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The Impact of the Financial Crisis on the Global Economy: Can the Islamic Financial System Help?
Abstract
Research Question/Issue - The aim of this article is to analyse the different measures taken by the G7 and G20 leaders to face this crisis and to show whether such decisions represent a return to protectionism. Research Findings/Insights - We proposed the introduction of a new economic system based on Islamic banks’ principle which calls for cancelling interests. This line of thinking might solve speculation problems and put this type of crisis to an end. Theoretical/Academic Implications - Our article represents a point of view on the financial crisis, the return to protectionism and the role of Islamic banking.Practitioner/Policy Implications - This financial crisis pushed most developed countries to lower their banking rates and to implement null- approximating interest rates, a move which replicates the principle adopted by Islamic banks.
... They argued that Islamic banks (IBs) had lower risk as seen in their lower non-performing loan (NPL) ratios. This is because IBs cannot engage in usury and speculative activities (Trabelsi 2011;Abedifar, Molyneux and Tarazi 2013). Others, however, assert that the IBs' risk is not very different from that for CBs (Iqbal and Mirakhor 2011;Bank Negara Malaysia 2011). ...
... This is because the regulators typically address the IBs' specificities so as to facilitate sound banking practices. Thus, IBs tend to have higher capitalization and lower bankruptcy risk (Kabir, Worthington and Gupta 2015;Trabelsi 2011). Islamic bank customers are also more conservative and cautious. ...
... Moreover, the IBs' inherent structural setups make them less risky for three reasons. First, IBs share their credit risks with their depositors (Trabelsi 2011;International Monetary Fund 2014). IB depositors do not earn interest but share, as business partners, in the bank's profits or losses. ...
... Artikel ini menemukan bahwa sistem keuangan konvensional merupakan penyebab utama terjadinya krisis, terutama pada aspek perilaku, politik dan ekonomi. Teori lain yang berkaitan dengan krisis keuangan adalah hipotesis ketidakstabilan keuangan Hyman Minsky (1982Minsky ( , 1989Minsky ( , 1992 ( Trabelsi, 2011;Almoharby, 2011). ). ...
... Selain itu, perilaku yang diharapkan juga menjadi faktor penyebab terjadinya krisis (Siddiqi, 2009). Peningkatan kejahatan sosial juga menjadi bagian dari krisis keuangan (Mirakhor & Krichene, 2009 (Trabelsi, 2011;Othman et al., 2012;Lietaer & Dunne, 2013). Dari perspektif fiskal, hutang pemerintah yang tinggi suatu negara (Othman et al., 2012) dan pengelolaan komoditas strategis yang buruk juga dapat memicu dan memicu krisis (Chapra, 2008;Rothbard, 2009). ...
... Dikatakan bahwa proteksionisme pemerintah juga turut mempengaruhi krisis dan menjadi penyebabnya, namun hal tersebut berkaitan dengan hal tersebut. Karena perbedaan pandangan tentang proteksionisme perdagangan itu sendiri, maka proteksi perdagangan terus berkembang(Trabelsi, 2011).Selain aspek perilaku dan politik, aspek ekonomi (ekonomi) juga menjadi perhatian peneliti.Hal inilah yang menjadi penyebab terjadinya krisis. Dari aspek moneter, sistem uang kertas (fiat currency) menjadi salah satu penyebabnya(Trabelsi, 2011;Lietaer & Dunne, 2013 ) Sistem Ribawi (bunga atau riba) merupakan faktor fundamental yang menyebabkan terjadinya krisis keuangan ...
The state of the financial crisis in the economy is a condition that continues to occur at a certain time. Finding economic systems and mechanisms that are able to withstand this crisis is an important task that must continue to be carried out. By using induction and literature study to analyze the results of previous empirical research, a framework is created to explain how Islamic finance will respond to future crises. This article finds that the conventional financial system is the main cause of the crisis, especially in behavioral, political and economic aspects.Keywords: System, finance, crisis.AbstrakKeadaan krisis keuangan dalam perekonomian merupakan keadaan yang terus menerus terjadi pada waktu tertentu. Menemukan sistem dan mekanisme ekonomi yang mampu menahan krisis ini merupakan tugas penting yang harus terus dilakukan. Dengan menggunakan induksi dan studi pustaka untuk menganalisis hasil penelitian empiris sebelumnya, maka dibuat kerangka kerja untuk menjelaskan bagaimana keuangan Islam akan merespon krisis di masa depan. Artikel ini menemukan bahwa sistem keuangan konvensional merupakan penyebab utama terjadinya krisis, terutama pada aspek perilaku, politik dan ekonomi.Kata kunci: Sistem, keuangan, krisis.
... According to Kaelan, interpretation is the process of interpreting or demonstrating the meaning of revealing, recounting, and saying something that is the essence of reality. Researcher gives meaning to the analysis, explains the patterns or categories, seeks the relationship between the various concepts and illustrates the research perspective [3]. ...
... Corruption is forbidden in Islam, which is stated in several suras in the Qur'an, such as sura Al-Maidah [5]: 38, sura An-Nisaa [4]: 29, sura Ali Imraan [3]: 161, and sura Huud [11]: 85. Prohibition of corruption is also noted in several Hadiths. ...
... The economic instability in the monetary sector is due to the usury interest system, paper money, fractional reserve banking system, leverage system, product derivation, and credit creation through credit cards [3].The high and low value of the Rupiah is strongly influenced by the amount of demand and supply of Rupiah on the money market. The more demand for Rupiah, the higher the Rupiah value, and vice versa. ...
... Dalam beberapa penelitian-penelitian pada saat maupun paska terjadinya krisis Keuangan 2008 banyak penjelasan mengenai penyebab utama dari Krisis Keuangan yang ada, sebagian peneliti menyimpulkan bahwa penyebab krisis adalah aspek perilaku (behavior) seperti tindakan spekulatif para pelaku ekonomi (Trabelsi, 2011;Almoharby, 2011). Selain itu, perilaku ekspektasi juga merupakan faktor penyebab krisis (Siddiqi, 2009). ...
... Meningkatnya perilaku kriminal di tengah masyarakat pun juga menjadi bagian dari krisis keuangan (Mirakhor & Krichene, 2009). Dari aspek politik (Politics), peran pemerintah dalam control terhadap harga juga disebut-sebut sebagai penyebab adanya krisis keuangan (Khan & Thaut, 2008;Rothbard, 2009), Proteksionisme pemerintah juga disebutkan berpengaruh terhadap krisis dan menjadi penyebab, namun perdebatan mengenai hal ini juga terus berkembang dikarenakan perbedaan sudut pandang terhadap proteksionisme itu sendiri (Trabelsi, 2011). ...
... Selain aspek behavior dan politics, aspek Ekonomi (economy) juga mendapat perhatian para peneliti sebagai penyebab krisis, dari aspek moneter sistem Uang kertas (Fiat money) merupakan salah satu penyebabnya (Trabelsi, 2011;Lietaer & Dunne, 2013), Sistem cadangan fraksional, dan sistem Ribawi (interest or usury) merupakan faktor-faktor fundamental penyebab krisis keuangan (Trabelsi, 2011;Othman et al., 2012;Lietaer & Dunne, 2013). Dari Aspek Fiskal, Hutang Pemerintah yang tinggi (Othman et al., 2012) serta buruknya manajemen terhadap komoditas-komoditas yang bersifat strategis di sebuah Negara juga bisa memicu dan meyebabkan krisis (Chapra, 2008;Rothbard, 2009). ...
The recurring global financial crisis in the world requires solutions to be resolved and prevented. This paper aims to build the paradigm of the Islamic financial system and explain its solution in dealing with the financial crisis based on the main causes of the crisis. By using the inductive method and analyzing the results of previous empirical research using library research and then building a framework in order to explain how Islamic finance deal with crises in the future. This paper finds that Conventional financial systems are the main cause of the crisis, especially in behavioral, political and economic aspects. Furthermore, Islamic finance with a different nature, its attachment to the real economy and control of behavior that deviates from sharia is a solution to remain stable in the face of the financial crisis
... Nëse e shikojnë nga prospekti historik, kriza financiare nuk është një fenomen i ri por është një fenomen që jemi ballafaquar shpesh-herë qoftë në nivel planetar (si kriza financiare në vitin 2007, kriza e naftës 1974 dhe kriza e madhe e depresionit 1929 -1933) qoftë në nivel të rajoneve (si kriza aziatike 1997), qoftë në nivel të shteteve të ndryshme, (Trabelsi, M. A, 2011) & (Singh, A., 1998. Pra, është një fenomen me të cilën shpesh-herë pa vullnetin dhe dëshirën tonë po ndeshemi në shumë fusha të domosdoshme të jetës tonë, si në atë: ekonomike, financiare, sociale. ...
... Historikut i shkurtër i krizave financiare "Të gjitha krizat e mëdha përgjatë shekullit XVIII, XIX dhe XX janë si rezultat i premtimeve të mëdha të pagesave dhe zhvillimet e financimeve të tyre, kjo sigurisht shkakton efekte të njëjta krize kudo dhe kurdo që ndodhin" [Përshtatur nga (Trabelsi, M. A, 2011), f. 3] Me qenë se ne jeni dëshmitar të rrethanave, sfidave dhe të vështirësive që ka ofruar kriza financiare globale por njëkohësisht jemi edhe faktori kryesor që po i përjetojmë qoftë si individ apo qytetërimi i civilizuar në këtë botë atëherë kriza e fundit ka goditur pothuajse të gjitha sfera e jetesës, duke filluar nga aspekti ekonomik, financiar, psikologjik pastaj ka tronditur besimin ndërmjet individit dhe institucionit dhe anasjelltas, pra kjo po e përcakton me një fjali prezencës e një krize të gjithëmbarshme në të gjitha sferat e jetesës në kohën moderne. Pavarësisht, që kanë kaluar disa vite nga kriza e fundit prapë se prapë në shumë segmente të jetesës mbetet një gjendje shumë e rëndë si për vendet e zhvilluara por edhe për vendet që janë në zhvillim. ...
