INCEIF Knowledge Repository (INCEIF University)
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An examination of factors affecting excess liquidity problem of Islamic banking in Malaysia
No full textAfter the global financial crisis, liquidity management has been a great concern to both Islamic and conventional banks, as liquidity management is linked to the bank's profitability and overall sustainability of financial system. While shortage of liquidity has taken centre-stage in Basel 3 reforms as a consequence of the US subprime loan crises, the problem of excess liquidity in Islamic banking remains unresolved in view of the lack of product offerings like medium term sukuk that should give relatively higher yields than short-term Islamic securities ..
Explaining intermediation costs of Islamic banks in OIC countries
No full textThe rapid growth of Islamic finance, especially Islamic banking, and its perceived resiliency during the global financial crisis have been key features in recent Islamic finance literature. The Islamic banking business model has also started to attract empirical attention from economists as to whether it can instil the much needed stability into the financial system. While some studies have offered evidence that Islamic banks are relatively more stable and resilient than their conventional counterparts (Cihak and Hesse, 2010; Hasan and Dridi, 2010), there still remain several concerns over whether Islamic banks can play a distinct role in the stability of the financial system and can better allocate financial resources ..
Do cost efficiency affects liquidity risk in banking? Evidence from selected OIC countries
No full textCost efficiency plays a significant role in bank risk taking behaviour. This paper examines the effect of cost efficiency on the liquidity risk of Islamic banks and conventional banks in 16 OIC countries from 1999 to 2013. The findings suggest that cost efficiency has a positive effect on liquidity risk. Other significant factors of liquidity risk include capital, bank specialization, credit risk, profitability, size, GDP and inflation whereas market concentration is not significant contributor to banking liquidity risk. There is weak evidence to support the notion that Islamic banks have higher level of liquidity risk than conventional banks. The findings imply the need to provide liquidity, probably through a well-functioning money market to lower liquidity risk in banking
Opportunities of implementing Islamic finance system in Muslim-minority countries: case study of the Russian Federation
No full textThe Russian Federation is emerging and yet, according to some experts, potentially successful marketplace for Islamic financial system development and it is in the stage of choosing the path it should take to achieve this goal. It is essential to determine the best possible option that could be suitable for it to adopt as the reputational risk is very high (and moreover, unfortunately it has already faced the compelled termination of several Islamic finance projects in its history). Should the Russian Federation learn from the experience of other Muslim-minority countries (there is also a misconception revealed in this paper that it is not correct to put Muslim-majority ..
HDFC Maldives to issue its second Sukuk in April 2017
No full textHDFC Maldives has submitted to the Capital Market Development Authority of the Maldives its proposal to issue its second sukuk in April 2017. This will be the second corporate sukuk to be listed on the Maldives Stock Exchange; the last sukuk facility was issued in 2013
Ethical banking and Islamic banking: a comparison of Triodos Bank and Islami Bank Bangladesh Limited
No full textEthical finance and Islamic finance are the two important topics in the post global financial crisis market environment and in the context of sustainable development goals and circular economy. If Islamic finance is inherently ethical finance, then what remains the difference between the two is an interesting theme for investigation. Islamic finance is governed by universal and divine legal and moral principles and standards related to economic transactions. Contemporary Islamic financial practices are however, strongly criticized for giving precedence to legal forms over ethical substance and for the rising gap between moral ideals and practical realities. Ethical finance is a conscious human effort to reform finance and it embraces environmentally, socially and morally conscious practices. In this paper we select two banks, namely Islami Bank Bangladesh Limited (IBBL) and Triodos Bank. We perceive that the first is an ideal Islamic Bank and the second is an ideal Ethical Bank. We undertake an analysis of the content of balance sheet disclosures of the two banks and try to gauge the similarities and divergences in their business principles and practices. The analysis uncovers that the current practices of IBBL may far exceed other Islamic banks in terms of financial inclusion, microfinance, gender balance, SME financing and green banking while still being financially stable and profitable. However, Triodos Bank has some significant lead over IBBL regarding ethical practices since it only promotes sustainable businesses. If Triodos Bank exceeds IBBL in ethical expectations as we conclude, then it is far ahead of other Islamic banks in such comparison. The implication of our conclusion is that Islamic banking needs ethical reform and this can be benchmarked with Triodos Bank's business model. For Islamic banks the correct approach would be to strike the right balance between ethics, moral standards, Shar'ah compliance and profitability. The Islamic banking model has in-built features to ensure Shari'ah compliance, and this can be enhanced through adopting sound ethical practices as well as dedicating efforts towards being environment friendly. The paper attempted to present some considerations which if present in Islamic banks would take them away from the criticism of being only for profit in motivation. Triodos has balanced its for-profit and not-for-profit motivations letting the later to lead the first
Relevance, trust and impact
No full textThis month I would like to use a theme that I have been using for several months now, which appears to resonate quite well with many different types of audiences all over the world. That theme is "Relevance, Trust and Impact."
Relevance applies to individuals as well as Corporations. I recall a discussion I had with a leading Shari'a scholar several months ago, where he was citing the Quran and the importance of remaining relevant at all times. He was using this in the context of a growing concern he held that many of his fellow scholars were becoming increasingly irrelevant to the needs of humanity in the 21st Century! This discussion got me focused and it started to get me thinking about myself, my organisation and, indeed, what my next steps should be
The potential of Islamic finance in green energy project financing
No full textFrom the start of 21st century, there has been rapidly increasing awareness of the environmental impact of people’s way of life and usage of resources. This impact arises from overconsumption, pollution, destruction of natural resources which result in emission of greenhouse gases, and permanent destruction that mankind cause to the planet. As the awareness of the serious and far-reaching consequences of climate change continues to grow, communities are looking for solutions to slow down, halt, and mitigate these effects. The renewable energy projects emerge as winning proposition against the current climate and environmental concerns which are the consequence of unsustainable economic activities. This study aims to exhibit great potential of Islamic finance in providing instruments for renewable energy projects. It explains and compares the financial structures used in both conventional finance and Islamic finance for green energy investments, resulting that Islamic finance has plenteous numbers of instruments for financing these projects. The research finds that Islamic finance, compared to its conventional counterpart offers better structures for renewable energy projects thanks to its asset based nature
Demystifying small and medium enterprises' (SMEs) performance in emerging and developing economies: empirical evidence from an enterprise survey
No full textSince small and medium-sized enterprises (SMEs) are drivers of economic growth and job creation in the emerging and developing economies, it is important to develop an evidence-based understanding of factors that drive small and medium-sized enterprises (SMEs) performance to provide an effective supply-side support. Applying the General-to-Specific modeling on World Bank Enterprise Survey data of 266 economies, this paper models five performance indicators based on 80 potential factors derived from firm characteristics, finance, informality, infrastructure, innovation and technology, regulation and taxes, trade and workforce concerning small and medium-sized enterprises (SMEs). We find that the factors vary regarding statistical significance and magnitude between small and medium enterprises
Sustainable impact: "into the great wide open"
No full textThis month I would like to focus on the opportunities that we have ahead of us, so long as we remain patient, persistent and focused on making an impact. Overall, I would like to take a brief look at 4 areas that I believe will be critical during 2017 to take us further forward and into the great wide open. All of them could be tied back to my EPL theory (Education, Perception and Liquidity). All of them have the capability of having sustainable impact