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The institutional development of Islamic finance in the Middle East: A post-colonial comparative perspective
... Therefore, the results may be used to determine the expectations of the practitioners regarding enhancing the current practice of Shariah auditing [86]. Several studies focused on the IT and SG practices [1,2,103,106] and mechanisms of Islamic banks and financial institutions [100,101,102,103,104,105,106,107]. Such as, [101] focused on Islamic banks corporate social responsibility, [102,107] focused on institutional and regulatory development, [104,105] focused on Shariah audit of Islamic banks. ...
... Several studies focused on the IT and SG practices [1,2,103,106] and mechanisms of Islamic banks and financial institutions [100,101,102,103,104,105,106,107]. Such as, [101] focused on Islamic banks corporate social responsibility, [102,107] focused on institutional and regulatory development, [104,105] focused on Shariah audit of Islamic banks. ...
This paper examines the application of institutional theory (hereafter IT) mechanisms (isomorphism and legitimacy) in Shariah governance (henceforth SG) practices and in operations, as it best illuminates the operational guidelines and procedures for Islamic banks and helps to attain legitimacy. More specifically, the study aims to empirically explore the SG of Islamic banks in Bangladesh from the viewpoint of IT mechanisms. The study applied a qualitative case study method, and a semi-structured face-to-face (individual) interview was conducted with a variety of stakeholders connected with the Islamic banks and SG practices in Bangladesh. This study finds that Islamic banks face pressure from the administration, regulators, and government in performing their activities and functions. More importantly, we find that most of the Islamic banks become used to following one leading Islamic bank, which indicates the presence of mimetic or cultural-cognitive isomorphism. Conversely, normative pressure covers the existing practicing environment, people’s social awareness, knowledge, willingness, and accountability of the Board of Directors (BOD) towards the people concerning Shariah compliance with policymaking. Moreover, socio-political norms and regulations, as well as corruption, have influenced policymaking, the preparation of SG guidelines, and their implementation. The study significantly contributed to national regulatory bodies by exploring the presence of significant pressures of diverse stakeholders. The study has several policy contributions for the Islamic banks and for the central bank of Bangladesh. Notably, this study will help global regulatory bodies and policymakers, to minimize multifaceted pressures, improve SG practices, and enhance the quality of Shariah compliance.
... According to Rammal et al. (2023), originating in the late 1940s was the idea of interest-free banking, when Ahmad (1952), Siddiqi (1948, and Qureshi (1946) offered a system of Islamic banking that avoids interest by using the concept of Mudaraba. Nonetheless, it was stated that Islamic finance was dormant during this time (Bintawim, 2011;Moisseron et al., 2014). ...
This paper examines the factors that influence Pakistani banks' stability, with a focus on Islamic Banks (IBs), through regression analysis. Drawing on a dataset spanning from 2007 to 2021, the study explores key factors influencing the financial health of banks, particularly through the lens of the Z-score, a popular indicator of stability. The analysis reveals several significant findings. Firstly, the created regression models have a high degree of explanatory power; their R-squared values of 0.721 and 0.556, respectively, show that the included variables account for more than 70% and 55% of the Z-score’s variance. Secondly, individual variable analysis highlights important relationships. Notably, increasing cost-income ratio, GDP growth rate, and loan assets ratio are associated with lower Z-scores, suggesting potential risks to financial health. Conversely, higher inflation and HHI deposit concentration are linked to higher Z- scores, indicating potential benefits for IBs under such conditions. The implications of these findings are substantial. Maintaining operational efficiency, managing complexity effectively (especially for larger banks), and understanding the positive impact of inflation on Z-scores are identified as critical factors for achieving better financial stability. Regulatory policies should consider these factors to promote and maintain a stable Islamic banking sector in Pakistan. However, the study acknowledges certain limitations. It suggests further exploration of interactive effects and alternative measures of bank stability for a more comprehensive understanding. Future research could delve deeper into the mechanisms explaining the observed relationships, providing valuable insights for strategic decision-making and regulatory frameworks. This paper offers evidence-based insights into the factors influencing bank stability in Pakistan, particularly for IBs. Understanding these factors can inform strategic decision-making for individual banks and regulatory policies, ensuring a healthy and robust Islamic banking sector in the country.
... In the Middle East, G. Rammal et al. (2023) explore the institutional development of Islamic finance, revealing evolving governance models in Bahrain, Kuwait, and the UAE. Their post-colonial analysis shows how these countries harmonize operations for regional and global growth. ...