... Por, kriza e fundit e ka venë në pikëpyetje programet dhe rekomandimet e këtyre institucioneve. Sinjali i krizës financiare ishte nga më të ndryshme; ♦ së pari: ishte nevoja e ristrukturimit të institucioneve ndërkombëtare, që deri para krizës financiare ndikimi ndaj këtyre institucione ishte një votë -një dollar (p.sh SHBA-ja kishte ndikimin e saj me 17 % në procesin e vendim-marrjes së FMN), (Selmanaj, S., 2006); ♦ së dyti: u bë thirrje për krijimi e një modeli të ri ekonomik drejt balancimit ndërmjet vendet të veriut (ato të zhvilluara) dhe atyre të jugut (ato që janë të pazhvilluar); ♦ së treti: krijimi i parajsës fiskale (Trabelsi, M. A, 2011), ri-strukturimin e marrëveshjes "Bazel II", kjo marrëveshje ishte jo e plote dhe më të meta për sistemin financiar të kohës andaj një marrëveshje të re "Bazel III" ishte e domosdoshme në kohën post -krizë. ...
Në këtë punim është hulumtuar mbi historikun e krizave financiare gjatë shekujve të fundit dhe efekti i këtyre krizave në ekonomin globale po ashtu është hulumtuar edhe de-rregullimin i sistemit ekonomik global nga krizat financiare, si dhe një fokus të veçantë në këtë hulumtim i është dhënë edhe efektit të krizës së fundit financiar globale në ekonominë amerikane. Punim është i bazuar kryesisht në argumentet teorike dhe ofron shtjellim mbi ecurinë e krizave financiare dhe efekti i këtyre krizave në periudhe post krizë. Në fakt, ky punim është i përbëre në tre (3) kapituj kryesor: Në Kapitullin e parë (I) është identifikuar historiku i krizave financiare nëpër vendet me ekonomi të zhvilluar pastaj janë analizuar faktorët që kanë ndikuar deri tek shfaqja e tre (3) krizave me pasoja mjaft më të mëdha globale, si dhe vlera totale e dëmeve që kanë shkaktuar këto kriza në ekonomin e gjithëmbarshme. Kapitulli i dytë (II) është i bazuar kryesisht në shkaqet e krizave financiare dhe de-rregullimin e sistemin ekonomik dhe financiar pastaj është analizuar efekti i shkollave ekonomike dhe ndikim i politikave qeveritare mbi tejkalimin e tre (3) krizave me përmasa globale. Gjithashtu është analizuar ecuria e GDP-së në dy dekadat e fundit nëpër regjionet kryesore ekonomike në botë pastaj janë identifikuar rreziqet kryesore që ka sjellë kriza e fundit në tërë ekonomin globale si dhe janë identifikuar rekomandimet e institucioneve me ndikim për ristrukturimin e sistemi ekonomik dhe financiar global pas krizës së fundit financiare. Në kapitullin e tretë (III) fillimisht janë identifikuar gjashtë (6) kriza financiare, tre (3) prej tyre me përmasa më të vogla dhe tre (3) tjera me përmasa më të mëdha. Pastaj është analizuar në detale edhe ecuria dhe rrjedha e krizës financiare nga flluskat e para deri tek efekti i saj në tregjet hipotekare të SHBA-ve dhe në tërë sistemi ekonomik global.
... There are several causes of the financial crisis from an Islamic economic perspective, including; Social instability, namely shocks that cause fluctuation in social aspects, such as rampant crime, corruption, and poverty, which hinder or stop economic activity (Ghoul, 2011;Hassan & Kayed, 2009), Speculation is the Volume 2, Nomor 2, Juli -Desember 2022 practice of financial transactions to benefit from short-term fluctuations. Or medium in the market value of tradable goods, such as financial instruments (Ahmed, Rosser Jr, & Uppal, 2010;Almoharby, 2011;Chapra, 2008;Farooq, John, & Jacome, 2009;Seidu, 2009;Siddiqi, 2008;Trabelsi, 2011), Ineffective Fiscal System, namely the fiscal system as a whole does not work well, where some income does not go into the state treasury, while some expenditures are not spent for the public interest (Chapra, 2007;Iqbal & Khan, 2004;Khan, 2001), Hedonism is the belief or idea that everyone has the right to do everything in their power to achieve as much pleasure as possible for them (Almoharby, 2011;Siddiqi, 2008), Fractional Reserve Banking System is a practice in which banks lend more than what they have on deposit. Some credit and monetary expansion can be generated through small changes in base money through a system of fractional reserve requirements. ...
... A small reserve base supports large amounts of savings and credit (Meera & Larbani, 2009;Mirakhor & Krichene, 2009;Othman, Aris, Azli, & Arshad, 2012), political instability, namely shocks that cause instability in political aspects, such as loss of trust in the state, inequality, human rights violations and riots, which hinder or stop economic activity (Oguz & Tabakoglu, 1991), Corruption, namely spiritual or moral damage, abuse or deviation committed for it; personal gain, such as bribery, embezzlement, dishonesty, and fraudulent behavior (Faiz-Ur-Rehman, Ali, & Nasir, 2007), Interest Rates, namely the application of interest rates in economic transactions, where the borrower must pay a predetermined percentage of the principal for the use of the money they borrow from their lenders (Smolo & Mirakhor, 2010;Zarqa, 2019), Fiat Money is Money that derives its value from government regulations or laws. Its face value is higher than its intrinsic market value (Hassan & Kayed, 2009;Meera & Larbani, 2009;Trabelsi, 2011), and the Wrong Man in the Wrong Place is the assignment of people who are not qualified for specific positions or jobs (Faiz-Ur-Rehman et al., 2007;Iqbal & Khan, 2004). ...
The financial crisis impacts the economy of developing countries. The existence of a financial crisis causes the economic growth of a country to decline. Islam has a perspective on the economic crisis issue. This research aims to find out and map research related to trends in the Islamic Economic Crisis published by leading journals from 1978 to 2022 and have been indexed by Scopus. Analysis of keyword trends, authors, and institutions. no one has used bibliometric analysis in this study. The data analyzed were 531 research publications using descriptive statistical methods and bibliometric analysis. The results show that the number of articles discussing the theme of the Islamic Economic Crisis has an increasing trend from year to year, along with the global economic crisis in 2008. the most prolific is Hassan M.K. Meanwhile, the country with the most famous writers and the most in Malaysia. Based on the bibliometric analysis, the leading causes of the financial crisis are; Natural Disasters, Political Instability, Social Instability, Faction Reserve Banking System, and Product Derivation. The research provides information for researchers who focus on research in the field of the Islamic Economic Crisis. In the end, this theme is possible to continue to develop.Krisis keuangan berdampak pada ekonomi negara-negara berkembang. Adanya krisis keuangan menyebabkan pertumbuhan ekonomi suatu negara menurun. Islam memiliki perspektif terhadap isu krisis ekonomi. Penelitian ini bertujuan untuk mengetahui dan memetakan penelitian terkait tren Krisis Ekonomi Islam yang diterbitkan oleh jurnal-jurnal terkemuka dari tahun 1978 hingga 2022 dan telah terindeks Scopus. Analisis tren kata kunci, penulis, dan institusi. Tidak ada yang menggunakan analisis bibliometrik dalam penelitian ini. Data yang dianalisis sebanyak 531 publikasi penelitian menggunakan metode statistik deskriptif dan analisis bibliometrik. Hasil penelitian menunjukkan bahwa jumlah artikel yang membahas tema Krisis Ekonomi Islam memiliki tren yang meningkat dari tahun ke tahun, seiring dengan krisis ekonomi global pada tahun 2008. yang paling produktif adalah Hassan M.K. Sementara itu, negara dengan penulis paling terkenal dan terbanyak di Malaysia. Berdasarkan analisis bibliometrik, penyebab utama krisis keuangan adalah; Bencana alam, ketidakstabilan politik, ketidakstabilan sosial, sistem perbankan cadangan faksi, dan derivasi produk. Penelitian ini memberikan informasi bagi peneliti yang fokus pada penelitian di bidang Krisis Ekonomi Islam. Pada akhirnya, tema ini memungkinkan untuk terus berkembang.
... 9. Selling one debt obligation for another debt obligation is prohibited. 10. Debt financing may only be used to create new nonfinancial assets. ...
... Islamic banks showed greater resilience to risk than traditional banking institutions; in particular, they are better capitalized and have better asset quality and risk-taking capacity [9][10][11]. ...
... Many studies show that Islamic finance is characterized by its resilience to the current global financial crises (see for instance: Cihak and Hesse, 2008;Hasan and Dridi, 2010; Bourkhis and Nabi, 2013 among others). However, others (see for example, El-said and Ziemba, 2009;Boumediene andCaby, 2013 andTrabelsi, 2011) show that even Islamic banks are, in turn, affected by such a crisis. Dridi and Hassan (2010) studied the impact of financial crises on the performance of 120 conventional and Islamic banks. ...
... Dridi and Hassan (2010) also found that Islamic banks are less affected by the crisis and attributed this fact to the low financial leverage and the strict adherence to the Shariah principles. Trabelsi (2011) suggested different ways through which Islamic financial risks can be minimized so that financial systems would be stable and flexible. As a matter of fact, Riba, Gharar and Maysir, as practices prohibited by Shariah, can act as a backup for Islamic finance during the financial crisis. ...
... First, it pointed figures to the limits of the traditional financial system. Second, it revealed some form of resistance and an operational ability of the Islamic financial system during this financial turmoil (Trabelsi, 2011). Worth noting is that during the very crisis, all financial institutions experienced crises, while economic growth crippled; an exception to this trend is financial institutions operating with the Islamic financial system, which showed signs of robustness, efficiency and stability (Ftiti et al., 2013;Mat Rahim and Zakaria, 2013;Fakhfekh et al., 2016;Olson and Zobi, 2016). ...
