INCEIF Knowledge Repository (INCEIF University)
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Maldives Islamic Bank's total assets reach MVR6 billion (US$388.23 million)
No full textIn the Q4 report of 2022, it is stated that Maldives Islamic Bank (MIB)'s total assets reached the MVR6 billion (US330.64 million) from MVR4.62 billion (US5.95 million) compared with MVR84.11 million (US1.4 million) from MVR36.86 million (US2.15) from MVR32.24 (US$2.09) recorded during Q3
Regional currency arrangements come with huge challenges
No full textDe-dollarising seems to be in vogue these days. China, Russia and their BRICS (Brazil, Russia, India, China and South Africa) partners may have initiated the narrative but the desire to remove or at least reduce the US dollar's hegemony has spread. Many nations, including Malaysia, have openly articulated their desire to move away from US dollar dependence for their trade. Though it has been a long time coming, the rising disdain of the US dollar is in no small part due to American policy hubris and abuse of its reserve currency status. As the only country that can repay its foreign debt in its own currency, it has run years of current account deficits, created a mountain of debt surpassing US$30 trillion (RM136 trillion) and effectively piggybacks on the rest of the world with its autarchic monetary policies
Islamic fintech: accelerating the financial inclusion agenda in Malaysia
No full textFinancial technology (fintech) refers to the application of technology-software, algorithms and even hardware-to traditional financial services to save time, optimise cost, and enhance efficiency and user experience. Fintech applications, which include digital payment, internet and mobile banking, peer-to-peer (P2P) financing, equity crowdfunding (ECF), robo-advisory, digital asset exchanges, insuretech, and e-services have provided innovative solutions to various stakeholders, either the surplus units (i.e., investors who have excess funds) or deficit units (i.e., parties who need funds). Islamic fintech, on the other hand, refers to the use of technology to deliver financial services and solutions that comply with the Shariah principles and requirements, promote the well-being of mankind, and integrate ethical elements to attain fairness and justice
Introduction to Islamic finance in Africa
No full textAfrica is a continent that has contributed significantly to the institutionalization and development of Islamic finance in the world. Islam is the major religion in many countries in Africa, particularly those in the north of the continent (Saleh, 2021). For instance, in countries like Somalia, Morocco, Mauritania and Algeria about 99% of the population are Muslims while in Egypt 90% of the population are Muslims (Saleh, 2021). In 1963, the first ever Islamic bank incorporated in the world was formed in Egypt (Orhan, 2018) while in 1979, the world's first takaful company was incorporated in Sudan (Billah et al. 2019). Though the institutionalization of Islamic finance began in the African continent, there is still a need to unlock the full potential of Islamic finance (Dey and Jen, 2018; Parker, 2021). For the huge necessity to finance infrastructure projects and to alleviate poverty via financial inclusion, Islamic finance has the potential to provide adequate solutions (Monnet, 2019). However, there are numerous challenges such as the regulatory gap and knowledge gap that must be resolved to implement Islamic finance in a sustainable manner in Africa (Dey and Jen, 2018). Lack of government support to utilize Islamic finance in Africa has also been identified as a challenge (Parker, 2021). The straw that broke the camel's back in this regard is COVID-19, which has become a threat not only to Africa but also the whole world in the quest to achieve sustainable development
Does (Islamic) stock market mitigate shadow economy in Malaysia?
No full textIn the present study we estimate the size of the shadow economy for Malaysia using the modified-cash-deposit-ratio (MCDR) approach. Subsequently, we relate shadow economy with its determinants such as national income, government spending, stock market development, misery index and tax burden. Our emphasis in this study is on the role of Islamic stock market in mitigating shadow economy in Malaysia. We consider Bursa Malaysia as an Islamic stock market as more than 70% of the companies listed in the Bursa Malaysia stock indices are Sharia-compliant. Our results clearly suggest that there is a role for Islamic stock market in reducing the size of shadow economy in Malaysia
Depositors response to the ESG risks: evidence of market discipline from banks in the Organisation of Islamic Cooperation Countries region
No full textThe Global Risk Report (2021) identifies ESG risks as the number one risk faced by the global economy. Banks have contributed to this risk and can also contribute to mitigating it. High exposure of Banks to ESG risks will contribute to climate disaster, which in turn will have financial risk implications for banks in the form of disaster events risks and energy transition risks. Depositors can discipline banks in reducing and preferably eliminating their ESG risks through enforcing market discipline by deposit withdrawal. This thesis investigates the extent to which deposit withdrawal works as market discipline against ESG risks in the banks of the OIC region. The thesis also examines the impact of financial risk represented by CAMELS variables on depositors' behavior. The generalized method of moments (System GMM estimator) is used for dynamic panel data models, as well as a sample from 65 countries over the period 2007 to 2016. Our findings indicate that depositors react significantly to environmental and governance risks while depositors' discipline does not exist with social risks. With regard to financial risks, our findings suggest weak evidence of market discipline. However, regressing CAMELS components separately provides better results and understanding than regressing CAMELS components collectively. In the OIC region, the study indicates that depositors tend to be sensitive to changes in capital adequacy, bank earnings and ESG risks, while in the non-OIC region, depositors are only sensitive to management quality
Islamic digital finance. Are we building a value-based ecosystem?
