INCEIF Knowledge Repository (INCEIF University)
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Oil and food prices in Malaysia: a nonlinear ARDL analysis
No full textThe present paper analyses the relations between food and oil prices for Malaysia using a nonlinear autoregressive distributed lags (NARDL) model. The bounds test of the NARDL specification suggests the presence of cointegration among the variables, which include the food price, oil price and real GDP. The estimated NARDL model affirms the presence of asymmetries in the food price behavior. Namely, in the long run, we find a significant relation between oil price increases and food price. Meanwhile, the long run relation between oil price reduction and the food price is absent. Furthermore, in the short run, only changes in the positive oil price exert significant influences on the food price inflation. With the absence of significant influence of oil price reduction on the food price both in the long run and in the short run, the role of market power in shaping the behavior of Malaysia’s food price is likely to be significant
Issues in Islamic finance: financial crises caused by a lack of risk sharing
No full textInterview session with Prof. Dr. Abbas Mirakhor, First Holder of INCEIF's Chair in Islamic Finance on "Issues in Islamic finance: financial crises caused by a lack of risk sharing"
The impact of efficiency on discretionary loans/finance loss provision: a comparative study of Islamic and conventional banks
No full textThe paper investigates whether there is a significance difference between the practices of discretionary loan/finance loss provisions between Islamic and conventional banks. Same time, the paper tests whether the efficiency may influence the behaviour of discretionary loans/finance loss provisions, taken into consideration other micro and macro variables. The study utilizes panel data runs over 1996-2011 with unbalanced observations for 16 banks, of which 4 Islamic banks. In order to achieve research objectives, the two-stage approach is adopted to examine the factors that may influence the behaviour of discretionary loan/finance loss provisions with specific emphasize on the efficiency. Furthermore, efficiency scores are estimated using Data Envelopment Windows Analysis. The findings of the research show that Islamic banks employ the discretionary loans/finance loss provisions to manage their earnings. However, the magnitude of discretion of accruals is significantly lower than conventional banks with exception for foreign banks which have reported lower discretionary loans/finance loss provisions than Islamic banks. Moreover, the analysis showed that efficiency affects the overall discretionary loans/finance loss provision positively, although this impact is shaped differently for Islamic and conventional banks
Regulated Shariah compliance: the case of Islamic fnance in Malaysia
No full textThe historical evolution of regulated Shariah compliance in Malaysia started 32 years ago wherein the Islamic banking industry was first regulated by the Islamic Banking Act 1983 (IBA). Under the IBA, Shariah compliance became 'institutionalized' through the formation of a Shariah committee at the first Islamic bank in Malaysia, i.e. Bank Islam Malaysia. Thereafter the number of Islamic financial institutions (IFIs) started to grow. This growth is followed by the growth of Shariah committees being set up in each of these IFIs. Numerous Shariah resolutions started to mushroom from these Shariah committees which at times result in duplicity and inconsistency of rulings (based on the ISRA Research Paper (No. 47/2012) titled 'The Shariah Advisory Council's Role in Resolving Islamic Banking Disputes in Malaysia: A Model to Follow?' by Mohamad, Abdul Hamid and Trakic, Adnan. (2012)). To overcome this, Malaysia's central bank (CBM) established a national reference Shariah advisory body called the Shariah Advisory Council (SAC) on the 1st May 1997. It was only in 2003 that the SAC was given due statutory recognition and empowerment through the amendment of the Central Bank of Malaysia Act 1958 (CBA). The amendment that came through the Central Bank of Malaysia (Amendment) Act 2003 elevated the position of the SAC. Under the CBA, the SAC is deemed as "the authority for the ascertainment of Islamic law for the purpose of Islamic banking business, Takaful business, Islamic financial business...". However, at this stage the adherence and compliance of the resolutions issued by the SAC is only mandatory on the IFIs, Takaful operators and arbitrators
Perspectives on Islamic finance: Islamic finance 2.0