... Indeed, some argued that the current financial crisis could have been avoided if Islamic finance was the norm instead of traditional finance (Choong et al., 2012;Beck et al., 2013). Ability of Islamic finance to overcome these adverse events encouraged several stakeholders to propose Islamic finance as a solution to financial deficiencies and a potential alternative to the current banking system (Trabelsi, 2011;Bourkhis and Nabi, 2013;Rosman et al., 2014). For them, ensuring the efficient functioning of the global financial system needs a remedy because of the weaknesses of traditional finance. ...
Design/methodology/approach
The aim of this paper is to examine whether Islamic finance could replace or complement the traditional financial system. To this end, we examined both risk-taking and profitability of 94 Islamic banks operating in 18 countries observed during the 2006-2013 financial crisis period. A series of bank-specific and other country-specific indicators are combined to explain profitability of Islamic banks as measured by ROA and ROE, and risk divided into credit risk measured by IMLGL and EQL, and insolvency risk measured by Z-SCORE. Indeed, a bank is stronger than another if it is stable with a higher capacity to absorb risks, on the one hand, and increased performance on the other.
Findings
Using dynamic panel data econometrics (GMM system), we estimated five regressions and found the following results: bank capital is found to be the main indicator that contributes to maximizing profitability and stability of Islamic banks and reducing their credit risk. However, the study of liquidity and asset quality determinants often leads to inconclusive results. Nevertheless, we found that Gulf region-operating IBs are more profitable, more solvent and less risky than those operating in the South East Asian region. At the macroeconomic level, we could not find a significant relationship between inflation rate and IBs profitability. However, unlike for IBs in Southeast Asia, we found that inflation rate improves IBs stability and reduces their credit risk level.
Practical implications
The results of our study have numerous implications for bank management and the different stakeholders (investors, customers...). This study identified several factors that may help bank managers to improve their financial outlook by controlling risk level and profitability. These factors could as well help to understand how macroeconomic indicators affect both banking risk and profitability, in particular Islamic banking. Likewise, portfolio managers can use these results to support their decisions to include Islamic banks in their assets portfolios to mitigate potential risk.
Originality/value
Our study contributes to the existing literature in two ways. First, this paper provides fresh data and recent information on Islamic banking in GCC and South East Asian countries. Second, the obtained results helped us to conclude that the Islamic financial system cannot replace but rather supplements the traditional system. This result may be explained by the fact that Muslims look for Islamic banking products, which conventional banks are not offering.
... The emergence of Islamic financial institutions can be traced in the early 1960s in Egypt (Tabash, 2018). The Islamic banking system came into prominence following the global financial crisis of 2008 (Trabelsi, 2011;Fakhfekh et al., 2016). Islamic banks (IB) fared better during the crisis as they operate differently than their conventional counterparts (Olson and Zoubi, 2011). ...
Purpose
This study aims to investigate differences between Islamic and conventional banks in Pakistan with respect to their operational efficiency, liquidity risk and asset quality. Importantly, in addition to full-fledged Islamic and conventional banks, this study also investigates a more recently emerged breed of hybrid banks, i.e. Islamic divisions of conventional banks.
Design/methodology/approach
Data for the period 2011–2020 was collected from financial reports of all full-fledged Islamic banks (5), Islamic banking divisions of conventional banks (8) and conventional banks (20) in Pakistan. Logistic regressions were designed to test the proposed hypotheses.
Findings
The findings suggest that full-fledged Islamic banks are operationally less efficient and experience higher liquidity risk than conventional banks. However, the asset quality of Islamic banks is better than that of conventional banks. Next, in the robustness analysis, the authors extended the sample size by adding the Islamic divisions (window) of the conventional banks; they found almost the same result except for efficiency which turned out to be non-significantly related to bank type.
Practical implications
The findings are beneficial for investors, depositors, consumers and bank management in understanding the financial features of such as efficiency, liquidity and liquidity risk that separate Islamic banks from conventional banks.
Originality/value
The findings of this study present a clear picture to bankers and practitioners about some financial features of banking systems and depict that Islamic banks are in need to improve their liquidity risk management practices to compete with conventional banks.
... In 2007 the Great Financial Crisis began in subprime mortgage market in the United States and has developed into full blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008, while around 123 banks in U.S. filed for bankruptcy. e crisis was followed by global economic downturn, the Great Recession of 2008 (Trabelsi, 2011). Comparing the performance of conventional and Islamic banks during the global financial crisis, Islamic banks were less affected during the initial phase in 2008, but in 2009 they experienced larger declines in profitability due to second round of effect on real economy, especially real estate and construction sector. ...
Customer Relationship Management (CRM) is the process of achieving a continuing dialogue with customers across all available touch points to maximize their contribution to the overall profitability and evolution of companies as well as to achieve satisfaction and loyalty. CRM-systems as the IT-component of this process support a business strategy to establish long-term and profitable relationships with customers and are constant companions in sales and marketing. They help organizations to increase the value of every customer interaction and drive superior corporate performance. The success of a CRM-system is dependent on the acceptance of the respective users. This paper identifies, due to a qualitative research approach through problem-centered interviews in the global sales organization of a leading company in the flexible packaging industry, necessary criteria for the acceptance and furthermore the success of CRM-systems by its users to contribute to the overall goal of an increased profitability and evolution of companies.
... Even limited deviation from the fundamental principles in pursuit of higher profits may damage the merely established trust factor of IFIs. Therefore, it is required that banking concentrates on the purpose of financial stability and overall human welfare (Smolo & Mirakhor, 2010Trabelsi, 2011;Yaacob, Muhammad, & Smolo, 2011). ...
... Secondly, the contradictions between the western countries headed by the United States and Russia have been increased (Trabelsi, 2011). The geopolitical confrontation between the United States and Russia and the security contradiction between these two countries have existed for a long time. ...
Chinese President Xi Jinping proposed the One Belt One Road initiative in 2013. It is a historical initiative of China to connect people all over the world. Recently it is known as Belt and Road Initiative. It comprises two significant programs entitled Silk Road Economic Belt and 21st Century Maritime Silk Road. The Silk Road Economic Belt connects three major routes China to Europe, the Persian Gulf, the Mediterranean and the Indian Ocean.
... Secondly, the contradictions between the western countries headed by the United States and Russia have been increased (Trabelsi, 2011). The geopolitical confrontation between the United States and Russia and the security contradiction between these two countries have existed for a long time. ...
... Second, the disagreements between the western countries headed by the United States and Russia have increased (Trabelsi, 2011). The geopolitical confrontation and security conflict between these two countries have existed for a long time. ...
China's national strength alone does not ensure its position as a "world leader" or a "competent leader." It would be prudent for China to consider the international situation. The question arises, "Will China become a super strong or a member of group strong or are we seeing a reversal to the bipolar era?" This article explores the role China can play in the development and change in the world order. Will China police the world along with the United States. The article discusses the background of the super strong and the group strong; how the country could evolve into a "group of strong." Furthermore, it analyzes the current situation of the world pattern and presents the outlook for the future. Results indicate that peace and development are current themes, and the pattern of future world would depend on the gambling stratagem among the major powers.
... The FRBS, as implemented by commercial banks, and leverage system implemented by investment banks, can provide credit/financing which are much larger than the deposits, thus, can create a bubble (and inflationary pressures), which was one cause of the financial and banking crisis. The issue of FRBS in commercial banks has not only been put forward by Islamic economists such as Othman et al. (2012), Trabelsi (2011), Farooq (2009, Krichene (2009), Thaker andAzam (2009), Meera and Larbani (2004), and Garcia et al. (2004); it has also been put forward by conventional economists such as Stiglitz (2010) and Claessens et al. (2010). Meanwhile, the problem of the leverage system in investment banks has been expressed by many Islamic economists, such as Ahmed (2010) (2007), in addition to being highlighted by conventional economists such as Claessens et al. (2010) and Trichet (2005). ...
Islamic finance essentially comprises of Islamic commercial finance (ICF) and Islamic social finance (ISF). This study aims to propose models of integrated Islamic commercial and social finance (IICSF) for Islamic bank in Indonesia using Delphi and Analytic Network Process (ANP) methods. The results propose six IICSF models for Islamic bank, and the IICSF Islamic bank should be prioritized on ICF (0.679) twice more than on ISF (0.321). The best model is Separate Baitul Maal model with integrated activities (0.221), where Islamic bank establishes separate Baitul Maal, as Amil of zakat and Nazir of waqf, to carry out all Islamic social finance activities, including zakat, infaq, waqf and other sadaqa, while the Islamic bank acts as corresponding/receiving bank of the Baitul Maal funds. The close second-best model is Corporate model with integrated activities (0.218), a corporate model, where in the corporate level zakat institution and waqf institution are established to manage Islamic social finance activities, while the Islamic bank will serve as corresponding/receiving bank of the zakat institution and the waqf institution. Even Integrated Baitul Maal model (0.162) is the ideal IICSF model for Islamic bank, it only ranked third, since this model is not yet applicable, since Islamic bank is still not allowed to become Amil of zakat and Nazir of waqf.
... Buna karşın Mustafa KEVSER Muhasebe Bilim Dünyası Dergisi 2021, 23(1), 61-80 konvansiyonel bankalar faiz temelli faaliyet göstermekte olup risk transfer mekanizması işlevi görmektedirler (Shanmugam ve Zahari 2009). Bu nedenle İslami bankaların konvansiyonel bankalara göre kriz dönemlerinde daha az riskli olduğu ve finansal kriz dönemlerinde daha iyi performans gösterdiği araştırmacılar tarafından belirtilmiştir (Trabelsi 2011;Olson ve Zobi 2016;Uddin ve diğerleri 2017). İslami bankaların kriz dönemlerinde gösterdikleri performans ve mevcut konvansiyonel sisteme bir alternatif olarak gelişmesi yatırımcıların da ilgisini çekmiş, İslami bankaların varlık temelli sundukları ürünler ile finansal performansları da 2008 küresel finans krizinden sonra artan bir şekilde araştırmalara konu olmuştur (Hasan ve Dridi 2010). ...
