INCEIF Knowledge Repository (INCEIF University)
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Malaysia not quite there yet as a global wealth management hub
No full textThe sum of global Islamic assets under management (AUM) is relatively small compared with the overall market. In the third quarter of 2015, Islamic AUM represented approximately 1% of the global market or US27.2 billion, according to data from the International Shariah Research Academy for Islamic Finance and Zawya. Chart 2 illustrates the position of Malaysia as a market leader for Islamic fund management. Growth in this industry, even if it’s small, would be a significant boost to the Malaysian economy and crucial when we need to diversify our economy in order to reduce the over-reliance on commodities. However, we are facing a number of challenges, some of which are expounded in the following paragraphs
Credit-risk sharing in Islamic banking: the case for Islamic deposits and investment accounts (IA) in Malaysia
No full textThis paper argues that the introduction of the investment account (IA) in Islamic banking amongst others should reduce potential Shariah non-compliance risk arising from the disproportionate distribution of income to depositors and banks. While impairment expenses are changed to depositors, the returns on mudaraba deposits (ROMD) do not seem to favour depositors as the ROMD has been consistently lower than returns on equity (ROE) despite evidencing some form of credit-risk sharing between banks and mudaraba depositors as outlined by Framework of Rate of Return of Bank Negara Malaysia. When investment accounts are channeled to fund murabaha transactions, the credit risk should be solely carried by the IA holders and hence, the return on investments accounts (ROI) can be the reference point in assessing the risk-taking activities of investment account holders which is comparable to the ROE of bank's shareholders
Making endowment for a good cause
No full textWakaf, or a religious endowment for a charitable cause, is a lesser-known component of Islamic wealth management. It can be viewed as a way of doing good, giving back to society, or earning pahala (divine reward). These endowments have usually involved immovable assets such as buildings and land, but they can also be in the form of movable assets such as furniture and jewellery - as long as they are not forbidden in Islam. Setting up a cash wakaf, or trust fund, is another way to make an endowment. Cash wakaf, which is based on the concept of mudarabah, has been around since the 8th century. But the Islamic authorities have recently established a legal framework for such endowments in an effort to develop the segment. As a result, some new schemes have been implemented
The impact of efficiency on discretionary finance loss provision: a comparative study of Islamic and conventional bank
No full textThe issues of earning management has received attention from practitioners and academicians since the last couple of decades in banking sector. It is evident that bank managers practice the discretion in estimating loan/finance loss provisions for various motives such as reducing earnings variability (Agarwal, Chomsisengphet, Liu & Rhee, 2007; Kanagaretnam, 2004). Majority of the studies have been focusing on conventional banks, and only a few studies have focussed on Islamic banks, for instance, Zoubi and Al-Khazali (2007) and Othman and Mersni (2014). The significance of examining the issues in the context of Islamic banks stems from the fact that Islamic banks should not manage their earnings the way their conventional banks do. This is because the underlying theoretical basis of Islamic banks are based on Shariah principles which is different from conventional banks
Islamic finance, investment and takaful products
No full textAn executive lecture delivered regarding: 1) Islamic financial system and products - consist on the main prohibited elements; 2) investment in prohibited (haram) properties; 3) takaful
Feasibility of corporate waqf as a vehicle for Islamic microfinance, case study of Bangladesh
No full textStudies of Islamic micro finances, sustainability and its development are an important thought in the Islamic finance arena. The global socio economic problems are in increasing motions provoking the betterment of the Muslim Ummah and society in general, resulted in widening the gap between the poor and the rich. Muslim Ummah in the need for an economy that will bridge the gap among the strata of society. Hence, Islamic Micro finance considered as an alternative Shariah compliant tool for Muslims to distribute their wealth in a way that will produce a productive nation. However, studies showed that due to the lack of sufficient fund in IMFIs, the institution had the minimum reach if compared to its conventional counterpart ..
