INCEIF Knowledge Repository (INCEIF University)
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Money demand in an interest free economy
No full textThe objective of this study is to derive a money demand function compatible with the Islamic Economic Rules, i.e., Prohibition of Reba. This rule, evidently eliminates the loan market from the economy.Therefore, we propose that the Islamic financial markets could link the real and nominal sectors of the economy and provide the information needed by both the financial intermediaries and the Central Bank authorities to allocate financial and liquid assets, respectively. Meanwhile, the nature of speculative activities are discussed. and conditions that facilitate harmful speculative activities are identified and the policies that are required to eliminate those conditions are proposed. Based on this financial market model, both demand for and supply of financial resources as well as demand for money balances are derived. This demand for money balance is formulated as a function of rate of return of shares exchanged in the stock market, real GDP, and inflation rate. The estimation result of this function using the cointegrated maximum likelihood Johanson-Josilious method shows that the demand for money is a stable and significant function of the above mentioned variables.
Specifically, the logarithm of the money demanded (m1) is a significant and negative function of dividend's rate of return, but positive and significant function of real GDP and inflation rate
Bridging Islamic juristic differences in contemporary Islamic finance
No full textThis article is an attempt to formulate a viable Shari'ah framework for juristic differences in contemporary Islamic finance. While acknowledging the legitimacy of juristic differences as an inherent feature of Islamic law, such differences could jeopardize a nascent Islamic finance industry, leading to what has come to be arbitrarily termed 'Shari'ah risk' in Islamic finance. Two blocks appear to represent the two disputing sides since the launch of this industry, i.e., the Middle Eastern and South East Asian markets. Thus, this article aims to bridge differences in Islamic finance by proposing a framework and set of parameters that can be applied to all Islamic banking, Islamic capital market and takaful products. Apart from the outlined framework that aims to circumvent juristic disputes, this article concludes that juristic dispute resolution in Islamic finance will not be attainable until one can appreciate the legal and regulatory differences in which Islamic finance operates worldwide
Article review: spam law for the Internet
No full textThis review evaluates and reports on the clarity, quality, originality as well as other aspects of the following research article: Khong WK, 'Spam Law for the Internet', 2001 (3) The Journal of Information Law and Technology (JILT
Islamic monetary policy in Malaysia: a conceptual framework
No full textMonetary policy is an important available tool for governments to pursuit macroeconomic objectives. However, the recent financial crisis has revealed the weaknesses of the conventional monetary policy framework. Monetary policy has been found to be a prominent cause of financial instability. Inability of expansionary monetary policy to induce new lending in many economies is considered as evidence of the impairment of conventional monetary policy transmission mechanism. Additionally, the post-crisis diagnostics have revealed that monetary policy failed to address asset market imbalances. A large number of these studies have focused on the reforms of the conventional
system. Some suggest major structural changes while others in frastructural. This concept paper is an attempt to search for an alternative and more efficient monetary policy framework, which is also Shariah compliant for Malaysia. It will also propose risk sharing instruments as substitute monetary policy tools
Sukuk in various jurisdictions: Shari'ah and legai issues
No full textSukuk are active Islamic finance instruments offered in various jurisdictions and have experienced various events in the recent years. Several sukuk defaults in 2009 highlighted a number of Shari'ah and legal issues that are necessary to be discussed. As a part of the prerequisites to fulfil Shari'ah requirements, compliance to the relevant laws is also a necessity. Among the issues that will be touched upon is ownership of the asset of the sukuk which will include discussion about 'al Qabd' (taking possession). Next, rights of the sukuk holders will be discussed to see whether their interests are well protected and in this context the concept of asset backed will be differentiated from that of the asset based securities. Discussion on the contentious purchase undertaking in sukuk dealings will follow in order to highlight its status and effect on the sukuk and parties to the transactions. Then, the practice of tranching in sukuk issuance will be discussed followed by legal documentation of sukuk issues. In the end, the paper will present way forward for sukuk, so that these issues are further addressed for better sukuk issuance
The approaches and directions taken in Islamic banking and finance development