In this study, the financial performance of 12 banks operating in the Turkish banking system from 2013 to 2018 was analyzed comparatively. In the research, the financial performance of public banks, private banks, foreign banks and participation banks was measured by using 13 financial ratios consisting of capital adequacy, profitability, asset quality, liquidity and income and expense structure. In emprical analysis, for detecting the differences among bank groups one way anova and Bonferroni which is post-hoc test were used. According to the results of the analysis, it can be stated that private banks perform better in capital adequacy and public banks perform better in profitability. On the other hand, the ratio of non-performing net loans of participation banks to total assets is high while the ratio of TP liquid assets to total assets is low. Foreign banks show the most successful performance in the ratio of net interest income to total assets.
... Second, the disagreements between the western countries headed by the United States and Russia have increased (Trabelsi, 2011). The geopolitical confrontation and security conflict between these two countries have existed for a long time. ...
China’s national strength alone does not ensure its position as a “world leader” or a “competent leader.” It would be prudent for China to consider the international situation. The question arises, “Will China become a super strong or a member of group strong or are we seeing a reversal to the bipolar era?” This article explores the role China can play in the development and change in the world order. Will China police the world along with the United States. The article discusses the background of the super strong and the group strong; how the country could evolve into a “group of strong.” Furthermore, it analyzes the current situation of the world pattern and presents the outlook for the future. Results indicate that peace and development are current themes, and the pattern of future world would depend on the gambling stratagem among the major powers.
... Islamic finance is booming worldwide with more than $1800 billion at the end of 2016 (IFSB) and is concentrated mainly in Iran, Malaysia and the Gulf countries. It has distinguished itself from the conventional system by its resistance to the global financial crisis of 2008 (Trabelsi, 2011). The Islamic banking sector continues to dominate the Islamic financial industry with a percentage of 78.9%. ...
Designed to contribute to the development of the real economy, the Islamic banking sector has grown significantly in the world during the last 40 years due to its ethical, religious and solidarity dimensions. It is set up to boost the banking system, to meet the needs of unmet customers and to give new hope to SMEs facing difficulties in accessing conventional bank financing. Islamic banks can contribute to the development of these companies and satisfy their financial needs. This article discusses the different factors influencing the decision of SME managers to adopt financing by participatory banks products. In this sense, the conceptual model presented is intended to study the level of acceptability of the participatory banks products by the SMEs starting from the application of the decomposed theory of planned behavior and the task-technology fit model.Keywords: SME, Participatory banking products, Acceptability.JEL Classifications: D22, G20, O16DOI: https://doi.org/10.32479/ijefi.8227
... The fundamental structures of the traditional financial system were questioned after the financial crisis in 2007 (Kassim & Majid, 2010) and investors and others began to search for other alternatives. Facing the global financial crisis, banks in developing countries such as Malaysia and Egypt react to replicate Islamic banking principles by reducing banking rates and offering null-approximating interest rates (Trabelsi, 2011). Islamic financing institutions then started to promote their Shari'ah compliant model of asset-based and risk sharing financing as a safer and more enduring approach (Rarick & Han, 2009). ...
The perceptions of Islamic banking professionals are surveyed through a questionnaire to explore whether the process of risk management mediates board involvement in risk management and risk management practices of Islamic banks in Malaysia and Egypt. The findings of this study identified that the Islamic banks in the selected countries are somewhat efficient in their risk management process. It was noticed that board involvement in risk management, process of risk management and risk management among Islamic banks in Malaysia are significantly higher than their counterparts in Egypt. Furthermore, high involvement of boards in risk management significantly increases the risk management process, and in turn, leads to significantly higher riskmanagement practices in Islamic banks. Hence, boards should take formal responsibility for setting, managing and periodically assessing the risk management culture of the banks. It is expected that the outcomes of this study would help policy setters in the selected countries to develop a well-structured and harmonized risk management process that enhance risk management practices, with emphasis on the effective involvements of the board of directors and Shari’ah supervisory boards in risk management practices.
... The root causes of financial crisis from Islamic perspective from these studies could be summarized in five groups, namely: 1) misbehaviors of economic actors, including greediness, self-interests, hedonism, speculation, criminal acts and expectation (Almoharby, 2011;Siddiqi, 2009;Mirakhor and Krichene, 2009); 2) external factors and events which are exogenous, including business cycle, natural disaster, contagion, international monetary system, political instability and social instability (Hassan and Kayed, 2009;Oguz and Tabakoglu, 1991); 3) poor governance in public and private institutions, including poor administration, corruption, price control, lack of regulation, lack of disclosure and wrong man in the wrong place (Al-Masri, 2009;Iqbal and Khan, 2004); 4) unstable monetary/financial system, including interest system, fiat money, fractional reserve banking system, leverage system, product derivation and credit creation through credit card (Trabelsi, 2011;Hassan and Kayed, 2009); and 5) unsustainable fiscal system, including unsustainable fiscal deficit, excessive tax, excessive sovereign debt, excessive spending, poor inventory management of strategic commodities and ineffective fiscal system (Chapra, 2007;Iqbal and Khan, 2004). ...
... Never in history has so much economic wealth been destroyed in such a limited timeframe [9]. Literature agrees that this has been the worst inancial crisis since the great depression [10][11][12][13]. Failing regulations [14] and bad management of a subprime residential mortgage market innovation [10,15,16] and a bursting bubble in the US housing market initiated the US credit crunch causing the US GDP to decline by 30%. ...
... In one hadits, Ibn "Abbas narrated that Rasulullah SAW prohibited gharar trading or bai' al-gharar (Hadits narrated by Imam ibn Majah, Sunan Ibn Majah vol.3, kitab al-Tijarah, chapter bai" al-gharar, hadits no.2195). The root causes of financial crisis from Islamic perspective from these studies could be summarized in five groups, namely: 1) misbehaviors of economic actors, including greediness, self-interests, hedonism, speculation, criminal acts and expectation ( Almoharby, 2011;Siddiqi, 2009;Mirakhor and Krichene, 2009); 2) external factors and events which are exogenous, including business cycle, natural disaster, contagion, international monetary system, political instability and social instability ( Hassan and Kayed, 2009;Oguz and Tabakoglu, 1991); 3) poor governance in public and private institutions, including poor administration, corruption, price control, lack of regulation, lack of disclosure and wrong man in the wrong place ( Al-Masri, 2009;Iqbal and Khan, 2004); 4) unstable monetary/financial system, including interest system, fiat money, fractional reserve banking system, leverage system, product derivation and credit creation through credit card ( Trabelsi, 2011;Hassan and Kayed, 2009); and 5) unsustainable fiscal system, including unsustainable fiscal deficit, excessive tax, excessive sovereign debt, excessive spending, poor inventory management of strategic commodities and ineffective fiscal system ( Chapra, 2007;Iqbal and Khan, 2004). Jurnal Ekonomi Islam Volume 8, Nomor 2, November 2017 Methodology This study will apply qualitative method Analytic Network Process (ANP) in three steps. ...
The ongoing global financial crisis is just a repeat of financial crises which have occurred one after another since the England crisis in 1825. The crises have subsided in the period under Bretton Woods Agreements (BWA) in 1950-1972, with the implementation of gold standard. The crises have reemerged with the collapse of BWA in 1971, and up to 2011 there are 421 financial crises covering 147 banking crises, 218 currency crises (10 episodes in 2008-2011), and 66 sovereign debt crisis, including 68 twin crises and 8 triplet crises (Laeven and Valencia, 2012). These repeated man-made financial crises happened due to the transgressions of God’s laws in financial dealings, especially in the abandonment of main pillars of Islamic financial system, namely prohibition of ribā (usury or interest), prohibition of maysir (game of chance or speculation) and prohibition of gharar (excessive uncertainty), in their many forms, as well as due to misbehaviors of economic actors, poor governance and unsustainable fiscal system.
This study applies Analytic Network Process (ANP) to determine the main root causes of financial crisis from Islamic economic perspective which are grouped into five clusters, namely: Misbehavior, External Factor, Poor Governance, Unstable Monetary System and Unsustainable Fiscal System. Each cluster will have six relevant elements obtained from literatures and in-depth interviews with several experts.
The ANP results show that the main root causes of financial crisis from Islamic economic perspective are Social Instability (External Factor), Speculation (Misbehavior), Ineffective Fiscal System (Unsustainable Fiscal System), Hedonism (Misbehavior), Fractional Reserve Banking System (Unstable Monetary System), Political Instability (External Factor), Corruption (Poor Governance), Interest Rate (Unstable Monetary System), Fiat Money (Unstable Monetary System), and Wrong Man in the Wrong Place (Poor Governance). These main root causes should be removed gradually in order to systematically and gradually improve the stability of financial system so that financial crisis will not reappear again and again in the future.
... Root Causes of Financial Crisis in Conventional and Islamic LiteraturesAscarya External -Intl. MultipleFiat Corsetti, et al. (1999: p.306),Eichengreen and Trabelsi (2011: p.17), Meera and Larbani Currency System Hausmann (1999: p.2) (2004: p.12), Ahmed (2001: p.10) -Fractional Reserve Lietaer and Dunne (2013:p.25 and 39), Bragues Othman, et al. (2012: p.12),Trabelsi (2011: Shakespeare and Challen (2002: Krichene (2009, Thaker and Azam p.213-214),Hoppe (1994: p.74),Rothbard (2009: p.10),Meera and Larbani (2004: p.10), (1990: 26), Bagus and Howden (2010:p.33&36)Garcia, et al. (2004: p.1) ...
