INCEIF Knowledge Repository (INCEIF University)
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Potential for wealth creation from waqf assets
No full textCharitable bequest as an endowment (waqf) is one of the wealth redistribution measures encouraged in Islam to bridge the gap between the haves and the have-nots. Such investments create flows of income/services of a charitable nature, in most cases, after the death of the endowers. Even though it is voluntary in nature, it is means to provide a continuous service to the needy in society and ensures a just and equitable distribution of wealth, and a means to seek God's blessings here and in the here-after
Islamic finance in Malaysia: development and growth
No full textThe slides "Islamic finance in Malaysia: development and growth" presented by Prof. Datuk Dr. Syed Othman Alhabshi to the Delegates from Ministry of Finance, Ghana, at INCEIF
Do profit-sharing investment account holders provide market discipline in an Islamic banking system?
No full textMarket discipline is one of the main pillars for stability and resiliency in banking system (Basel II, 2004). The mechanism of market discipline primarily relies on the role of depositors who receive timely information and act accordingly through their respective accounts. Empirical evidence shows the presence of market discipline, whereby non-insured depositors react to risk factors of the bank accordingly by either withdrawing their deposit (quantity mechanism) or demanding higher return (price mechanism). In tandem with conventional banking system, Islamic banking also emphasize on market discipline, signified by the global standard number 4 issued by Islamic Financial Services Board in 2007. However, unlike conventional banking, market discipline in Islamic Banking is conjectured to work via profit-loss sharing system. That is, the role of Profit Sharing Investment Account (PSIA) holders who are exposed to the variability of profit generated from their investment. The intriguing question of whether PSIA would be more effective and efficient in implementing market discipline remains an ongoing debate. Even there is no empirical study attempts to address this issue. Therefore, we perform empirical research to discover it
Replacing the interest rate mechanism in monetary policy: case of Malaysia
No full textThe current macroeconomic policies in Malaysia follow conventional model based on the risk-transfer and/or risk-shifting paradigm, as opposed to risk-sharing principles proposed in Islamic finance. Malaysia’s monetary policy relies and operates through short-term interest rates which is currently called the overnight policy rate (OPR) to achieve price stability. In order to become a global leader and an indisputable global hub for Islamic finance, there is a need to develop an alternative monetary policy framework for Malaysia that is Shariahbased. One of the key elements in doing so is to come up with an alternative Islamic Pricing Benchmark (IPB) that is free from interest rates. Here, we consider using equity risk premium, which is an important concept in promoting risk-sharing through equity participation. This paper aims to investigate whether equity premium could be an incentive structure for adopting Shariah-based monetary policy. After calculating the historical equity premium in Malaysia in the 1980-2011 period, the data is used to simulate the proposed monetary framework and compared with the results of the present conventional policy framework. We conclude that equity risk premium is not statistically significant as a proxy to be used in Islamic monetary policy framework in Malaysia. However, we propose Return on Equity (ROE) as a better alternative to replace the interest rate
Financial derivatives: markets and applications in Malaysia
No full textThis book is designed specifically for a first course in derivatives. It has been written with the beginner in mind and assumes no previous knowledge or familiarity with derivatives. Written in an informal, easy to read style, it guides readers through the challenging and complex world of forwards, futures and options. As the first book of its kind on Malaysian financial derivatives, the emphasis on local condition enables easier understanding. All financial derivatives contracts traded in Malaysia are covered, in each case, their three common applications - hedging, arbitraging and speculating - are shown by means of fully worked out examples. Extensive use of illustrations and write-ups provide easy comprehension of the underlying logic of derivatives
FinTech - the future is already here
No full textI would like to turn my attention this month to area of our business that is gaining in traction and requires considerable thought, analysis and attention. This relates primarily to technology, otherwise known as FINTECH, and how it relates to the real world and the real economy. I must confess that, as someone in their 60's, I cannot claim to have any particular expertise in this area. However, I would like to make some observations (based purely on my experience) and to promote not only a discussion but also to speed up the process of realisation
Islamic finance: the new normal
No full textThis publication highlights the vast untapped potentials of Islamic finance if unleashed could help meet the massive demand for long-term financing for infrastructure development, promote financial inclusion and spur economic development. Most importantly, the publication underscores the challenges facing Islamic finance in the midst of the era of the new normal - the uncertainties in global economic outlook, accelerated technological changes stimulating expansion of new financial instruments and products, and rising regulatory demands
Administration of zakat on wealth in Maldives
No full textFor Muslims zakat is obligatory and different jurisdictions in the world have different mechanisms to administer it. Maldives is a hundred percent Muslim country and zakat administration in the country is unique. As such the objective of the paper is to discuss the zakat administration in Maldives with special reference to zakat al mal and to discuss the challenges facing the existing way of zakat administration. The paper also includes ways to overcome the challenges. No literature on this area in Maldives could be found and as such reference to primary materials such as unpublished statistics, reports, brochures have been made. It is hoped that this paper will encourage further research on this area in Maldives
Testing the contagion between conventional and Shari'ah-compliant stock indexes: a multi country study using wavelet analysis
No full textRecently there has been heightened concern over "contagion" in the conventional financial markets. This study is motivated by the desire to test empirically whether the contagion seen in conventional stock indexes are also present amongst Shari'ah-compliant stock indexes. A key issue in testing for both Islamic and conventional financial market contagion is to draw a distinction between "excessive" and normal co-movements across financial markets. A distinction between contagion and interdependence during periods of high volatility in financial markets has important implications for the asset allocation strategy of risk managers and for policymakers' optimal policy response to a crisis
Deploying middle-class savings for public infrastructure project financing : a public mudarabah sukuk model : case study for Turkey
No full textThere are some fundamental problems encountered by developing countries such as over-accumulation of inefficient modes of saving, such as gold and real estate, dominance of banking sector as reflected in low public awareness towards risk-sharing instruments and alternatives, low share of public securities in household balance sheets. The fact that risk-sharing finance instruments can address most of the contemporary finance problems in an effective way, which forms the basis of this study. In this respect, the aim of this study is to illustrate case that a mudarabah-based public finance instrument can offer comparable better risk-return profile for investors ..