Innovation is key to commence a sukuk market: case of Maldives
No full textMaldives is a hundred percent Muslim country consisting more than thousand islands situated in the Indian Ocean. Nevertheless, the concept of Islamic finance is still new to the country as the first form of Islamic finance was introduced to the country in 2003 via the operations of Amana Takaful Maldives and it took about eight years from 2003 to establish the first Islamic Bank of the country. In 2011, the regulator of the capital markets in the country, the Capital Market Development Authority ('CMDA') undertook the project of pioneering a sukuk market in the country and this dream was realised only in 2013, when Housing Development Finance Corporation Plc ('HDFC') issued the first sukuk that was listed in the Maldives Stock Exchange ('MSE'). The purpose of this article is to explain the challenges faced in issuing the first sukuk in Maldives, in a detailed manner and to inspire other jurisdictions aspiring to issue sukuk by proving this practical example that innovation is the key to commence a sukuk market. This article will also attempt to explain and highlight the inside views of the author who structured the first sukuk for Maldives and who facilitated the process from the beginning to the end. It infers that to initiate a sukuk market in any jurisdiction that has no specific legal and regulatory framework for it, the key to start the market would be to use innovation and move forward with the available resources at hand without reluctance. If this very first step done correctly, the demand for sukuk is capable of building a required legal and regulatory framework in place. Sukuk is a flexible product that could be molded according to the needs and requirements of any jurisdiction. As such sukuk when implemented in different jurisdictions will create new types of it that will reflect the ultimate beauty of Islamic finance. The article highlights a shift in paradigm that could potentially be utilised in the introduction of sukuk in new markets. It is limited to Maldivian experience of sukuk. The details and background of the first sukuk in Maldives is not discussed in detail yet in any publication and it is anticipated this article will inspire future research towards the subject. finance was introduced to the country in 2003 via the operations of Amana Takaful Maldives and it took about eight years from 2003 to establish the first Islamic Bank of the country. In 2011, the regulator of the capital markets in the country, the Capital Market Development Authority ('CMDA') undertook the project of pioneering a sukuk market in the country and this dream was realised only in 2013, when Housing Development Finance Corporation Plc ('HDFC') issued the first sukuk that was listed in the Maldives Stock Exchange ('MSE'). The purpose of this article is to explain the challenges faced in issuing the first sukuk in Maldives, in a detailed manner and to inspire other jurisdictions aspiring to issue sukuk by proving this practical example that innovation is the key to commence a sukuk market. This article will also attempt to explain and highlight the inside views of the author who structured the first sukuk for Maldives and who facilitated the process from the beginning to the end. It infers that to initiate a sukuk market in any jurisdiction that has no specific legal and regulatory framework for it, the key to start the market would be to use innovation and move forward with the available resources at hand without reluctance. If this very first step done correctly, the demand for sukuk is capable of building a required legal and regulatory framework in place. Sukuk is a flexible product that could be molded according to the needs and requirements of any jurisdiction. As such sukuk when implemented in different jurisdictions will create new types of it that will reflect the ultimate beauty of Islamic finance. The article highlights a shift in paradigm that could potentially be utilised in the introduction of sukuk in new markets. It is limited to Maldivian experience of sukuk. The details and background of the first sukuk in Maldives is not discussed in detail yet in any publication and it is anticipated this article will inspire future research towards the subject
The economic system of the early Islamic period: institutions and policies
No full textThis book provides an economic analysis of the earliest Islamic society, focusing on the policies of the Messenger of Islam (Sawa) and his successors during the first four formative decades of Islam. The author uses historical economic data, facts, and evidences that are reported from the period, both prior to and after establishment of the Islamic State, to explore the economic relations, policies, and models that were in practice and applied at that time
Financial stress and economic activity in some emerging Asian economies
No full textThis paper investigates episodes of financial stress and its relationship to economic activity in some Southeast Asian economies. To that end, we use a dynamic factor model to construct a financial stress index for Indonesia, South Korea, Malaysia, the Philippines, and Thailand and examine the relationship between financial stress and economic activity. Our financial stress index consists of riskiness in the banking sector, security market risk, currency risk, external debt and sovereign risk. Empirical results indicate that our financial stress index tracks recessions closely in the sample and impulse response functions suggest financial stress causes significant economic slowdowns
Issues and challenges in introducing Islamic insurance (takaful) into the Algerian financial market: lessons from Malaysia
No full textThe Islamic insurance sector or akaful has seen remarkable global growth in many major markets, especially in Muslim dominated countries. However, the development of Islamic finance, particularly takaful in Algeria appears to have lagged behind. Although there are two Islamic banks operating in Algeria, takaful is yet to be introduced into the Algerian financial market. We ran a study to investigate the perspective of Algerian experts in Islamic finance and takaful on the issues and challenges of introducing Islamic insurance into the Algerian financial market to address the following questions: What are the benefits of introducing Islamic insurance into the Algerian financial market? What challenges might Algeria face with the introduction of Islamic insurance? And how can the Algerian financial market adopt the Malaysian Islamic insurance framework