No full textInterview session with Daud Vicary Abdullah, President & Chief Executive Officer of INCEIF on "Perspective on Islamic finance: Islamic finance 2.0"
Combining momentum, value, and quality for the Islamic equity portfolio: multi-style rotation strategies using augmented Black Litterman factor model
No full textThis study constructs active Islamic portfolios using a multi-style rotation strategy, derived from the three prominent styles, namely, momentum, value, and quality investing. We use the stocks that are consistently listed in the U.S. Dow Jones Islamic index for a sample period from 1996 to 2012. We also include two macroeconomic mimicking portfolios to capture the premiums of industrial production growth and inflation innovation, accommodating the economic regime shifts. Based on the information coefficients, we find the six-month momentum and the fractal measure as momentum factors; the enterprise yield (gross profit/TEV) and the book to market ratio as valuation factors; the gross profit to total assets, the return on capital, and the scaled total accruals as quality factors. We further construct active portfolios using the augmented Black Litterman (ABL) factor model to avoid the factor alignment problem, with the factor views predicted using Markov Switching VAR, MIDAS, and Bayesian Model Averaging. The out-of-sample performance of our portfolios can produce information ratios of 0.7–0.8 over the composite indices, and information ratios of 0.42–0.48 over the style indices, with the annualized alphas of 10–11%. Even when we put the constrained tracking error of 1% over the benchmark, our portfolios still produce information ratios of 0.9–1.2 before transaction costs, and 0.6–0.8 after transaction costs. We provide intuitive explanations for each premium changing over time, and suggest the promising strategy for Islamic equity investors to outperform the market
Sustainable fiscal position for Malaysia: a proposal for reform
No full textOver the past three decades, the Malaysian economy has been experiencing economic growth, but at the same time inundated by a deterioration of overall fiscal balance and consequently a rise in national debt. As a country that has faced persistent fiscal deficits for the last 16 years, Malaysia now needs more fiscal space and a plausible fiscal sustainability plan that would place its economy on a trajectory to a higher growth path. Its budget deficit in 2013 stood at 4% of GDP while federal government debt stands at 53% of GDP ..
Shariah committee and shariah governance framework: some evidence
No full textOver the last few decades, the Islamic financial system has shown a strong and improved performance, where the global total assets of the industry as of end 2014 has exceeding USD2.0 trillion or a compounded annual growth rate (GACR) of 17.4% between 2009 and 2014. The Malaysia International Islamic Financial Centre (MIFC) reported monumental issuances in sovereign sukuks by the governments of the UK, Senegal, Hong Kong, South Africa and Luxembourg ammounting to USD 115 billion
The Shari'ah basis for imposition of fees and charges in Islamic banking products and services
No full textThis research is essentially intended to explore relevant Shari'ah principles that may underlie imposition of fees and charges in various lslamic banking products and services (IBPS). It also aims at constructing a Shari'ah parameter for imposition of fees and charges in IBPS. This is a library research in which data has been collected from various materials such as classical fiqh books, regulators' policy guidelines and journal articles. In addition, deductive and inductive rnethods have also been employed to analyze the data critically in search for conclusive findings. The expected outcomes of this research may be in the form of a Shari'ah-compliant guide for practitioners and industry players in relation to the imposition of fees and charges in various products and services under different banking portfolios
Management and development of waqf properties in Malaysia: lessons for Afghanistan
No full textWealth and property are the pride and splendor of humans, in so, those who are willing to donate could be considered as those seeking Allah's (s.w.t) blessing and mercy. Therefore, the practice of establishing and donating to waqf is an important medium to draw oneself closer to Allah (s.w.t). By willingly giving away things that are most loved, one is deemed to get Allah's (s.w.t) blessings. Apart from being a source of development for the economy of Muslims, this practice is strongly encouraged in Islamic doctrine given the benefits it guarantees in the hereafter and this world ..