Noraziah Che Arshad, Abdul Ghafar IsmailInternational Journal of Economics and Research. 01/2011; 2:157-189.
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ABSTRACT: Purpose – The purpose of this paper is to provide an insight of Islamic securitization based on sukuk structures. Design/methodology/approach – Descriptive, analytical, and comparative analyses are used to discuss the risk-sharing behaviour in Islamic securitization through different structures of mudharabah and musharakah sukuk derived from asset securitization. Findings – The paper reveals that although sukuk are structured in a similar way to conventional asset-backed securities, they can have significantly different underlying structures, provisions and shariah-compliant. In particular, it prohibits the receipt and payment of interest and stipulates that income must be derived from an underlying real business risk rather than as a guaranteed return from interest. With regards to sukuk securitization, an asset is one of the vital elements that should exist as an evidence to support the process and make it permissible in Islam. In terms of Islamic securitization mechanism, it can be divided into two principles, namely, debt based and partnership. This paper further emphasizes that sukuk structures based on partnership principle is regarded as risk sharing rather than risk shifting, where it works by combining risk-exposures in such a way that they offset one another to some degree. Accordingly, overall risk will be less than total risks on individual basis. Practical implications – This paper has important implication for the understanding of risk management practices particularly in structuring sukuk. Banks as originators and special purpose vehicles (SPV) as issuers, might consider more sukuk on partnership principles since it directed towards risk-sharing concept that could lead to increase mobilization of savings and investment. As for the investors or sukuk holders, the partnership principle could generate the wealth creation, which to be shared between both investors (fund providers) and issuers (fund users), while both bear the risks involved and the resulting loss. Originality/value – The paper will fill the gap in the existing literature of Islamic finance by showing that Islamic securitization via sukuk is a viable source of funds that could help stabilize the securities market, and as solution to the current subprime mortgages financial crisis.International Journal of Islamic and Middle Eastern Finance and Management 11/2010; 3(4):386-401.
Widiyanto Mislan Cokro, Abdul Ghafar Ismail[show abstract] [hide abstract]
ABSTRACT: The aim of this study is to analyze the sustainability of Islamic micro-financing for developing micro-enterprises (ME). We use the sample of Baitul Mal Wat Tamwil (BMT), as Islamic microfinance institution in Indonesia. Two approaches will be used to explore the sustainability, i.e., technical efficiency (using data envelopment analysis (DEA) and level of outreach. The results indicate that: first, generally the efficiency of BMTs is relatively low. Scale efficiency also indicates that BMTs are operated still far from optimal scale. The results suggest that there is gap in efficiency scores obtained from CCR and BCC models. This indicates that BMTs still face the managerial problems. Second, Islamic micro-financing is useful for developing micro-enterprises and contribute a great social benefits to the society in several ways. Although the profitability efficiency of BMTs is relatively low, since generally BMTs have made a profit and social benefit, Islamic financing can be predicted to be sustainable – able to provide viable Islamic financing.03/2008;
Roza Hazli Zakaria, Abdul Ghafar Ismail[show abstract] [hide abstract]
ABSTRACT: Purpose – The purpose of this paper is to validate the concern that banks' increasing involvement in securitization activity restrains banks' lending, as well as their degree of risk tolerance. Theoretical frameworks claim that securitization reduces risk, hence decreasing banks' degree of risk aversion. Subsequently, banks would be motivated to increase their percentage of assets devoted to risky activities, which is lending to economic sectors. However, banking statistics dictates that banks' lending is on the decline while banks' securitization activities are on the rise. Design/methodology/approach – The paper refers specifically to the Malaysian Islamic commercial banks and utilizes standard panel data analysis. Findings – Supportive evidence was found that banks' involvement in securitization activity do restrain their lending activity. In addition, banks tend to have a riskier portfolio composition following their involvement in securitization activity. Taken together, this signals that banks' involvement in securitization activity needs to be regulated or restricted since excessive securitization activities could curtail credit and increase risk inherent in banks' lending portfolio. Originality/value – This study departs from previous literature in the sense that an alternative method is introduced to measure banks' securitization activity.Humanomics: The International Journal of Systems and Ethics. 01/2008; 24(May):95-109.
Wahyu Ario Pratomo, Abdul Ghafar Ismail[show abstract] [hide abstract]
ABSTRACT: The choice between debt and equity financing has been directed to seek the optimal capital structure. Under the agency costs hypothesis, a high leverage or a low equity/asset ratio reduces the agency costs of outside equity and increases firm value. Several studies show that a firm with high leverage tends to have an optimal capital structure and therefore it leads to produce a good performance, while the Modigliani-Miller theorem proves that it has no effect on the value of firm. The importance of these issues has only motivated researchers to examine the presence of agency costs in the non-financial firms. In financial firms, agency costs may also be particularly large because banks are by their very nature informationally opaque – holding private information on their loan customers and other credit counterparties. In addition, regulators that set minimums for equity capital and other types of regulatory capital in order to deter excessive risk taking and perhaps affecting agency costs directly to change banks’ capital structure. In this paper we attempt to prove the agency cost hypothesis of Islamic Banks in Malaysia, under which high leverage firm tends to reduce agency costs. We set the profit efficiency of a bank as an indicator of reducing agency cost and the ratio equity of a bank as an indicator of leverage. Our findings are consistent with the agency hypothesis. The higher leverage or a lower equity capital ratio is associated with higher profit efficiency.02/2006;