The ongoing global financial crisis, which was triggered by US subprime mortgage crisis since 2007 and has spread to some EU countries, is just a repeat of previous financial crises. The new financial crisis usually has wider, deeper and more devastating impacts on the economy and the people. In the history of capitalism, there have actually been crises almost continuously for the past 200 years except for during one short period, 1945-1971, under Bretton Woods Agreement. Failing to learn the lessons from history will assure that the crises will continue to hobble the financial system. This study applies Vector Error Correction Model (VECM) to determine and compare conventional and Islamic quantitative variables of the financial crisis, as well as to analyze the impact of the real determinants of financial crisis to output and inflation.
The results show that the real determinants of financial crisis are structural in unstable monetary system (interest system and fiat money system), poor governance (administered price), and unsustainable fiscal system (volatile food), as well as misbehavior of economic actors (expectation). Interest system (Monetary) is the number one determinant of financial crisis with 43.66% share in inducing inflation and 24.85% share in curbing economic growth, followed by administered price (Governance) with 14.41% share in inducing inflation and 5.33% share in curbing economic growth, fiat money (Monetary) with 5.54% share in inducing inflation and 13.49% share in curbing economic growth, and volatile food (Fiscal) with 5.79% share in inducing inflation and 9.11% share in curbing economic growth. Meanwhile, the best cure of financial crisis is single global currency (External) and just money (Monetary) using gold standard with 8.03% share in curbing inflation and 3.50% share in inducing economic growth, followed by profit-and-loss sharing (Monetary) with 0.02% share in curbing inflation and 0.09% share in inducing economic growth.
... Dëmet dhe kaosi ekonomik dhe financiar që po sjellin këto kriza janë të mëdha, si: kriza e borxhit tek vendet e zhvilluara më 1980, kriza ruse më 1988 dhe kriza financiare e BE-së, etj. (Trabelsi, M. A, 2011). Këto kriza janë të shoqëruara me pakënaqësi sociale, rritja e papunësisë, rënia e aksioneve në bursat, rënie e dërgesave dhe të investimeve të huaja, etj; (Merovci et al, 2011). ...
Në këtë punim është analizuar efektet e krizës financiare globale në Evrope, në vendet e Evropës Jug - Lindore (EJL) dhe në Kosovë. Punim është i fokusuar kryesisht në argumentet teorike dhe është orientuar në tri (3) kapituj kryesor për diskutim dhe për shtjellim me te gjere mbi roli, efektet, sfidat dhe vështirësitë që kishte kriza e fundit financiare në ekonominë evropiane. Në kapitullin e parë (I) është diskutuar mbi historikun e krizave nëpër Evropë gjatë tri dekadave të fundit pastaj është përshkruar mbi flluskat e para të krizës së fundit financiar dhe efektet e kësaj krize mbi sistemin e gjithëmbarshëm ekonomik të Evropës. Janëidentifikuar faktorët që kanë nxitur krizën financiare po ashtu janë identifikuar edhe sektorët ekonomik më të goditurit nga kjo krizë. Përmes të dhënat të institucioneve me ndikim ndërkombëtar është analizuar ecuria rritjes ekonomike nëpër rajone të ndryshme të Evropës gjatë dhe pas krizës financiare. Në kapitullin e dytë (II) janë analizuar sfidat dhe vështirësitë ekonomike tek vendet e EJL si dhe masat e ndërmarra nga ana e institucionet të këtyre vendeve për të përballuar krizën financiare. Pastaj është analizuar ecuria e GDP-se gjatë dhe pas krizës financiare, janë identifikuar sektorët strategjike më të goditurit të ekonomisë si dhe efekti i qëllimeve të Lisbonës për tejkalimin e krizës financiare dhe recesionit ekonomik në vendet e EJL. Në kapitullin e tretë (III), fillimisht janë analizuar sektorët kryesor të ekonomisë dhe indikatorët makroekonomik që janë të prekura nga kriza financiare në Kosovë, krizë kjo e cila ju ka imponuar ekonomisë e Kosovës për shkak të varësi së madhe ekonomike që ka
Kosova me vendeve të rajoni dhe më gjere. Pastaj janë identifikuar resurset financiare të goditura nga kriza, që ishin të depozituar në institucionet e jashtme financiare si dhe politikat e institucioneve të Kosovës për të përballuar sfidat e krizës financiare përmes privatizimit të resurseve strategjike të Kosovës dhe mbajtjen e rritje ekonomike me parametra pozitive.
... High interest rate is an important element in bringing the financial crises because it will decrease the supply of loans. High interest rate leads to better chance that lender will lend even to bad credit risks and even a probable crumple in loan market Misbehavior of Economic factors including self interest, criminals actions, speculation and greediness (Mirakhor and Krichene, 2009) External Factors including natural disasters, political insecurity, weak internal monetary system (Hassan and Kayed, 2009) Pitiable Governance which includes corruption and poor administration, lack of revelation and regulatory system, qualification disparity and wrong hiring in certain institution (Al-Masri, 2009) Wobbly monetary system including reserve system, fiat money and interest rate, and product derivation (Trabelsi, 2011) Unsound fiscal system includes excessive fiscal deficits and colossal expenditures and taxes and poor inventory management (Chapra, 2007) Rajan and Zingales, 2003). Such openness in capital flow leads to financial fragility in economy (Ramey and Ramey, 1995). ...
... A study on the global financial crisis of 2007-08 by Trabelsi (2011) suggested certain preventive steps which supported the Islamic economic system. Trabelsi criticized that capitalist system was not a welfare economic system in the world due to unequal distribution of wealth. ...
... The subprime lending crisis that shook the world in 2007 showed the limits of the traditional financial system (Fakhfekh, Hachicha, Jawadi, Selmi, & Idi Cheffou, 2016;Trabelsi, 2011). All financial institutions have been destabilized and the economy was crippled while the Islamic financial system kept its stability and sustainability (Ftiti, Nafti, & Srairi, 2013;Mat Rahim & Zakaria, 2013). ...
The aim of this paper is to examine whether Islamic finance could be an alternative to the traditional financial system and could guarantee stability in times of crisis. To this end, 78 Islamic banks in 12 countries have been studied over the 2004–2013 period. A series of bank-specific and other country-specific indicators are combined to explain the soundness of Islamic banking in terms of profitability as measured by ROA and ROE, and risk divided into credit risk measured by IMLGL and EQL, and insolvency risk measured by Z-SCORE. The aim is to estimate five regressions using dynamic panel data econometrics (GMM system). The results indicate that bank size and capital are the main factors responsible for increasing profitability and stability of Islamic banks and reducing their credit risk. However, the ratios forming the variable liquidity and asset quality often lead to inconclusive results. It is also found that macroeconomic variables, except inflation, are able to improve Islamic banks’ stability. This is not the case for credit risk where the ratio is still unfavorable.
The conclusion is that there are no major differences between IBs and CBs in terms of their profitability and risk features.
... Liberalization of world trade is only one weapon in store against poverty. As it reduces the cost of food in protectionist countries and stimulates global economy, it helps thus millions of people out of poverty (Nash and Mitchell, 2005;Trabelsi, 2011). ...
The struggle against poverty and social inequality is one of the biggest challenges for developing countries. These countries should adapt themselves to a new economic world order characterized by trade liberalization and based on a desire to make globalization work for poorer people. Most empirical studies on the relationship between trade, inequality and poverty assume that trade contributes to increasing wage inequality in developing countries. In this paper, we studied the impact of trade liberalization on poverty on a sample of 106 developing countries during the period 1980-2010. The results indicate that trade is not the main factor affecting inequality and poverty persistence.
Purpose
This study is a meta-analysis of the relationship between bank lending, profitability and non-performing loans (NPLs), and the purpose is to identify a research gap in studying this very crucial triad.
Design/methodology/approach
Firstly, relevant keywords are used to pull the studies from the Scopus and Web of Science (WoS) databases. The initial result is then narrowed down using relevant search criteria by manually filtering the studies based on the title and abstracts, out of which meta-analysis has been done of the findings of the top 200 papers (citation-based).
Findings
The literature in this field of study indicates heterogeneous results for relationships between bank lending and NPLs, bank lending and profitability and also NPLs and profitability. The meta-analysis of the results also reveals that the behaviour of these variables shows heterogeneity, which, based on the literature review, can be attributed to the different economic conditions during the study period and thus indicates nonlinearity in the behaviour of these variables.
Originality/value
This review explores the interrelationship of three variables, as they are very important to strike a proper balance between growth and safety in the banking industry, but the same has been inadequately researched in past studies.
After the global financial crisis in 2008, and revealing the devastating effects of the problem of non-repayment of banking facilities to other sectors of the global economy various schools of economics and specialy Islamic economic researchers were analyzing and presenting solutions to this crisis. Therefore, it is important to discuss about the factors affecting credit risk in order to improve its management practices. The macroeconomic variables that reflect the macroeconomic conditions of the society influences the default rate of bank facilities and the results of several studies carried out both inside and outside the country support this. On the other hand, considering the differences in risk and its management practices in Islamic banking and conventional banking, studying credit risk in the form of Islamic financial instruments seems to be necessary. Several researches have also been done to identify and manage the risks associated with Islamic financial instruments, in particular profitable financial instruments, such as Musharaka ,Mudaraba, etc. According to the above, in this research, the effect of changes in macroeconomic variables on the rate of non-payment facilities granted on the basis of Musharaka and Installment sale has been investigated in Iran. This analysis uses annual data of selected banks and used GMM model
According to the results of this study, it is found that the default rates of granted facilities based on these two Islamic contracts are affected by fluctuations in macroeconomic variables. It can also be said that the credit risk in contract, installment sales is more sensitive to the fluctuations of macroeconomic variables than in contracts, Musharaka. In addition, among the macroeconomic variables discussed in this study, fluctuations of exchange rate, more than other variables, affect the credit risk of these Islamic contracts.