This article explores the convergence of Islamic Finance principles and Environmental, Social, and Governance (ESG) considerations in investment strategies. It provides a comprehensive analysis of the significance of ethical and sustainable economic practices in the digital age and offers practical solutions for a more inclusive, responsible, and sustainable economic ecosystem. The article covers the foundational principles of Islamic Finance, its exponential growth in the digital age, and the global challenges of environmental degradation, social inequality, and economic instability. It delves into the pivotal role of Islamic Finance in addressing sustainability and ethics and the transformative impact of digital technology on the industry. The article also investigates the potential of ESG investments in Islamic Finance and their alignment with ethical principles, social welfare, and corporate social responsibility. Additionally, it explores innovative financial products for underserved populations, empowering women, and fostering financial literacy. The article concludes with policy recommendations and future trends for advancing ethical and sustainable Islamic Finance.
Islamic finance institution is becoming increasingly important for MENA countries to finance their growth economically. Businesses respect people's social and religious beliefs while meeting their economic necessities. Even little is known about the factors influencing Islamic banking's expansion. It offers a preliminary study of the relative significance of the major elements contributing to the expansion of Islamic banking in the area. By examining these banks' historical performance, we may use the financial crisis as an opportunity to analyze how Islamic banks contribute to the financial sector's resilience and inclusivity. The paper begins (Nizam, Kamarudin, Ali, & Hussain, 2024) with a brief background Islamic banking's development in the Sultanate of Oman, including how it connects to regional and foreign assets, liabilities, finance, and funding structures on the global Islamic financial markets, before examining Oman's current environment, examining the trends in the traditional financial sector and the rationale for adopting an Islamic financial system, as well as the long-term strategies the Sultanate of Oman has taken. Include how it might the layout achieve the objective, create jobs for local people
Covid-19 has affected the global economy, influencing firm and household financial decisions worldwide. The Central Bank of the United Arab Emirates (CBUAE) released an AED 256 billion stimulus package to provide banks with sufficient capital to support
economic activities and development by providing temporary relief to large corporations, small- and medium-sized enterprises, and households. New financial products have rapidly appeared, including relief packages for rent, mortgages, personal loans, credit
cards, SMEs, and corporate entities. Regression analysis explores the effect of such relief packages on UAE firm and household finances. Using online survey data gathered via convenience sampling of UAE households, econometric analysis confirms that
select demographic factors and financial instruments positively relate to effective financial decision-making. Our results guide policymakers on which relief packages effectively manage firm-level and household financial distress during a health pandemic.
Purpose
Prior studies on Islamic finance provide a limited linkage between organizational theory and the complex Shariah governance framework embraced by Islamic banks worldwide. This paper aims to show the relevance of the application of “institutional theory” in the Shariah governance framework of Islamic banks.
Design/methodology/approach
This study applied library research to investigate the application of institutional theory in the Shariah governance framework of Islamic banks. The authors also critically reviewed prior empirical and review papers for accomplishing the research objectives.
Findings
Based on the critical review, the authors found that institutional theory is the most influential in progressing Shariah governance as it contributes toward the organizational image, helps to achieve religious legitimacy, and inspires a more robust regulatory environment. In addition, a well-designed Shariah governance framework is driven by institutional theory and that could assist in providing guidelines, strategies and procedures for Islamic banks to better conduct; monitor and control their social, religious and accountability obligations. The authors also highlighted the societal, economic and legal environment of Islamic banks in relation to the propositions of institutional theory. They emphasize that a well-designed Shariah governance framework driven by institutional theory could assist in providing guidelines, strategies and procedures for Islamic banks to better conduct, monitor and control their social, religious and accountability obligations.
Research limitations/implications
This study highlights institutional theory to serve best the development of operational strategies and structures of Islamic banks including the roles, functions and powers of the various stakeholders including regulators and those involved in the Shariah governance process of Islamic banks. The authors recognize the institutional theory to perform a key role in enriching the structural framework of Islamic Financial Institutions. This study is heavily dependent on prior research rather than empirical investigations. The authors did not cover other Islamic finance areas (such as Islamic insurance, Islamic microfinance and Halal industries). Thus, future researchers can apply institutional theory in Shariah governance practices and implementations of setting up rules by the regulators and respective institutions.
Originality/value
To the best of the authors’ knowledge, this is the first study that attempts to show the importance of the application of institutional theory in Shariah governance of Islamic Banks. Thus, this study, therefore, adding a novel dimension to the literature by arguing why institutional theory, is more pronounced (as compared to the other theoretical frameworks) in the formation and discharge of the roles, powers and functions by the different governance organs (such as regulators, the board of directors, management and Shariah supervisory board) operating in this unique corporate governance landscape.
