1,720,995 research outputs found
Risky behaviour of Islamic banks in Malaysia with special reference to credit risk
No full textThis study attempts to investigate the aggressive and highly risky financing behaviour of Islamic banks operating in Malaysia. Particular reference was given to Islamic banks' credit risk-weighted assets for the purpose of determining the state of aggressive risk-taking behaviour in relation to the level of debt financing undertaken. 15 Islamic banks operating in Malaysia were examined over a short period of four years from 2013 - 2016; primarily due to limitations afforded by Pillar 3 Disclosure availabilities. Regulatory guidelines were assessed via the Bank Negara Malaysia (BNM) 2015 Capital Adequacy Framework for Islamic Banking (CAFIB) in attempt to ..
Economic principles in Islam: some methodological issues
No full textThis paper examines the nature of economic principles in Islam. Two types of economic principles are identified. The first type refers to the economic laws derived from revelation-based sources namely the Quran, Sunnah, Ijtihad and Ijma. The second type refers to economic lwas derived from reasoning and experience. The former is the economic system and the latter is economic theory. Both forms of economic laws are in harmony and have no basis for compartmentalization as there is no conflict between revelation and science in Islam. in theory building, it is shown that Quran based assumptions act as the linking mechanism in harmonizing revelation and science. As revelation is superior to reason and experience. Modification of economic models for empirical verification must not involve changes in Quranic based assumptions. Only the observed or tabi' based assumptions are subjec to modifications
Islamic project financing
No full textThere are numbers of things one should consider to better understand project financing from an Islamic perspective. Most are interested in examining the nature and structure of Islamic instruments used to mobilise the capital needed by a project company. Structuring an Islamic bond (sukuk) is becoming more challenging among investment bankers. Most popular are the Al-bai bithaman ajil bonds (BAIDS) and murabaha notes issuance facility (MuNif
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
Critical issues on Islamic banking and financial markets : Islamic economics, banking and finance, investments, Takaful and financial planning
Get PDFThis book examines the principles and practices ofIslamic banking and financial markets, particularly from the Malaysian experience. The main objective of Islamic financial system is to govern the flow of funds from the surplus sector to the deficit sector and it does so to
promote justice ('adalah). That is, by adhering to Shariah principles and achieving efficiency - doing the right thing and doing it right, public and private interest interests are can both be protected. By doing so, the legal and moral dimensions of product design and development are now equally important. In this way halal status should not discount how Islamic products affects general economic
activities. It means that Shariah advisors should not only approve Shariah complaint products along the juristic plane but dutifully consider how the products can affect income disparities and poverty, economic stability and growth. For this reason, the principle of risktaking (ghorm) and the principle of work (kasb) and the principle of liability, accountability, responsibility (daman) are paramount in
determining Shariah legitimacy of profits and earnings derived from Islamic financial transactions. Risk (ghorm), work (kasbh) and liability (daman) constitute the essence of trading and commerce (ai-bay') the Holy Quran has enjoined over usury (riba). By risk, it means allowing capital to depreciate and appreciate as dictated by the market forces. By work, it refers to value-additions namely, knowledge and skills imparted into the business process. Liability means the responsibility each party must assume in the contract such as providing warranties on the goods and services sold. Based on these principles ofrisk, work and responsibility, also known as the principle of equivalent countervalue ('iwad), the ethical and moral dimension of Islamic fmancial transactions can be realized and thus promote the sense of justice the Quran attempts to convey. It helps people take a second-look at financial products that have received Shariah compliant status and help control potential duplication of interestbearing
products bearing the Islamic label
Islamic finance: grasping with price and profit theory
No full textThe Halal industry comprising of bank and non-banking firms is hardly visible in theoretical rigor except for the Shariah rules it promotes to exert religious labelling. While Islamic banks pay greater attention the elimination of riba, gambling and ambiguities in financing contracts to claim Shariah legitimacy, non-banking companies are more concerned about halal slaughtering, avoidance of pork in the production process, prevention of food adulteration, promoting hygiene in food preparation and many more
Iwad as a requirement of lawful sale: a critical analysis
No full textThis paper will argue that replacing riba' with al-bay' does not mean that the latter can imply any form of sale (al-bay') to justify Islamic legitimacy. Apart from the prohibition of uncertainties (gharar) in sale, the requirement of an equivalent countervalue (ciwa') must also be met. Risk (ghurm) and liability (iman) after sale and value-addition or effort (ikhtiyar) are the principal components of ciwa'. As such, any increase from sale must contain ciwa', otherwise riba' is implicated. In classical Islamic commercial contracts such as ijarah, salam and mudarabah, ciwa' is evident. However, the contracts of credit of al-murabahah or al-bay bithaman ajil are widely used by Islamic banking practitioners. To prove Islamic legitimacy, this contract must show that the financiers assume the risk of ownership in making the sale. It must also show evidence that the seller is liable to the option of defect (khiyar al ayb). The same holds for bay al-inah and bay al-dayn which are also widely used in Islamic money and capital markets in some Muslim countries
Riba in La-riba contracts: where to turn in Islamic home financing?
Get PDFThe Musharakah Mutanaqisah Partnership model or the MMP is fast gaining popularity in Islamic home financing, for jurists and the bankers both validate it as a totally interest free structure. We have exploded the myth of thatvalidation in our earlier writings and reinforce our argument here . But on a more important side, we shall show that the construct, which some now refer to as the Zubair Diminishing Balance Model or the ZDBM, is cheaper for the customer without reducing in any way the profit margin for the bankers; Instead, it provides them with a competitive edge over their mainstream rivals at zero cost. The model is more efficient: it uses fewer resources, the rate of return on investment remaining unchanged. Liquidity in the system is improved and social cause is served as the price of a basic human need is lowered. In contrast, the MMP is complicated, implies compound interest in practice, and is prune to Shari’ah frowns. ZDBM is especially fairer in the treatment of default related issues. It also does not invite the tensions which rental determination/revision or property valuation creates in the MMP programs. In this context the paper refers as illustrations to actual cases from some countries where MMP is gaining ground. The innovation of charging on diminishing balance may usher in revolution in finance.Islam; home finance; La-riba; implicit interest; MMP model; pricing; profit margins; efficiency ZDBM
Economic Priciples in Islam: Some Methodological Issues
No full textEconomic Priciples in Islam: Some Methodological Issue
Property rights and Shariah non-compliance risk
No full textThis chapter attempts to argue that an organized effort to avoid such risks due to the financial infrastructure rigidities may invite non-compliance with shariah rules. This is due to the fact that the shariah requires Islamic financial institutions to take ownership of the goods it intends to sell as a fundamental principle in contract law and to move the title to the buying party once the sale is executed. Hence this chapter critically examines the concept of al-bay and property rights in Islam in relation to the constraints posed by the existing financial infrastructure, namely capital requirement and taxation, on the taking of risks by Islamic banks
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