The Cambridge Handbook of Institutional Investment and Fiduciary Duty is a comprehensive reference work exploring recent changes and future trends in the principles that govern institutional investors and fiduciaries. A wide range of contributors offer new perspectives on the dynamics that drive the current emphasis on short-term investment returns. Moreover, they analyze the forces at work in markets around the world which are bringing into sharper focus the systemic effects that investment practices have on the long-term stability of the economy and the interests of beneficiaries in financial, social and environmental sustainability. This volume provides a global and multi-faceted commentary on the evolving standards governing institutional investment, offering guidance for students, researchers and policy-makers interested in finance, governance and other aspects of the contemporary investment world. It also provides investment, business, financial media and legal professionals with the tools they need to better understand and respond to the new financial market challenges of the twenty-first century.
The Cambridge Handbook of Institutional Investment and Fiduciary Duty is a comprehensive reference work exploring recent changes and future trends in the principles that govern institutional investors and fiduciaries. A wide range of contributors offer new perspectives on the dynamics that drive the current emphasis on short-term investment returns. Moreover, they analyze the forces at work in markets around the world which are bringing into sharper focus the systemic effects that investment practices have on the long-term stability of the economy and the interests of beneficiaries in financial, social and environmental sustainability. This volume provides a global and multi-faceted commentary on the evolving standards governing institutional investment, offering guidance for students, researchers and policy-makers interested in finance, governance and other aspects of the contemporary investment world. It also provides investment, business, financial media and legal professionals with the tools they need to better understand and respond to the new financial market challenges of the twenty-first century.
The Cambridge Handbook of Institutional Investment and Fiduciary Duty is a comprehensive reference work exploring recent changes and future trends in the principles that govern institutional investors and fiduciaries. A wide range of contributors offer new perspectives on the dynamics that drive the current emphasis on short-term investment returns. Moreover, they analyze the forces at work in markets around the world which are bringing into sharper focus the systemic effects that investment practices have on the long-term stability of the economy and the interests of beneficiaries in financial, social and environmental sustainability. This volume provides a global and multi-faceted commentary on the evolving standards governing institutional investment, offering guidance for students, researchers and policy-makers interested in finance, governance and other aspects of the contemporary investment world. It also provides investment, business, financial media and legal professionals with the tools they need to better understand and respond to the new financial market challenges of the twenty-first century.
The rapid development of digital finance is reshaping the business model of the traditional bank industry and bringing challenges to it as well. Based on an unbalanced panel of data constructed by 36 banks in Malaysia from 2006 to 2020, this study examines the impact of financial technology on banks' stability and efficiency. We find that, compared with Islamic banks, FinTech innovation significantly improves the stability of commercial banks. Additionally, it improves the entire sample banks' efficiency calculated by the data envelopment analysis‐Malmquist method, which can capture the efficiency changes from a dynamic perspective. These baseline results are affirmed by the generalized method of moment approach to mitigate potential endogeneity issues. Furthermore, the impacts of FinTech innovation on banks are heterogeneous. The high‐profit banks enjoy the benefits of improving their stability level from FinTech development. However, for the small‐sized and low‐profit banks, FinTech innovation contributes more to improving their efficiency. Our analysis provides empirical evidence for Malaysia and similar developing countries that are receptive to FinTech development but have relatively less advanced technology infrastructure. It can also shed light on the FinTech investment decisions of bank management.
Business cycles or crises occur when the economy falls after prosperity (Schumpeter 1939) or when genuine insecurity increases volatility, uncertainty, and contradictions in several domains (Haralambie 2011). According to (Colander et al. 2009), crises have made mainstream economics a systemic failure. We use Islamic viewpoints to investigate the crises’ account. In this regard, many Muslim authors attribute the economic crisis to mainstream economic discipline's failure and suggest Islamic economics as a solution or alternative. We use a systematic literature review to evaluate 36 studies based on peer-reviewed journals and sources between 1990 and 2022. Banking and Finance, Economic Thinking, Spending and Consumption, and Human Resources and Governance were identified from the selected literature. It largely focuses on banking and finance, underlining the inherent flaws of the sector in the capitalist system and lessons for strengthening Islamic banking and finance to handle future cyclical shocks. The literature of other clusters in the review also shows that the lessons from the crisis have influenced Muslims’ consumption and spending decisions, including credit decisions, enrichment of Islamic economic thinking, and best practises to survive in crisis times for Muslims or Islamic institutions.
The Cambridge Handbook of Institutional Investment and Fiduciary Duty is a comprehensive reference work exploring recent changes and future trends in the principles that govern institutional investors and fiduciaries. A wide range of contributors offer new perspectives on the dynamics that drive the current emphasis on short-term investment returns. Moreover, they analyze the forces at work in markets around the world which are bringing into sharper focus the systemic effects that investment practices have on the long-term stability of the economy and the interests of beneficiaries in financial, social and environmental sustainability. This volume provides a global and multi-faceted commentary on the evolving standards governing institutional investment, offering guidance for students, researchers and policy-makers interested in finance, governance and other aspects of the contemporary investment world. It also provides investment, business, financial media and legal professionals with the tools they need to better understand and respond to the new financial market challenges of the twenty-first century.
This study examines the relationship between corporate governance and banking stability by considering the moderating role of corruption controls. This study applies the Generalized Moments Method using a sample of panel data collected from 74 banks in 10 Organization for Economic Co-operation and Development countries during the period 2006–2016. The empirical results reveal that banking governance is positively associated with banking stability as measured by the Z-score. Additionally, the findings indicate that effective corruption control significantly moderates the power of the board of directors in boosting banking stability. This study discerns the fundamental role of the board of directors as the main corporate governance mechanism and internal player in the stability of banking institutions.
The global economic crisis has resulted in various global financial institutions experiencing losses and bankruptcy. The recurring global financial crisis in the world requires solutions to be resolved and prevented. The global economic crisis has resulted in various global financial institutions experiencing losses and bankruptcy. The perfect Islamic Sharia is able to provide a way out of the grip of the global economic crisis that has hit many countries today. The Islamic economy is one of the significant steps the government must take in dealing with negative spreads and the vulnerability of the global economy. Sharia banking is considered to be more crisis resistant than conventional banking if economic conditions deteriorate. This is because Islamic banking is more flexible in dealing with any situation. Islamic banking is increasingly recognized in the community from day to day. Not only for Muslims, but also for those who are non-Muslims. This study aims to determine the Islamic economy as the best solution in solving the problem of the global economic crisis. The data used in this research is secondary data. The results of this study indicate that the Islamic economy is a solution to the global economic crisis. Islamic banking can help in overcoming the burden of the crisis in the short term and also in the future.
The SDGs, developed by the UN in 2012, focuses on 17 goals for the betterment of humanity and humanitarian causes. Among the core objectives of Shari'ah in Islamic finance is to offer a helping hand, emphasizing the efforts and scope of the SDGs. This book explores how Islamic ethical wealth is structured to contribute to the SDGs and an overall socio-economic impact within the principles of Maqasid al-Shari’ah. Focusing areas such as Islamic micro-finance, wealth inclusion, corporate and agro-Zakat, Awqaf, SRI Sukuk, and green Sukuk, this book will feature contributions from the leading researchers in sustainability and Islamic finance and will be of interest to scholars, researchers, industrialists, NGOs, UNDP and students studying both areas.
This study aims to provide a bibliometric and science mapping analysis on the research area of Islamic banks and the 2018 global financial crisis published in the Scopus indexed database over the 2008-2021 period. The study used the VOSviewer software and MS Excel spreadsheet for data analysis. The study identified an increasing trend in publication on the topic. The study found that Alqahtani was the most productive author, while Bourkhis and Nabi were the highly cited authors. The authors from Malaysia were the productive publication, while the Journal of Islamic and Middle Eastern Finance and Management was found to be the most influential journal. Authors from Saudi Arabia showed a strong collaboration with Malaysia, United States, Tunisia, and Australia. The most reoccurring keywords on the topic were Islamic banks, financial crisis, global financial crisis, conventional banks, Gulf Cooperation Council, and efficiency. Finally, the most co-cited sources included the Journal of Banking and Finance, the Journal of Islamic and Middle Eastern Finance and Management, and the Journal of Financial Economics.
The menace of hunger has become a global concern as number of people going hungry in the world increases for various reasons including climate, epidemic, conflicts and economic downturn. The advent of zero hunger scheme through the United Nations Sustainable Development Goal 2 specifically represents purposive efforts to pursue a global agenda to address this menace. From Islamic perspective, the goal coincides with a basic tenet and objective of Shariah for societal welfare to be pursued using Islamic ethical wealth and its solution against this contemporary socio-economic issue. As a library-based study, this chapter adopts a qualitative method whereby provisions of primary sources of Shariah are explored vis-à-vis their application towards pursuing, keeping up and sustaining zero hunger initiative. In the same line, content analysis of relevant secondary data from published works was made while exploring pertinent issues and presenting discussions thereon. It is discovered that hunger is a societal and developmental issue in the contemporary world against which a cooperation among national governments is led by the UN to tackle its scourge on affected world population. In Islam, such a cooperation is considered a collective responsibility of public authorities and of rich individuals through Shariah rules governing ethical wealth including charitable and religious obligation of zakat, sadaqat philanthropy and waqf endowments as well as agriculture-oriented Islamic financing technics which provide avenues to pursue and promote zero hunger initiative. Islamic wealth altogether provides cheap and sustainable mechanism that supports and promotes zero hunger. Accordingly, recommendations were offered for the deployment of Islamic ethical wealth management/operation alongside suitable regulation and governance that propel Shariah complaint sustainable zero hunger activities.
The concept and practice of Islamic economics and finance cover both the commercial and social aspects (such as zakat, infaq, waqf, and microfinance), and the two are not dichotomized. Moreover, the integration of the social and commercial finances is capable not only of improving socioeconomic well-being, reducing poverty, and enhancing holistic financial inclusion, but also of improving the stability of the financial system. This study is therefore an attempt to fill the gap in deriving ideas and concepts related to the integration of Islamic commercial and social finance that is compatible with the Islamic Financial Institutions’ structural environment along with the prevailing laws and regulations.
