INCEIF Knowledge Repository (INCEIF University)
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Islamic finance in North America
No full textIslamic finance is an alternative source of financing to the conventional financing that emerged via institutionalization in the 1960s. It has gained popularity in the world irrespective of faith convictions due to the universal and ethical principles adhered in the practice of it. In this regard, North America is not an exception. In the United States and Canada, Islamic finance has been adopted, and there is an established regulatory environment for the operation of it with political support. There is also a wide range of innovative Islamic finance products structured and used in this part of the world that is conducive to the demand of the population and regulatory environment of Islamic finance found in the respective jurisdictions. These two countries are often described as competitors in the region, but the reality is despite the competitive relationship they are in by default, they are also collaborators in developing Islamic finance in the region. More than one million self-identified Muslims in Canada represents 3.2 percent of the total Canadian population. In comparison, the Muslim population in the United States represents 0.9 percent of the total population. Hence, Canada has been viewed as more suitable to become the hub of Islamic finance in the region simply because the number of Muslims in Canada is greater than that found in the United States in terms of religious representation in each nation's total population. Furthermore, in terms of the regulatory environment, though the regulatory landscape applicable to financial institutions including Islamic financial institutions in the United States is much more sophisticated, the lack of a regulatory environment in Canada for Islamic finance is viewed as an opportunity for Canada as this provides flexibility required to develop and innovate unique Islamic finance products and increase the number of institutions dealing with Islamic finance. Sharia governance is the backbone of the Islamic finance industry in any jurisdiction. A common weakness found in both countries in the development of Islamic finance is on adopting a uniform Sharia governance framework applicable to all institutions offering Islamic finance products and services. In the early 21st century, the practice of Islamic financial institutions in the region indicates that there is no uniform yardstick to adopt in this regard, leading to confusion as well as lack of confidence-not only among 'laypeople' but among Sharia scholars as well-in the Sharia-compliant products offered. In the absence of regulatory backing in this regard, an agreement among the industry stakeholders in the region would be sufficient to standardize this practice and implement procedural requirements that ought to be followed in offering Sharia-compliant products and services
OIC economies during the COVID-19: implications and recommendations
No full textCOVID-19 is a pandemic that is a black swan event that has disrupted the economic activities in the whole world. Organization for Islamic Cooperation (OIC) is the second largest international organization that unites Muslims to collectively protect their interest by having a global platform to voice out their concerns. This is an exploratory research of which the objective is to understand the implication of this pandemic on OIC countries to suggest ways in which pandemic related economic challenges facing these countries could be resolved. This research identifies four key economic challenges faced by the OIC countries: challenges in adapting to new normal in in re-starting the economic activities; issues in formulating effective plans for economic recovery; increase in poverty, unemployment and inequality in societies; and disruption to global economy chains. To overcome these economic challenges identified, fives recommendations are proposed via which OIC could play the leading role in ensuring that OIC countries could leverage each other to rebound the respective economies in the shortest possible time. The recommendations proposed are made not to gain short term benefits; but they are proposed considering the long-term benefits it will give to the economies of member countries of OIC. The recommendations proposed are: creating a fintech ecosystem for financial services and introducing OIC electronic commerce market; formulating strategies to implement shared prosperity via effective implementation of Islamic social finance; adopting Blue Ocean Strategy; promoting Islamic economic principles; and implementing circular economy concept. It is anticipated that through this research the economic challenges faced by Muslim countries due to the pandemic can be understood and the recommendations proposed could be utilized by the government and policymakers of the respective countries to resolve the challenges identified
Russia-Ukraine conflict: 2030 Agenda for SDGs hangs in the balance
No full textWhile the world is yet to fully recuperate from the social and economic repercussions of COVID-19, the Russia-Ukraine conflict poses another major threat causing a humanitarian crisis and economic shock. Although the 2030 Agenda for Sustainable Development Goals (SDGs) and its pledge to "leave no one behind" is a universal commitment to protect the livelihoods of vulnerable groups, the Russia-Ukraine ongoing conflict is causing immense suffering and a gloomy future for the 2030 Agenda. The purpose of this study is to provide a holistic understanding of the ramifications of the Russia-Ukraine war in SDGs progress around the world. Further, the authors shed light on how stakeholders can help engage in support of SDGs in such a challenging time
Internationalization of zakat to serve humanity in the midst of COVID-19: using international organizations as intermediaries of zakat