This paper empirically investigates whether intellectual capital (IC) and shariah governance jointly affect the economic performance of Islamic banks (IBs). In contrast to prior research, this paper disaggregate IC and corporate governance features and examine whether the two are jointly related to economic performance. These relationships are further explored before, during and after the financial crisis based on a sample of 64 Islamic banks operating in different regions during the period 2007–2014. The required data to calculate different constituents of IC efficiency and governance mechanism is hand collected from 512 annual reports. After controlling for other corporate governance and bank‐specific characteristics (operational type, bank size, listing status, risk, type of auditor, accounting standard and region), we find both intellectual capital efficiency and shariah governance proxies (size and dominance of prominent scholars of shariah supervisory board) to have a significant positive relationship with accounting measure of performance. However, based on market performance measure, only one proxy for shariah governance mechanism, that is, prominent scholars on SSB, is found to be significant but in the negative direction. These results provide important insights into the relationship between IC efficiency, corporate governance and performance in Islamic banking business model and have policy and practical implications.
The project to standardize the commercial elements of the sharia as undertaken by standard-setting bodies, such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), is a lawmaking effort that is incentivized by market forces and the interaction of municipal legal systems. This Article examines the ways in which these factors contribute to the development of private Islamic legal standards, and in doing so, contribute to an emergent legal architecture that is integrated within the global economy. Contrary to the primary role assigned in existing analyses to sharia scholars and sharia supervisory boards, the Article shows that the processes that determine the composition of Islamic financial law (IFL) highlight the starkly reduced role of jurists in developing law in accordance with the traditional methodology (usul al-fiqh). Such analyses have failed to consider the standardization effort as a lawmaking project driven by market forces, which must be realized if authentic sharia principles are to be given effect. Therefore, examination of these market-led processes and their contribution to the creation of Islamic standards is essential for understanding what standardization means in relation to the fulfillment of Islamic principles and whether a high degree of standardization is desirable. First, the Article examines the role of interpretation, which highlights the methodological challenges of the standardization project. Second, the Article investigates the AAOIFI’s standard-setting efforts, including the methods of standardization, its market- and law-driven incentives, and the status of standardization efforts including the madhahib (schools of law)’s differences of legal thought. Third, an analysis of the interaction of IFL and the law of municipal legal systems (the United Arab Emirates, England and Wales, and Malaysia) highlights the legal incentivization for developing sharia standards. Finally, an analysis of the commercial practice of IFL, particularly in retail markets, demonstrates commercial law’s trend toward standardized contractual practices. Market forces compel the use of standard-form documentation, comprising standards that reflect the commercial practice of law firms and corporations.
Purpose
This paper aims to propose a derivation of Shariah risk from both the Islamic finance theory and theory of contracts in Islamic law. Specifically, it deliberates the derivation of Shariah risk following the contracts validity and apprises the readers of the Shariah risk issues currently under debate.
Design/methodology/approach
This study reviews the relevant literature and presents an analysis of contract rulings through evidence derived from the Qur’an, Hadith and other secondary sources of Islamic law. Various theories of Islamic finance and Islamic law of contracts are identified, to examine the general principles and essential elements and conditions of a valid contract.
Findings
This analysis asserts that any circumstances that may render invalidity of the contract will trigger Shariah risk. More importantly, this paper highlights the implications of invalid contracts, based on the opinion of Hanafi jurists, who concluded that Shariah risk may be derived from any void or voidable contracts due to the failure of the contractual parties to comply with Shariah contractual obligations.
Research limitations/implications
This paper emphasises the derivation of Shariah risk over theoretical approaches. It does not include an explanation in the form of any empirical model.
Originality/value
This is the first study that contributes to the field of derivation of Shariah risk, based on the theory from the Islamic law of contracts.
In economic geography and cognate disciplines, a good deal of attention has been paid to the roles of investors, lenders, analysts, advisors, actuaries, and other skilled financial professionals in forming and reproducing financial and other markets. Relatively neglected, by contrast, is the work of lawyers, judges, and other legal agents. This article redresses this imbalance by making two contributions. First, we highlight the role of legal labor in financial market formation in Malaysia, specifically the role of Shariah jurists and translators in institutionalizing the (re)production of Islamic values in market life. Second, drawing on cases of financial litigation and interviews with Shariah scholars, we argue that Malaysia's strategy to develop its Islamic financial governance institutions, to bolster its international stature, and to extend the regional, national, and international reach and mobility of its Islamic values is intrinsically geographical in nature. The strategy involves a rescaling and consolidation of legal spaces and institutions—including the Central Bank, the juridical system, Islamic universities, research think tanks, and their Shariah bureaucrats and professionals—to facilitate the geographical mobility of Malaysian sharia expertise to otherwise secular legal spaces. Yet, we argue that this strategy has not led to a retreat from neoliberal influence but rather to a reordering of market values and norms that collateralize moral risks in addition to market risks.