We, the Editors and Publisher of the Journal of Sustainable Finance and Investment, have retracted the following articles which are all part of the Special Issue titled Accounting, management, finance, and accountability in times of crisis: A COVID-19 perspective:
Quoc Thuan Pham, Xuan Thuy Ho, Thi Phuong Loan Nguyen, Thi Huyen Quyen Pham & Anh Thanh Bui (2023) Financial reporting quality in pandemic era: case analysis of Vietnamese enterprises, Journal of Sustainable Finance & Investment, 13:1, 330-352, DOI: 10.1080/20430795.2021.1905411
Ibrahim Tawfeeq Alsedrah & Elhachemi Abdelkader Hacine Gherbi (2023) Impact of COVID-19 pandemic on total market trade value (institutional investors vs non-institutional investors), Journal of Sustainable Finance & Investment, 13:1, 353-365, 10.1080/20430795.2021.1905412
Elhachemi Abdelkader Hacine Gherbi & Ibrahim Tawfeeq Alsedrah (2023) Does stock market development and COVID-19 pandemic lead to financial crisis: the case of largest Islamic stock exchange market?, Journal of Sustainable Finance & Investment, 13:1, 297-310, 10.1080/20430795.2021.1896987
Manar Tayseer Hasid Batayneh, Rimal Bou-Bakr Saleh Al-Kouki & Hanadi Eid Albogam (2023) Economic and social implications of the spread of Corona virus on the Saudi Community and the scientific and practical solutions to reduce and limit them, Journal of Sustainable Finance & Investment, 13:1, 311-329, 10.1080/20430795.2021.1896989
Nguyen Bang Nong & Van Hong Thi Ha (2023) Impact of Covid-19 on Airbnb: evidence from Vietnam, Journal of Sustainable Finance & Investment, 13:1, 283-296, 10.1080/20430795.2021.1894544
Thi Thao Hien Bui, Manimekalai Jambulingam, Muslim Amin & Nguyen Tan Hung (2023) Impact of COVID-19 pandemic on franchise performance from franchisee perspectives: the role of entrepreneurial orientation, market orientation and franchisor support, Journal of Sustainable Finance & Investment, 13:1, 264-282, 10.1080/20430795.2021.1891787
Atallah Al-hosban, Mohammed Alsharairi & Isssa Al-Tarawneh (2023) The effect of using the target cost on reducing costs in the tourism companies in Aqaba Special Economic Zone Authority, Journal of Sustainable Finance & Investment, 13:1, 194-209, 10.1080/20430795.2021.1891782
Elvis Elezaj, Halit Shabani, Bekë Kuqi & Nguyen Tan Hung (2023) Managerial decision-making (DM) in Kosovo organizations based on SPACE model analysis by using AHP fuzzy method, Journal of Sustainable Finance & Investment, 13:1, 248-263, 10.1080/20430795.2021.1891786
Mousa Mohammad Abdullah Saleh, Omar A. A. Jawabreh, Sameer ahmad hmoud al-Amro & Haneen Mahmoud Ibrahim Saleh (2023) Requirements for enhancing the standard of accounting education and its alignment with labor market requirements a case study hospitality and industrial sector in Jordan, Journal of Sustainable Finance & Investment, 13:1, 176-193, 10.1080/20430795.2021.1891781
Khawla Kassed Abdo (2023) The effect of external economic variables on the conventional banks and Islamic banks financial performance in Jordan: a comparative study, Journal of Sustainable Finance & Investment, 13:1, 229-247, 10.1080/20430795.2021.1891785
Hanan Ahmed AL Qudah (2023) Credit risks measurement in Islamic banks study model, Journal of Sustainable Finance & Investment, 13:1, 210-228, 10.1080/20430795.2021.1891783
Husam Jasim Mohammed (2023) The optimal project selection in portfolio management using fuzzy multi-criteria decision-making methodology, Journal of Sustainable Finance & Investment, 13:1, 125-141, 10.1080/20430795.2021.1886551
M. Hilmi Özkaya & Maeen Alhuwesh (2023) Effectiveness of exchange rate channel in transiting monetary policy impact to real economy: the case of Yemen, Journal of Sustainable Finance & Investment, 13:1, 104-117, 10.1080/20430795.2021.1886549
Share Aiyed M. Aldosari (2023) The relationship between leaders’ mastery of tacit knowledge management skills and the achievement of competitive advantage at universities, Journal of Sustainable Finance & Investment, 13:1, 142-160, 10.1080/20430795.2021.1886552
Aiman M. Abu Hamour, Deema Daifalleh Mohammed Massadeh & Mohamed Mahmoud Bshayreh (2023) The impact of the COSO control components on the financial performance in the Jordanian banks and the moderating effect of board independence, Journal of Sustainable Finance & Investment, 13:1, 161-175, DOI: 10.1080/20430795.2021.1886553
Khawla Kassed Abdo, Hanan A. M. Al-Qudah, Laith Akram Al-Qudah & Mohammad Zakaria al Qudah (2023) The effect of economic variables (workers ‘diaries abroad, bank deposits, gross domestic product, and inflation) on stock returns in the Amman Financial Market from 2005/2018, Journal of Sustainable Finance & Investment, 13:1, 59-72, DOI: 10.1080/20430795.2021.1883384
Mursal Mursal, Mahyudin Ritonga, Fitria Sartika, Ahmad Lahmi, Talqis Nurdianto & Lukis Alam (2023) The contribution of Amil Zakat, Infaq and Shadaqah Muhammadiyah (LAZISMU) institutions in handling the impact of Covid-19, Journal of Sustainable Finance & Investment, 13:1, 118-124, 10.1080/20430795.2021.1886550
Syed Kaleem Ullah Shah Bukhari, Rani Gul, Tayyaba Bashir, Sumaira Zakir & Tariq Javed (2023) Exploring managerial skills of Pakistan Public Universities (PPUs)’ middle managers for campus sustainability, Journal of Sustainable Finance & Investment, 13:1, 73-91, 10.1080/20430795.2021.1883985
Mona Solomon Al-Thoblany & Muna Ibrahim Alyuosef (2023) The role of digital management in improving the performance of tourism sectors in the Kingdom of Saudi Arabia in the light of 2030 vision, Journal of Sustainable Finance & Investment, 13:1, 44-58, 10.1080/20430795.2021.1882236
Bekë Kuqi, Elvis Elezaj, Bedri Millaku, Adem Dreshaj & Nguyen Tan Hung (2023) The impact of COVID-19 (SARS-CoV-2) in tourism industry: evidence of Kosovo during Q1, Q2 and Q3 period of 2020, Journal of Sustainable Finance & Investment, 13:1, 92-103, 10.1080/20430795.2021.1883986
Saud N. Alshmery, Hind R. Alqirnas & Muna I. Alyuosef (2023) Influence of the social and economic characteristics of Saudi women on their attitudes toward empowering them in online labor market, Journal of Sustainable Finance & Investment, 13:1, 1-15, 10.1080/20430795.2021.1874216
Amnah A. A. Alasgah & Eman S. I. Rizk (2023) Empowering Saudi women in the tourism and management sectors according to the Kingdom's 2030 vision, Journal of Sustainable Finance & Investment, 13:1, 16-43, 10.1080/20430795.2021.1874217
Following an investigation by the Taylor & Francis Research Integrity and Ethics team, it was discovered post-publication that the articles were not peer reviewed appropriately, in line with the Journal's peer review standards and policy. As the stringency of the peer review process is core to the integrity of the publication process, the Editor and Publisher have taken the decision to retract all of the articles within this Special Issue (listed above). The journal has not confirmed if the authors were aware of this compromised peer review process. The journal is committed to correcting the scientific record and will fully cooperate with any institutional investigations into this matter. The authors have been informed of this decision.
We have been informed in our decision-making by our policy on publishing ethics and integrity and the COPE guidelines on retractions.
The retracted articles will remain online to maintain the scholarly record, but they will be digitally watermarked on each page as ‘Retracted’.
This paper explores the time-varying interactions between oil price (OP) and U.S. economic policy uncertainty (EPU), monetary EPU (MEPU), fiscal EPU (FEPU), trade EPU (TEPU). The existing studies focus more on the unilateral impacts, cannot explore which kind of policy uncertainty has the closest interactions with OP, also ignore the relationships based on the time and frequency domains, then this paper fills these gaps by employing the wavelet analysis. The empirical result shows that the influences from EPU to OP are both positive and negative, which highlights that policy uncertainty of the U.S. economy can affect the oil market. This result is consistent with the equilibrium model, which suggests that EPU has certain impacts on OP. In turn, OP has a positive effect on EPU, which indicates that oil bull market causes policy uncertainty to increase. In general, MEPU has a closer relationship with OP than FEPU and TEPU before Trump becomes the U.S. president. Understanding the relationship between policy uncertainty and oil market can not only assist investors to optimize their asset allocation and reduce the investment losses, but also provide insights for the U.S. policy-making authorities to readjust the energy pattern and stabilize the national economy.
