INCEIF Knowledge Repository (INCEIF University)
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Effects of financial development and financial inclusion in mitigating shadow economy in OIC and non-OIC countries
No full textAlthough literature on shadow economy has been growing, the examination is scarce in the case of developing countries, especially the Organization of Islamic Cooperation (OIC) economies. In this study, we develop various testable hypotheses related to shadow economy. We investigate the determinants of shadow economy across a large sample of 141 countries and examine whether it varies across OIC (42) and non-OIC (99) countries. The average size of the shadow economy in OIC countries is 34.36% of gross domestic product (GDP) while it is 30.57% of GDP in non-OlC economies. The approach of exploring various definitions, historical development, types, Islamic viewpoint and the determining factors behind people's preference to join shadow economy is adopted in order to provide a deeper understanding of shadow economy. As far as our first objective Is concerned, we explored the determinants of shadow economy in OIC and non-OIC countries (1995-2015). Our results show that economic growth and institutional variables have negative association with shadow economy in both types of countries whereas government expenditure has a positive effect on shadow economy in both groups ..
Integrating waqf crowdfunding into the blockchain: a modern approach for creating a waqf market
No full textLooking at current global reports, it seems that half of the world's population is suffering economically and socially. According to the most recent estimates, in 2013, 10.7 per cent of the world's population (767 million people) lived on less than US1.25 a day (SESRIC - Statistical, Economic and Social Research and Training Centre for Islamic Countries 2015). Highlighting these upsetting statistics reveals the need to explore alternative ways to address some of the current global issues through the study of the role of the institution of waqf and the potentials of fintech
Mitigating fatalities and damages due to natural disasters: do human development and corruption matters?
No full textStudies have shown that natural disasters could pose a spectrum of challenges to human development, especially in developing countries. United Nations Development Programme (UNDP, 2004) estimates that low human development countries accounted for more than half of reported casualties due to natural disasters for the last two decades. The study also estimates that nearly 85 percent of the people exposed to natural disasters live in either medium or low human development countries. Other related studies have shown that corrupted officials in poor countries would increase the vulnerability of these countries to natural disasters. Thus, the purpose of the present study is to investigate the impact of human development indicators, such as income per capita and human capital development (education level), as well as corruption (a measure of governance) on fatalities and damages due to natural disasters in selected 77 developing countries. By employing the two-step system GMM estimators, we identified several economic variables that are significantly related to fatalities and property damages due to natural disasters, such as flood, storm, earthquake, landslides, drought, extreme temperature, wildfire, and volcanic eruption. By exploring the impact of economic development, population density, unemployment rate, investment, government consumption expenditure, education, openness, and corruption, on disaster preparedness, it would be useful for both government and international disaster risk reduction and mitigation agencies to re-evaluate their approach towards target recipients in the future
A statistical model of the firm
No full textA model of the firm is proposed that considers the firm to be a stochastic and random entity described by an action functional and the Feynman path integral. The action functional is postulated based on the profit maximization principle. The Cobb-Douglas production function and the Solow-Swan model for capital input are employed to define a specific model for the firm's action functional. An option is defined on the profit of a firm in the framework of the statistical model. The option's price can be studied empirically. A profit and loss sharing system of wages is defined as an extension of fixed wages
Venture waqf in a circular economy
No full textThis paper aims to enhance the impact of incorporated waqf institutions by blending their resources to promote responsible small businesses that are inclusive of human development, service to society and preservation of ecological environment and other species. This is expected to shift the paradigm of businesses from the current waste-oriented linear economy to ideally a zero-waste circular economy. This is an analytical study building on the experience of European Venture Philanthropy Organizations (VPOs) that work with the primary objective of making impactful businesses successful, with capital protection and return on investment being of secondary concern. This paper suggests an incorporated institutional design that blends resources for promoting responsible businesses using a new hybrid financial mechanism, namely, equity-at-default (EaD) to replace collateral and foreclosure requirements with responsibility and compassion. The research calls for changing the business paradigm from linear to circular, an incorporated institutional framework for venture waqf, purpose of the waqf to make impactful small businesses successful and designing a financial contract to loan in favor of responsible businesses that convert to equity stake for the waqf in case of default (EaD) replacing collateral and foreclosure requirements. This is a theoretical study motivated by the success of VPOs but assigns a new role to waqf institutions. Furthermore, the incorporated nature of waqf is a new idea and EaD is a new mechanism. Being