The organisation of business transactions in the preindustrial period, once a central concern in scholarly debates about the rise of capitalism, currently plays only a marginal role in the literature on long-run economic development. Our survey of the contents of five top-tier business and economic history journals published in the United Kingdom and the United States from 2000 to 2016 finds that only 20 per cent of the articles concern the entire period before 1800 and that, among those articles, most are national or regional in scope, with a disproportionate focus on Europe, and on England in particular. At the same time, our survey suggests that a strong theoretical foundation and rich empirical data exist on the basis of which we can develop a comparative business history of the preindustrial world. We identify four areas of enquiry that are especially conducive to further comparisons within and beyond Europe: the corporation, the family firms, the economic role of women, and the funding of private businesses.
Purpose: This paper aimed at examining the compliance status of AAOIFI FAS-1 and IFSB Standard-4 by IBBL, recognizing the regulatory influence for complying with AAOIFI and IFSB standards and identifying the factors influencing the compliance with these standards.
Design/methodology/approach: The present study used content analysis approach for investigating the compliance status. The study considered IBBL as the only sample because it is the only Islamic bank in Bangladesh which is the member of both AAOIFI and IFSB. Hence, this paper investigates the compliance status of IBBL as a member of AAOIFI and IFSB. The study examined the annual reports of 2008-2012 as these were the latest and contemporary reports in 2013 when the study was conducted. SPSS software version 22.0 was used to analyse the data. A total of 203 items under 13 categories of AAOIFI standard and 133 items under 17 categories of IFSB standard were considered. OLS was run to test the hypotheses of the study.
Findings: The study found that IBBL on an average complied 46.31% of AAOIFI and 52.50% of IFSB standards during the period and importantly, IBBL did not comply some of the categories. The study also observed that size as measured by total asset and number of branches has a significant influence on compliance IFSB standard but not AAOIFI. The findings of the study depicted that IBBL did not reasonably recognize the importance of complying with AAOIFI and IFSB standards. Poor compliance or non-compliance with AAOIFI and IFSB accounting and reporting standards by IBBL exposed that the bank is not efficient in managingSharìah compliance risks, operational risks, and transparent financial reporting. Therefore, recognition of theSharìah standards by the respective IFIs and a 'regulatory push' is vital for improving the level of compliance with these standards.
Research limitations/implications: The study considered IBBL as the only sample of the study because it is the only Islami Bank in Bangladesh which holds the membership of both AAOIFI and IFSB. The fiscal years 2008 to 2012 only were selected to evaluate the compliance status of the AAOIFI and IFSB standards in preparation and presentation of the financial statements of IBBL for comparative analysis because IFSB standard for accounting and disclosure was formulated in 2007. Hence, the study could not evaluate the compliance status before 2008.
Practical implications: The study will help the particular bank identifying their limitations in complying AAOIFI and IFSB standards and also the regulators in designing the accounting and reporting frameworks in regulating Islamic banks in Bangladesh. The study would help IBBL in identifying the reasons for non-compliance, how improvement in compliance level may help the bank in mitigating Sharìah compliance and operational risk and how new legal and institutional framework may improve the level of compliance with those standards.
Social implications: The study observed that the AAOIFI and IFSB standards were set for increasing the level ofSharìah compliance, but the compliance status showed that different classes of accounting and reporting were ignored from compliance by IBBL. This study will benefit the stakeholders in choosing a Sharìah compliant bank.
Originality/value: This is the study which considered both AAOIFI and IFSB accounting and reporting standards in evaluating the reporting compliance status of an Islamic bank. This study expected to instigate the Islamic banks in complying accounting and reporting standards for beingSharìah compliant.
Purpose
This paper aims to discuss the opinions of current Shariah scholars on the concept of debt money in the present-day fiat money system.
Design/methodology/approach
Research design of this paper is a quantitative investigation of Shariah experts by distributing a questionnaire to them. As majority of Shariah scholars are also Shariah advisory of the current banking system, it is important to find out their level of knowledge on the issue of debt money created by the commercial banking system through the fractional-reserve banking (FRB) system.
Findings
Based on this investigation, most Shariah scholars are unaware of and confused about the mechanics underpinning the creation of money, especially with respect to FRB as it is practiced by the conventional and Islamic banking systems.
Originality/value
Based on this research, it is recommended that these scholars should improve their understanding of the operation of the fiat money system and its consequences. It is recommended that, in future, Shariah scholars should think “outside of the box” by creating Islamic financial instruments that do not resemble those of the conventional system.