No full textThe evolution of the Islamic banking and finance (IBF) industry from its humble beginnings in the 1970s has now grown to comprise of more than 600 Islamic banks and 90 takaful companies in over 75 countries. The industry is now managing US$1 trillion in assets with a growth rate of 15-20 per cent per year. Many view this stage as a seamless continuation of the three earlier decades (1970s-1990s) of IBF's development, in which scholars and practitioners habe ladi down its philospohical and conceptual foundations. This expansion might be seen as a success story which shows the world that Islam and the Islamic finance industry can contribute positively to solving modern finance needs. Islamic finance is one the main practical manifestation of the Islamic worldview in the field of economics and finance as well as one of the most visible features of Islamic revivalism in the latter part of the twentieh century. Some, however, do not view this development within such a short period of time as a natural progression from the pioneering stage. Many questions have been raised about the genuineness of IBF and the nature of its progress. While evaluating progress is always a subjective enterprise, the criticisms cannot be underestimated, especially if IBF intends to promote a real economy that can be sustainably developed in the future. This paper attempts to highlight the development of Islamic finance by looking at its emergence and the approaches taken in its development. Subsequently, the directional trends of development and their future outlook will be outlined. This paper argues that Islamic finance should be directed toward providing meaningful development in the twenty-first century. IBF must be competent in order to deliver its full potential as a system, not merely a stopgap means of surviving the crisis. IBF must go above and beyond by providing guidelines for managing a good economy, stimulating growth and development, promoting socio-economic justice, employment and stablitity, IBF cannot limit itself to merely offering economic and financial practices that satisfy the minimum standard of legal requirements
Human capital and economic growth: does gender matter?
No full textThis study is set out to investigate the linkages between economic growth and human capital by gender and level of education. The panel data was averaged at 7 points based on a sample of 62 countries spanning over the years 1970 to 1999. The Dynamic Panel System Generalized Method of Moments (SGMM) was employed on an Autoregressive Distributed Lag Model (ARDL) to analyze the effect of gender on the economic growth, which is the best method given the short time period and large cross sectional characteristic. Control variables such as gross capital formation, export volume, population and year effects were also decoded in order to obtain a more accurate and robust result trend. The data relating to economic variables of interest was extracted from the World Development Index 2007 and the data relating to human capital was taken from the study done by Barro and Lee (2000). The indicators for human capital include number of secondary school graduates and high school graduates according to gender. Findings reveal that females with high school as their highest education level, significantly contributed towards the economic growth, contributing approximately 3.35%. However the results also point out that the male secondary school graduates contributed to the countries’ development more significantly as compared to the female, whereby the formers’ contribution towards the economic development is approximately 5%, ceteris paribus. These results further strengthens the ideology that human capital is indeed an important component, at different levels, and it is this vital component which drives economic growth. An adequate and efficient form of funding or investment is required in order to improve the education industry, which will consequently benefit every other industry thus strengthening the economy
Microfinance and poverty eradication from an Islamic perspective
No full textThe last three decades have witnessed the emergence of many programs for ending poverty: including microfinance and poverty eradication programs. Yet according to the World Bank, poverty has been reduced only by around 10% since 1981, (excluding China, which accounts for nearly all the world’s poverty reduction), as seen in Chart 1. Moreover, the recent economic and financial crises have worsened the situation. According to the latest statistics in 2012, almost half the world (over 3 billion people) live on less than US$2.50 a day; 640 million live without adequate shelter and 925 million people suffer from hunger. This highlights the main objective of the millennium development goals for eradicating extreme poverty and hunger by 2015
Fostering nation building
No full textMention any developed nation like the United States or Japan, and one thing comes to mind as the reason for their success: research. Fuelled by research in various areas, these developed nations have progressed not only materialistically but also holistically. “Research is what brings these nations to where they are. Even today with many Americans not as interested in hard sciences, the government is still focused on getting people from everywhere around the world to lead this sector to support the government initiatives,” says Dr. Mohd-Pisal Zainal, Head of Research and Publication at The Global University of Islamic Finance (INCEIF)