new, these ideas have the risk of not being implemented. However, the broader message that waqf shall promote businesses that are inclusive of ecological concerns is generally applicable. The paper has a significant practical implication to transform the responsibility and consciousness of businesses. Waqf is fundamentally a compassionate institution, and it must enhance the responsibility of businesses to become more inclusive of the environment and other species. It should also become more compassionate toward businesses that are in distress and default. In this sense, the paper tries to internalize compassion in financial contracting that can potentially change the architecture of lending. Altering businesses' mindset from a waste-driven extractive linear economy to inclusive circular economy has a tremendous transformative role. This will have implications for enhancing business consciousness and responsibility. As poverty is a phenomenon of state of mind, changing the society's state of thought in Muslim communities is expected to have basic positive implications. Entrepreneurs with a new mindset can have far-reaching positive impacts on the society
Framework for financial hardship indebtedness management in abandoned housing projects in Malaysia
No full textThis paper aims to examine the existing practices and pertinent issues affecting Islamic banks and their customers in abandoned housing projects (AHPs) to ensure compliance with Shari'ah and statutory requirements. This study employs the qualitative research method using the inductive approach to analyze both primary and secondary data and sources. Data collection involved a series of semi-structured interviews with five volunteering Islamic banks and a representative of Abandoned Property Owners Association Malaysia (Victims). Statutory acts, regulatory policies, guidelines, directives and standards were also analyzed. The result indicates developer's default, underlying contracts, regulatory arbitrage and bureaucracy, attitudinal disposition of customers and sell-then-build approach as major factors of AHP's conundrum. This study has suggested both short- and long-term solutions based on the principles of justice, public interests and removal of hardship to resolve and effectively manage financial hardship indebtedness arising from housing abandonment. Further, part of the proposed solutions would also reshape housing development policies and home financing transactions
Shariah and socially responsible investment (SRIs) in the US: are investors in these portfolios disadvantaged?
No full textIn recent years, there has been a notable increase in investor consideration for religiosity and/or ethics in investment decision making it a class of investments in its own right and an important input in portfolio selection decisions. Investment decisions are governed not only by factors including investor anticipation of future economic, geo-political trends, social changes and investment timing but also religion or belief system. The religiosity and/or ethical practices prompt investors to discard so-called 'sin stocks' and limit their investment horizons to permissible investment alternatives
Possible impact of the latest international standard of auditing 570 on the rate of going concern opinion issuance in Malaysia
No full textAuditors are required to issue going concern opinion (GC opinion) to companies that are incapable to continue their operations in the near future. It is very important for auditors to issue the GC opinion properly because such opinion is the only signal from them on the viability of a company. Investors need such signal before they can make good investment decisions. In Malaysia however, auditors do not want to issue GC opinion to a very large percentage of financially distressed companies. This motivates this paper to discuss the impact of the latest ISA 570 (2016) on GC opinion issuance rate in this country. Overall, we are in the opinion that there is no strong ground to expect the new ISA 570 (2016) to reduce the problem of Malaysian auditors do not issue the GC opinion to many financially distressed companies. This is due to no new stricter measures being introduced in the latest auditing standard. Nonetheless, we propose four actions that can be taken by Malaysian policy makers and standard setters if they want to improve the rate and practice of GC opinion issuance
Finance and inequality in eight Asian countries: does size matter
No full textThe present paper seeks to assess the implications of increasing financial sector size on income inequality in eight Asian countries - Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, and South Korea. Adopting a panel data approach, it document a non-linear relation between income inequality and financial sector size in these countries. More precisely, the increasing financial sector size is favourable to equal income distribution only up until a size threshold, beyond which further expansion of the financial sector can worsen income distribution. The analysis further highlights the income-equalizing effect of economic growth and infrastructure development and the income un-equalizing effect of trade and government expenditures. These results are robust to alternative model specifications and to exclusion of a country at a time from the sample
Does diversification improve bank performance in dual-banking systems?
No full textConventional intermediation theories argue that imperfections in financial markets are raison d'etre for financial intermediaries such as banks. Islamic banks are no different from their conventional counterparts in this regard as they too perform similar intermediary functions. However, unlike their conventional counterparts, the principles of Islamic banks are different as they are operated on Shariah-based precepts of riba avoidance and risk sharing. In practice, however, Islamic banks are claimed to be likened to conventional banks, which raises concerns about possible convergence of these two banking systems over time