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Takaful is not disruptive enough
No full textThe development of the Takaful industry in Malaysia has been encouraged by three main factors. First, the Malaysian Muslim population of more than 60% of the country's population cannot be ignored. Statistics have shown that the Muslims in Malaysia now have greater affluence and are educated; and have developed greater skills. The per capita income of the Malays has grown from 60% of the average per capita income in Malaysia in 1970 to 80% of the average per capita in 2000, attributed mainly to the implementation of the New Economic Policy (NEP) which was designed to eradicate poverty and restructure society, put in place in 1971. Takaful is necessary for Muslims as a replacement for conventional insurance. Having said that, one must hasten to add that Takaful is beneficial not only for the Muslims but also non-Muslims, as it adds variety and widens the choices
Mitigating the size of shadow economy and tax evasion in 10 ASEAN economies: is there a role for Islamic banks?
No full textShadow economy and tax evasion are two inseparable phenomena. The existence of the former suggests the present of the latter and vice versa. The presence of shadow economy reduces the tax base and thereby eventually reduces government tax revenue. Since the activity of the shadow economy is excluded from the official gross domestic product (GDP) statistics, thus, official GDP statistics will provide wrong indicators for macroeconomic policy decisions. On the other hand, tax evasion is a growing concern to the government as the tax revenue loss has serious economic consequences. By evading taxes the government is deprived from providing adequate financing for public services, infrastructure, human capital development, best health care services and other facilities that would benefit the society. Furthermore, the loss of tax revenue may result in slow economic growth, the proper functioning of the government as the ability to finance its basic expenses is threatened. Thus, fighting shadow economy and tax evasion should be an important agenda for any government. In this study, we propose to estimate the size of the shadow economy and tax evasion for 10 ASEAN economies and further to determine factors affecting both shadow economy and tax evasion
Determinants of profit rates in true sale-based Islamic financing: a case study of Malaysia
No full textThe fundamental principle of true sale is based on the ownership state of the subject matter of sale where the selling party must own the asset legally and keep full ownership of the goods before making the sale. In the riba-free system, the Islamic bank assumes a role of a trading entity. It undertakes a trading position and exposes itself to business risk as the asset is booked on its balance sheet. It follows that the profit rate it charges the customer will reflect an additional risk-premium to account for the business risk exposure ..
The dawn of Islamic tourism: if there is a will, there is a way
No full textTourism is the lifeline and the golden goose of the economy of the Maldives, the number one honeymoon destination in the world. Tourism is a sector that has shown progressive growth in the country and the largest contribution to the GDP of the country comes from this sector, proving that tourism is the most profitable sector in the country to be invested in. However, although the Maldives is a 100% Muslim nation, the country is alien to the concept of Islamic tourism. With the rapid development of the Islamic finance industry in the country, the urge to test the practical applicability of Islamic tourism in the Maldives has grown. The year 2016 has proved that Islamic finance is here to stay and the country has novel developments that will hopefully realize in the next year which will lead to the sustainable development of Islamic finance in the country
Maldives seeks technical assistance to develop Maldives Center for Islamic Finance
No full textOn the 24th April 2016, Abdulla Jihad, the minister of finance and treasury of the Republic of Maldives, visited the capital of Malaysia, Kuala Lumpur, with a delegation on an official trip to seek technical assistance to develop the newly established Maldives Center for Islamic finance, an entity that was established with the objective of strategizing and promoting Maldives as the hub for Islamic finance and the halal industry in South Asia
Investigating risk shifting in Islamic banks in the dual banking systems of OIC member countries: an application of two-step dynamic GMM
No full textIn the last five decades, advances in information technology and in financial innovations have made possible the emergence of an immense capacity for banks to switch regimes from risk transfer to risk shifting. The devastating power of this capacity was amply pronounced in the financial crisis of 2007/2008. The fallout of which has intensified calls for a re-examination of current banking model and its risk management (or rather mismanagement). Risk shifting is, axiomatically, absent in an ideal Islamic financial system. The Islamic banking model, thus, provides unique paradigm with risk sharing at its core, potentially fostering financial inclusion and reducing the incidence of bank failures and the size of losses incurred by depositors and tax payers. However, the present formation of Islamic banking has grown out of conventional banking and reverse engineers many of its techniques and instruments. The main objective of this paper is to empirically investigate risk management in Islamic banks in dual banking systems in member states of the Organization of Islamic Countries. The two-step dynamic difference GMM is applied to cater for the nature of Islamic banking data, which is characterized by a larger dynamic panel and a smaller timeframe. Findings tend to indicate that Islamic banking has a limiting effect on risk shifting. The effect however is not sufficient to fully nullify the overall risk shifting incentives. The evidence supports strengthening risk sharing and reforming Islamic banking configuration as the way forward
Growth & development of Islamic capital market and takaful
No full textEmerges out of rising demand for long term capital. Long term capital are for large and long-term investments, development projects, and starting and expanding businesses. Islamic capital market (ICM) is also crucial in mitigating risks associated with long term financing, asset & liability mismatch of financial institutions. The common products are: Shariah-compliant stocks, sukuks, Islamic funds, and private equities
Money, capital and the Islamic property rights paradigm
No full textThe purpose of this paper is to highlight the profound transformations that occur in ribawi financial systems when an Islamic conception of property rights is adopted. The nature of financial transactions changes, financial markets undergo structural transformation, and money, capital and financial assets acquire new jurisprudential status. Banks' relationship with their clients and with the Central Bank will be different resulting in different macroeconomic policies and a more effective transmission mechanism. Further, the financial and real sectors of the economy will be integrated, and sustainable
Diversification in crude oil and commodities: a comparative analysis
No full textThis paper is an humble attempt to add value to the existing literature by empirically testing the "time-varying" and "scale dependent" volatilities of and correlations of the sample commodities. Particularly, by incorporating scale dependence, it is able to identify unique portfolio diversification opportunities for different set of investors bearing different investment horizons or holding periods. In order to address the research objectives, we have applied the vector error-correction test and several recently introduced econometric techniques such as the Maximum Overlap Discrete Wavelet Transform (MODWT), Continuous Wavelet Transform (CWT) and Multivariate GARCH - Dynamic Conditional Correlation. The data used in this paper is the daily data of seven commodities (crude oil, gas, gold, silver, copper, soybean and corn) prices from 1 January 2007 until 31 December 2013. Our findings tend to suggest that there is a theoretical relationship between the sample commodities (as evidenced in the cointegration tests) and that the crude oil, gas, gold and copper variables are leading the other commodities (as evidenced in the Vector Error-Correction models)
Shariah audit in Islamic finance
No full textShariah audit represents an important component in the process of ensuring Shariah compliance in the operation of Islamic financial institutions (IFIs). Shariah audit is regarded as one of the very important line of defense in the operations of IFIs. It is normally discussed within the context of Shariah governance, Shariah compliance, Shariah non-compliance risk and risk management