No full textZakat is an effective Islamic social financial tool that could be used to eliminate global poverty. The pandemic has turned back the world's poverty clock and as such, more work is required to bring equitable and shared prosperity to the world. International organizations that serve humanity could be used as intermediaries of zakat to reach out to those categories of legal recipients of zakat who are most deserved of such assistance, but who are unidentified and unreachable by the zakat organizations. This is with the ultimate objective of enhancing the effectivity of zakat as a social finance tool. However, using international organizations as zakat intermediaries is not a straightforward issue and limited literature are available on the matter to understand the contemporary practice and challenges in this regard. As such, using a qualitative research approach, this chapter sheds light on the issues revolving around the internationalization of zakat by looking at the existing practice of it by identifying the challenges in doing so. This chapter proposes a way to resolve the existing issues in internationalization of zakat by leveraging on blockchain technology where a proposition is made to introduce a crypto zakat platform. This chapter also reveals that in contemporary times, there are three ways in which international organizations have been involved as zakat intermediaries: by creating a zakat fund for specific purpose; by receiving zakat money to be distributed to transform the societies in countries other than where the zakat was collected; and by creating partnership with zakat organizations to use zakat money in the respective country in which zakat was collected. It is anticipated that soon the stakeholders of zakat would join hands with international organizations to effectively manage zakat to alleviate poverty in the world exacerbated by the ongoing pandemic
Challenges facing the development of takaful industry in Bangladesh and Indonesia: a review
No full textTakaful is the Islamic version of insurance, and the size of global takaful industry is about USD$51 billion in 2019. Limited studies have been conducted on the development of takaful sector in Bangladesh and Indonesia using a comparative approach. As such, this review aims at investigating the challenges facing the development of takaful industry in these two countries. Primary sources such as laws and regulations, and the secondary sources such as scholarly articles and books on the subject matter were reviewed to derive conclusions. This review concludes that efficiency of takaful in both countries depend on some common factors, such as having a proper and sophisticated regulatory framework for takaful with the development of required talent pool while focusing on creating awareness and education to ensure that not only the general public have the required takaful literacy; but even the existing and potential customers have the basic knowledge about takaful. Further, it is also found in this review that in order to further develop the takaful industry in both countries, it is imperative to use innovation and technology to promote takaful parallel to the conventional insurance by creating a level playing field. This review also identifies some specific issues in both countries and have suggested recommendations accordingly. It is anticipated that the outcome of this review will assist policy makers and other stakeholders to understand the inhibitions facing the development of takaful industry in these two jurisdictions with hope that these challenges can be eliminated for the sustainable development of takaful sector
Cryptos: distiguishing hype and realities in Islamic finance
No full textAccording to the Financial Stability Board's recent study, crypto-asset market capitalisation grew 3.5 times in 2021 to USD2.6 trillion. Still, the market remains a small portion of the overall global financial system, and direct connections between crypto assets and systemically important financial institutions and core financial markets are limited at the present time. The market, according to the European Central Bank, represents less than 1% of the global financial system in terms of size, but it is still similar in size to, for example, the securitised sub-prime mortgage markets that triggered the global financial crisis of 2007-2008. However, most central banks perceive the use of cryptocurrencies for payments to be trivial or limited to niche groups and not widely used in critical financial services (including payments) on which the real economy depends. Besides, the different incidences of price volatility in cryptocurrency markets have, so far, been contained within crypto-asset markets and have not spilled over to other financial markets and infrastructures. This report - which is based on the notes and commentaries shared by the participants of the workshop "Cryptos: Distinguishing Hype and Realities in Islamic Finance", held at SOAS, University of London on 16th June 2022 - discusses the above-mentioned topic in some detail. Although the full commentaries are extremely valuable and beneficial, this 'summary of commentaries' aims to discuss the most crucial concerns regarding cryptos that the world faces today. The report gives some insights regarding the crypto-asset industry and sheds light on some legal and Shari'ah issues that can arise in cryptocurrencies. To serve this purpose, this report is a brief compilation, with selective editing, of the notes and commentaries shared by individuals prior to the workshop. A list of contributors is placed at the end of this report
Understanding issues of affordable housing in Malaysia to attract investment: an exploratory investigation
No full textThis study attempts to investigate the issues that impede the provision of affordable housing for Malaysian population. These issues need to be identified and addressed, as they hinder potential private investments in affordable housing projects. In order to achieve this aim, a qualitative method was adopted, in the form of interviews with several developers and institutional investors. Seven areas were recognised to be the sources of major problems with affordable housing in Malaysia namely, the lax policy; poor urban design and planning; supply and demand; property overhang, financing, and price; lacking innovation and research and development; escalating development costs; as well as obsolete quota and subsidy programmes. These findings may provide invaluable insight for policymakers in identifying and resolving the issues of affordable housing, which may then create potential avenue for private investment to alleviate the issue of shortage of affordable housing
Mushrooming of gig workforce: advantageous to the Islamic finance industry in Malaysia?
