)
No full textThe idea of a new era, the Industrial Revolution (IR 4.0), encourages the increased use of highly automated tools and the development of cutting-edge technology that limits human interaction and speeds up normal processes in the banking industry's existing environment. This paper attempts to explore the significance of IR4.0 in the Islamic finance education. Thus, this article presents three main purposes; 1) to identify the Fourth Industrial Revolution (4th IR); 2) to identify the IR 4.0 and Higher Education In Malaysia and 3) to stress the roles of Islamic Finance Education Providers. This study employed a qualitative research methodology through data collection from several previous works. The findings of this study revealed that the universities as provider of higher education services in the area of Islamic finance must also strategize the Islamic finance education direction and revisit the program that they are currently offering by altering the contents to be in consonance with the IR 4.0
Bank default indicators with volatility clustering
No full textWe estimate default measures for US banks using a model capable of handling volatility clustering like those observed during the Global Financial Crisis (GFC). In order to account for the time variation in volatility, we adapted a GARCH option pricing model which extends the seminal structural approach of default by Merton (J Finance 29(2):449, 1974) and calculated "distance to default" indicators that respond to heightened market developments.With its richer volatility dynamics, our results better reflect higher expected default probabilities precipitated by the GFC. The diagnostics show that the model generally outperforms standard models of default and offers relatively good indicators in assessing bank failures
COVID-19: it's impact in hajj and umrah and a future direction
No full textThere is a misconception that Hajj and Umarah is just a worship matter and the consequences of suspending these religious gathering due to the pandemic is only limited to delay of going Saudi Arabia to perform it. However, the purpose of this paper is to focus on the impact of the pandemic in Hajj and Umrah by exploring its impact on different stakeholders affecting its disruption due to the pandemic. This is a library-based study that uses qualitative method to explore the impact of COVID-19 on Hajj and Umrah. Thus, provisions of Quran and hadith on Hajj and Umrah were examined as primary data for the research to establish the importance of the rituals in Islam. Guidelines set by Hajj regulators and instruments enabling them in that behalf were examined likewise. In addition, content analyses were made of relevant secondary data from published sources including articles, books, newspapers and web resources that embody scholarly, scientific and religious views on the issue being studied. It is realised that in the first year of the pandemic, while Umrah is entirely suspended, Hajj was scaled back and performed by 10,000 people altogether, a tiny segment of the over two and half million that partook in the ritual previously. Hajj and Umrah have been greatly inhibited and jeopardised by the COVID-19 pandemic resulting in religious, social, economic, psychological effects on the eligible but affected Muslims and Muslims countries. Along these lines, recommendations were accordingly proffered on the way forward to better Hajj and Umrah management. It is anticipated that the findings of the research would assist policy makers to comprehend the impact of the pandemic on Hajj and Umrah to ensure that the policies they make in this regard would adequately cover every aspect affecting the stakeholders which is deliberated in this research. It is also expected that the recommendations provided in this paper will assist stakeholders of Hajj and Umrah to grasp the importance of taking precautions for any crisis similar to COVID-19 when it happens
Pandemic thoughts to assist poor in India: being a helper in your community
No full textCOVID-19 is a black swan event that has turned back the global poverty clock. Millions have lost their jobs overnight and have no way to find employment due to the lockdown measures taken to adequately deal with the pandemic and save the humankind from being extinct. The first case of COVID-19 in India was reported on 30 January 2020 and on 24 March 2020, the Prime Minister of the country announced that the country is going for full lockdown. This caused disruption in all major economic activities and led to increase in unemployment causing extreme poverty as no immediate financial helping hand was offered to them. According to the International Labor Organization (ILO), it is expected that 400 million people in India risk falling into poverty due to disruption in economic activities caused by the lockdown measure taken to control the pandemic
Conceptualisation of a waqf asset management company in Malaysia
No full textWaqf has been established in Malaysia as a social instrument that is utilised for the purpose of charity and/or religious purposes. Despite the availability of waqf assets in Malaysia through property and unit trusts, initiatives taken by individual States' Islamic Religious Councils, and the establishment of JAWHAR at the federal level to coordinate development of waqf assets, the overall utilisation, development, and reach of waqf assets in achieving its intended purposes remain low. Differing approaches taken by the individual State Islamic Religious Councils are also evident. This research paper thus proposes the establishment of a centralised waqf asset management company to manage waqf assets, taking lessons from foreign experiences such as Kuwait and Singapore, which emulate a traditional asset management company to solve the underlying issue of the underdevelopment of the waqf assets. To achieve that, the study ascertains the need for a waqf asset management company and the required regulatory and operational framework required for the company to manage and develop waqf assets through the adoption of applicable Islamic debt and capital market instruments. For the structure of the waqf asset management company, we conduct a qualitative study on the literatures surrounding waqf in general. Then, we focus on the current issues surrounding waqf management in Malaysia and recent developments in waqf financing. Finally, we review waqf management in Kuwait and Singapore and apply the understanding and structures of their waqf management for the conceptualisation of a waqf asset management company in Malaysia
VBIT and VBI: a long-term response to sustainable takaful?
No full textThe sustainability agenda has increased in prominence as climate change wreaks havoc across vulnerable areas globally. Over the last two decades, the substantial increase in weather-related events, human displacement, and loss due to conflict and contagion have nudged global leaders to drive more sustainable policies for a better world. Financial institutions, as funders of the largest contributor to climate change, the industrial complex, have also been required to adopt sustainable policies through several responsible, ethical or Environmental, Social, and Governance (ESG) frameworks such as 6 United Nations Principle for Responsible Investment (PRI), 17 United Nations Sustainable Development Goals (SDGs), etc. The significant cost of damages has been increasing exponentially
Impact of bank concentration and financial development on growth volatility: the case of selected OIC countries
No full textThis study investigates the impact of bank concentration and financial development on economic volatility for the Organization of Islamic Cooperation (OIC) member countries. Employing dynamic panel models, we find no evidence that bank concentration is significantly related to economic volatility when it is entered independently in the models. Meanwhile, financial development lowers economic volatility. Extending the models to include market structure - financial development interaction, we note that the impact of bank concentration on volatility depends on the level of financial development within OIC countries. More specifically, the volatility-increasing effect of bank concentration tends to be moderated by financial development. Accordingly, in the wake of banking sector consolidation in these countries, policymakers and regulators in OIC countries should focus on further developing their financial markets such that the negative consequences of resulting market concentration can be mitigated
Shari'ah framework for pricing family takaful products
No full textThis research investigates the Shari'ah compliance of the pricing elements used in family takaful products. The reviewed literature has revealed a great deal of emphasis on the Shari'ah aspects of the takaful contract, distribution of surplus, models used, incorporating waqf in takaful, and the relationship among the parties. Other research has focused on the operational and technical aspects of takaful such as underwriting, pricing, reserving and risk management. None of these studies has addressed the Shari'ah compliance of the pricing elements of family takaful products. Through qualitative research using open-ended interviews as well as content analysis, this research analyses the conformity of family takaful pricing mechanism with the Shari'ah principles of price-setting (tas'ir). The research findings indicate that the assumptions of mortality and morbidity are Shari'ah compliant based on the principles of ibahah (permissibility), maslahah (public interest), istiqra' (induction) and 'urf (custom). However, the investment returns assumption is not quite fair to the shareholders should there be a loss in the investment. The research also indicates that the concept of time value of money is a Shari'ah compliant element that can be used to price family takaful products. Further, the findings highlight that the pricing elements such as health condition are deemed unfair by some practitioners. Similarly, adding an extra loading to the contribution because of family medical history should not be taken for granted