p>This study reviews the movement of Islamic stock indices in selected countries in the Organization of Islamic Cooperation (OIC) with high number of muslim population namely Indonesia, Malaysia, Turkey, Qatar, Bahrain, and Oman. The objectives are to examine the changes in cross market linkage among six selected OIC countries during crisis and after 2007 crisis and to analyze whether the international investor can gain benefit when allocating their funds across these markets. The set of relationship for each pair of Islamic stock index is analyzed using Engel-Granger (1987) and Autoregressive Distribution Lagged (ARDL) bound testing approach. The analysis is made for the sub period during crisis is 3 September 2007 – 11 January 2010 and post crisis is 18 January 2010 – 30 April 2013. The result depicts that there are evidences of cointegration among the Islamic stock markets after crisis but not during crisis. The long-run relationship indicates that investors can gain portfolio diversification benefit across these six countries.</p
In the past two centuries financial crises have occurred one after another repeatedly since the first financial crisis in England 1825 until current ongoing global financial crisis triggered by the US subprime mortgage crisis in August 2007. These repeated man-made financial crises happened due to the transgressions of Allah " s laws in financial dealings, especially in the abandonment of main pillars of Islamic financial system, namely prohibition of ribā (usury or interest), prohibition of maysir (game of chance or speculation)
The ongoing global financial crisis, which was triggered by US subprime mortgage crisis since 2007 and has spread to some EU countries, is just a repeat of previous financial crises. The new financial crisis usually has wider, deeper and more devastating impacts on the economy and the people than those of previous ones. In the history of capitalism, there have actually been crises almost continuously for the past 200 years except for during one short period, 1945-1971, under Bretton Woods Agreement. Failing to learn the lessons from history will assure that the crises will continue to hobble the financial system. This study applies Vector Error Correction Model (VECM) to determine and compare quantitative variables of the root causes of financial crisis using conventional and Islamic variables, as well as to analyze the impact of the main determinants of financial crisis to output and inflation. The results show that the root causes of financial crisis are structural in unstable monetary system (interest system and fiat money system), poor governance (administered price), and unsustainable fiscal system (volatile food), as well as misbehavior of economic actors (expectation). Interest rate (Monetary) is the number one root cause of financial crisis with 43.66% share in inducing inflation and 24.85% share in curbing economic growth, followed by administered price (Governance) with 14.41% share in inducing inflation and 5.33% share in curbing economic growth, fiat money (Monetary) with 5.54% share in inducing inflation and 13.49% share in curbing economic growth, and volatile food (Fiscal) with 5.79% share in inducing inflation and 9.11% share in curbing economic growth. Meanwhile, the number one cure of financial crisis is single global currency (External) with 8.03% share in curbing inflation and 3.50% share in inducing economic growth, followed by profit-and-loss sharing (Monetary) with 0.02% share in curbing inflation and 0.09% share in inducing economic growth.
An ever increasing body of literature is focusing on the role of the fiduciary duty principle in socially responsible investment (SRI). Typically, this body of literature emphasizes the relationship between non-financial considerations of fund managers and financial return. Generally speaking, trustees are to manage their funds in ways that best represent the financial interests of their investors. The rise of SRI however continues to give evidence that a fair share of such investors have more than purely financial interests. Consequently, even in cases where the fiduciary duty principle is not violated by way of insufficient financial returns, a non-financial fiduciary duty problem may exist. We argue that this non-financial fiduciary duty problem is aggravated by differences in the sustainability-related perceptions and priorities of SRI practitioners and beneficiaries. SRI practitioners are shown to form a relatively homogeneous epistemic community across national borders. From the perspective of ESG integration, this in turn creates an agency problem. This agency problem is mainly relevant for value-driven investors and ESG integration. Alongside the continued mainstreaming and maturing of SRI, practitioners will increasingly need to find ways to address these non-financial fiduciary responsibilities.
Islamic finance is emerging as a rapidly growing part of the financial sector in the Islamic wo rld. Islamic finance is not restricted to Islamic countries, but is spreading wh e re v e r t h e re is a sizable Muslim c o m mu n i t y. CCORDING to some estimates, more than 100 financial institu-tions in over 45 countries practice some form of Islamic finance, and the industry has been growing at a rate of more than 15 percent annually for the past five years. The market's current annual turnover is estimated to be 5 billion in 1985, and is projected to hit the $100 billion mark by the turn of the century. The growth in Islamic finance initially coincided with the current account sur-pluses of oil-exporting Islamic countries. But its continued growth in the face of eroding oil revenues reflects the influence of other factors, such as the desire for sociopo-litical and economic systems based on Islamic principles and a stronger Islamic identity. In addition, the introduction of broad macroeconomic and structural reforms—in financial systems, the liberal-ization of capital movements, privatization, and the global integration of financial mar-kets—have paved the way for the expan-sion of Islamic finance. What is Islamic finance? Islamic finance was practiced predomi-nantly in the Muslim world throughout the Middle Ages, fostering trade and business activities with the development of credit. In Spain and the Mediterranean and Baltic states, Islamic merchants became indis-pensable middlemen for trading activities. In fact, many concepts, techniques, and instruments of Islamic finance were later adopted by European financiers and businessmen. In contrast, the term "Islamic financial system" is relatively new, appearing only in the mid-1980s. In fact, all the earlier refer-ences to commercial or mercantile activities conforming to Islamic principles were made under the umbrella of either "interest-free" or "Islamic" banking. However, describing the Islamic financial system simply as "interest-free" does not provide a true picture of the system as a whole. Undoubtedly, prohibiting the receipt and payment of interest is the nucleus of the system, but it is supported by other princi-ples of Islamic doctrine advocating risk sharing, individuals' rights and duties, property rights, and the sanctity of con-tracts. Similarly, the Islamic financial sys-tem is not limited to banking but covers capital formation, capital markets, and all types of financial intermediation. Interpreting the system as "interest free" tends to create confusion. The philosophi-cal foundation of an Islamic financial sys-tem goes beyond the interaction of factors of production and economic behavior. Whereas the conventional financial system focuses primarily on the economic and financial aspects of transactions, the Islamic system places equal emphasis on the ethical, moral, social, and religious dimensions, to enhance equality and fair-ness for the good of society as a whole. The system can be fully appreciated only in the context of Islam's teachings on the work ethic, wealth distribution, social and eco-nomic justice, and the role of the state. The Islamic financial system is founded on the absolute prohibition of the payment or receipt of any predetermined, guaran-teed rate of return. This closes the door to the concept of interest and precludes the use of debt-based instruments. The system encourages risk-sharing, promotes entre-preneurship, discourages speculative be-havior, and emphasizes the sanctity of contracts (Box 1). An Islamic financial system can be ex pected to be stable owing to the elimina-tion of debt-financing and enhanced alloca-tion eff i c i e n cy. A "two -w i n d ows" model for Islamic financial intermediaries has bee n s u g gested in which demand deposits are b a cked 100 pe rcent by re s e rves, and inve s t-ment deposits are accepted pure ly on an equity-sharing basis. Analytical models d e m o n s t rate that such a system will be s t able since the term and stru c t ure of the l i abilities and the assets are symmetrically m a t ched through profit-sharing arra n ge-ments, no fixed interest cost accrues, and refinancing through debt is not po s s i b l e. Allocation eff i c i e n cy occurs because in-vestment altern a t ives are strictly selected based on their pro d u c t ivity and the ex pected rate of re t urn. Finally, en-t rep re n e urship is encoura ged as entre-p re n e urs compete to become the agents for the suppliers of financial capital who, in t urn, will cl o s e ly scru t i n i ze projects and m a n a gement tea m s.
A unique feature of Islamic banking, in theory, is its profit-and-loss sharing (PLS) paradigm. In practice, however, we find that Islamic banking is not very different from conventional banking. Our study on Malaysia shows that only a negligible portion of Islamic bank financing is strictly PLS based and that Islamic deposits are not interest-free, but are closely pegged to conventional deposits. Our findings suggest that the rapid growth in Islamic banking is largely driven by the Islamic resurgence worldwide rather than by the advantages of the PLS paradigm and that Islamic banks should be subject to regulations similar to those of their western counterparts.
Purpose
The core objective of this paper is to direct worldwide attention towards the unparalleled development in Islamic banking, its infrastructures and supporting institutions in recent years. This paper articulates the case for Islamic banking in a very comprehensive and effective manner. It depicts Islamic banking as a growing discipline adding more ethical, competitive and diversified tools and systems into global finance. It highlights the paradigm, theory and practice, achievements, pitfalls and future prospects of Islamic banking.
Design/methodology/approach
The paper deals with the Islamic paradigm of borrowing, lending and investment. It presents the conceptual model and practice of Islamic banking. It covers other related issues over the recent development of Islamic banking across the globe.
Findings
The paper observes that Islamic banking has made unprecedented progress over recent years. The Middle East, South Asia and the Indian Subcontinent have emerged as hubs of Islamic banking. Western conventional regulators and investors and other agents have also shown a greater interest in and a receptive attitude towards Islamic banking. Despite all this, Islamic banking has been facing some core problems and challenges that will have deep impacts on its future growth and development.
Research limitations/implications
The paper deals with concepts, information and other facts on Islamic banking that are not supported by any statistical analysis and empirical evidence. Thus this paper may be regarded as being subjective in its real essence.
Originality/value
The paper educates Western market players about Islamic banking tools and systems in their own language so as to bridge the gap between conventional and Islamic banking disciplines. It suggests that Islamic banking is an equity‐based system with conventional features. It makes an important point – that the main players from both the Islamic and conventional streams have a good opportunity to pool their expertise and resources to come up with better solutions in business, investment and finance.
Purpose
The objective of this paper is to assess the degree to which Islamic banks in Brunei Darussalam use risk management practices (RMPs) and techniques in dealing with different types of risk.
Design/methodology/approach
The researcher developed a questionnaire which covers six aspects in the first part: understanding risk and risk management, risk assessment and analysis (RAA), risk identification (RI), risk monitoring, credit risk analysis and RMPs. The second part consists of two questions based on an ordinal scale dealing with two topics: methods of RI and risk facing the sample banks.
Findings
This study found that that the three most important types of risk that the Islamic banks in Brunei Darussalam facing are foreign‐exchange risk, followed by credit risk and then operating risk. It also found that the Islamic banks are somewhat reasonably efficient in managing risk where RI and RAA are the most influencing variables in RMPs.
Research limitations/implications
The paper's findings are limited to the RMPs of Islamic banks in Brunei Darussalam.
Originality/value
The paper explores the RMPs of the Islamic banks in Brunei Darussalam. The results can be used as a valuable feed back for improvement of RMPs in the Islamic banks in Brunei and will be of value to those people who are interested in the Islamic banking system.
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