No full textA near three-year protracted COVID-19 pandemic since the 2019 first outbreak in Wuhan, China, has hugely impacted all the basic economic units: the household, the firm and the government. Over the two-year period from 2 January 2020 to 15 January 2022, the following five industries: airlines; hotels, restaurants and leisure; energy equipment and services; automobiles, and specialty retail were most affected by lockdowns and social distancing intended to curtail the spread of COVID-19 (S&P Global Market Intelligence, 2022). Many of these industries are small businesses requiring a longer period to recover and return to their pre-pandemic state. One of these businesses' immediate measures was retrenching a certain percentage of employees to reduce operational costs. For the retrenched employees who need to find other sources of income to survive, the gig economy, which had gained attention after the global financial crisis in 2008, is an attractive alternative for them to earn a living. This article sheds light on the growth drivers of gig workforce after the COVID-19 pandemic and how advantageous this new economic trend is to the Islamic finance industry
Intellectual capital disclosure practices and governance mechanisms of Islamic banks: a comparative study between IFRS and AAOIFI financial reporting regimes
No full textThe Islamic banking industry has grown and gained a remarkable position in the global share of the financial sector. This growth requires a strong emphasis on intellectual capital (IC) that includes dedicated human capital, reliable structural capital, and a committed and long lasting relational capital among participants in the Islamic banking ecosystem. The study aims is to examine and compare the intellectual capital disclosure (ICD) practices of Islamic banks under different reporting regimes. The IFRS issued by IASB and FAS issued by AAOIFI are the two commonly used standards for financial repoting by Islamic banks. The findings indicate that, on average, there is not much difference between IFSB and AAOIFI scores (IASB:57.25% vs AAOIFI: 56.58%); in fact, most of IFSB-based banks performed better that AAOIFI-based banks throughout the period of study except in first year (i.e. 2012). The study also examined the relationship of corporate governance and the moderating role of Shariah committee with the extent of ICD practices among the Islamic banks. Several corporate governance mechanisms such as board size, number of board meetings, board gender, board independence, board expertise, audit committee size, number of audit committee meeting, audit committee gender, audit committee independence, and audit committee expertise were used as dependent variables. While, selected Shariah committee characteristics that, included Shariah committee size and Shariah committee gender were the moderating variables and firm characteristics were used as control variables to control for cross-sectional differences associated with ICD. The study applied the prominent resourced-based, agency and legitimacy theories and formulated twenty-three (23) hypotheses. Based on a total sample of 231 Islamic banks in four countries, namely Malaysia, Brunei, Bahrain and Jordan covering year 2012 to 2018, the findings revealed that having an effective governance structure is essential, as it is able to influence the ICD practices of Islamic banks. Specifically, the study found that ICD practices of Islamic banks is significantly and positively associated with board size, board independence, audit committee gender and audit committee independence. The results suggest that larger or reasonable board size tends to have varied skills and expertise among the board members, resulting in more information by allowing for greater diversity of backgrounds and viewpoints
Towards a post-Covid global financial system lessons in social responsibility from Islamic finance
No full textThe impact of Covid-19 has exposed major cracks in the global financial system and has severely undermined global financial stability. Never have the shortcomings of universal financialization - the dominant principle of the global financial system for the past thirty-odd years - been more obvious or more painful. Islamic finance provides ways forward: based on commercial and social modes of risk-sharing and financing, it offers radical structural solutions to the health, human and financial crises faced in this unprecedented time. In Towards a post-Covid global financial system lessons in social responsibility from Islamic finance, an international team of experts explore how Covid-19 has affected the most vulnerable parts of the global economy; how it has been met by Islamic banking and finance specifically; and how the principles of Islamic social finance could be used to have a fairer, more resilient Islamic finance system for all