No full textDisruption of banking services over the last five years has evolved into a more normative expectation of new financial technology (fintech) with varied offerings and competitive solutions compared to incumbent (traditional, mainstream) banks. National initiatives have also focused on building micro, small and medium enterprises (MSMEs) in the aftermath of the pandemic and have successfully applied digital transformation strategies to support their market inclusion. For example, Southeast Asian economies rely on MSMEs as they represent almost 70 per cent of the respective national labour forces and over 40 per cent of the countries� gross domestic product (GDP) (Asian Development Bank, 2020). The big challenge has been access to financing for entrepreneurs, where over 60 per cent of surveyed MSMEs claimed they were unable to access financing (Harvard Business Review, 2021)
Legal and compliance reform for Islamic financial benchmarking
No full textIslamic financial benchmarking is an area that requires research and needs practical solutions to advance the Islamic finance industry to a greater level. From the inception of contemporary Islamic finance, criticisms have been made about the fact that in Islamic finance, financing rates are benchmarked against conventional interest rates. To respond to these criticisms, Sharī ͑ah scholars have given justifications from Sharī ͑ah perspectives and in this regard some scholars ask: “Does consumption of beef suddenly become forbidden if its price were based on the price of pork?” (Alshubaily, 2018)
Determinants of shadow economy in OIC and non-OIC countries: the role of financial development
No full textThe purpose of this paper is to empirically investigate the determinants and the impact of financial development on shadow economy in OIC countries and then compared with non-OIC countries. The study applies advanced panel GMM technique. The study finds that macro-variables (unemployment, economic growth, money supply and foreign trade) and institutional variables reduce shadow economy both in OIC and non-OIC countries. The study also explores that financial development mitigates shadow economy; however, its impact is significantly less in case of OIC economies compared to the non-OIC countries. Since the focus of this study is OIC countries vs non-OIC countries, the research only includes discussion about shadow economy in 42 OIC member states and 99 non-OIC economies. The decision to restrict the study to 42 OIC economies and 99 non-OIC nations is due to the availability of data. The study suggests that free market and good business environment in the formal economy are the keys to have less shadow economy. Good institutional setup and ease in regulations can attract firms and businesses from informal sector to the official economy, while political instability is one of the main factors for having large size of shadow economy. The OIC member countries should implement policies which improve accessibility to finance of every citizen of the country
Adoption of the COSO methodology for internal Shari'ah audit
No full textIslamic financial institutions (IFIs) are required to establish a Shari'ah Governance Framework (SGF) to strengthen their Shari'ah compliance mechanism and ensure that all relevant IFI regulations are in line with Shari'ah rules and principles. Effective implementation of the Shari'ah-compliance function will further promote stakeholder confidence, as well as the integrity of IFIs, by reducing Shari'ah non-compliance risks. This study aims to examine the internal control framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and explore the extent to which it can be incorporated in the Shari'ah-compliance function of IFIs. This study adopts a qualitative method of inquiry, utilizing the inductive method and content analysis to build comprehensive knowledge that will assist in exploring the framework of COSO methodology and the extent to which it can be adopted by IFIs. The findings indicate that the existing frameworks of Shari'ah governance, whether that of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) or Bank Negara Malaysia (BNM), need to be further developed. Therefore, the adoption of COSO methodology in the internal Shari'ah audit of IFIs, as suggested by AAOIFI, is not only possible but desirable. The study also finds that the COSO framework places the highest priority on risk management in that it makes it an integral part of the decision making process in all the institution's activities. As a result, incorporating the comprehensive COSO risk management structure within the Shari'ah-compliance function will enhance risk management in IFIs