Purpose
Does Islamic finance affect economic growth? The empirical literature in this area seems to be in early stages and the results are often mixed and inconclusive. This paper aims to examine the causality between financial development in general, Islamic finance in particular and real economic growth in the United Arab Emirates (UAE).
Design/methodology/approach
Using time series data from 1990 to 2012, a bivariate vector autoregressive model was used to document the financial development-Islamic finance-growth causal nexus and to forecast growth under various scenarios. A composite indicator, as a proxy for financial development, was determined using a non-parametric approach: data envelopment analysis.
Findings
The direction of causality runs from financial development to economic growth and the reverse causality does not drive this relationship; however, the real gross domestic product (GDP) causes Islamic financial development with no reverse effect. Furthermore, the forecasting results indicate that the past relation has been a proxy for the future where financial development leads to better progress in real economic activity. This will likely continue to stimulate the development of Islamic finance.
Research limitations/implications
Because the financial markets in the UAE were established in 2000, this study ignored Islamic bonds and equity product. The value of the S ukuk listed on Dubai’s exchanges is around US$36.75bn (Thomson Reuters, 2015), reinforcing Dubai’s position as an international center for Sukuk activity. Among the most important tools of the Islamic financial sector, Sukuk deserves a closer empirical study. This can set the agenda for future work.
Practical implications
The financial sector appears to be one of the main drivers of real economic activity. However, more effort in the area of Islamic finance is needed to promote Shari’ah -compliant economic activities and thus better contribute toward making Dubai-UAE the capital of the Islamic economy.
Originality/value
A new indicator was used to evaluate the financial strength of the UAE and analyze its effect on economic development. In addition, as one of UAE’ emirates, Dubai declared its vision in 2013 to become the “capital of the Islamic economy”, this study analyzed the finance, Islamic finance and growth relations over the period 2013-2022.
This paper aims to provide a holistic view of the underlying values and principles of the Shari'ah Islami'iah (Islamic teachings) and its application to the Islamic perspective of accounting (IPA), which we defined as an assurance function that seeks to establish socioeconomic justice through its formalised procedures, routines, objective measurement, control and reporting in accordance with Shari'ah Islami'iah principles. The paper first discusses the need for IPA by critically looking at two aspects of conventional accounting which are perceived as problematic and unsuitable for Muslims viz. philosophical foundation which excludes religion and the limited role of current accounting practice in ensuring society's longer term well-being. Based on the limitations of conventional Western accounting, the Shari'ah Islami'iah is proposed as the foundation in building a theoretical framework for IPA. Since adherence to Shari'ah Islami'iah is a form of worship, the role of IPA is thus an act of worship in fulfilling obligations to Allah (God), society and self as well as achieving Al-Falah (rewards in this world and hereafter).
Purpose
– The purpose of this paper is to look into the ethical practices of a profit-driven financial institution that is currently adopting Islamic banking and whether it can actually be ethical from an Islamic perspective. The recent decade has seen an upsurge of the increasingly integration of ethical management into operational strategies by businesses across the globe. Like any other religion, Islam wants its followers to be truthful and honest and to be compliant with its teachings and especially in a business transaction. This research paper explores the ethical factors of Islamic banking and how it is perceived by its stakeholders.
Design/methodology/approach
– Due to the exploratory nature of the research and the fact that it involves in-depth theoretical analysis, a qualitative research method was adopted to explore the details of ethics in Islamic banking sector. The aim of this research was to explore the ethical options of an Islamic bank. This was done by carrying out in-depth interviews with the managers and executives of Islamic banks having authority over the subject of Islamic banking and Shariah finance. Furthermore, a detailed session of interviews was also carried out with the customers of Islamic banking to take their views on the subject issues. The data are analysed through thematic content analysis and matched with the existing theory with the objective of coming up with detailed findings that would contribute to knowledge on the subject of ethical Islamic banking.
Findings
– The paper provides empirical insights about ethical management as a vital part of Islamic banking modus operandi . The findings highlight the involvement of ethics in different procedures, operations and approaches of Islamic banking and how it is perceived by its many stakeholders.
Practical implications
– The motivation of this thesis comes from literature review to explore the ethics of Islamic banking and how it Islamic banking is perceived by stakeholders at an ethical banking practice. This research aims to aid bankers in identifying what practices they can enhance and what practices should be dropped to bring about a more ethical banking system. This research was prompted as a result of the gaps identified in the literature review followed by the observations made of the market by the researcher. It was evident that further research on this topic was required to aid the subject.
Originality/value
– The research is original in its nature, as there have not been many instances where the ethical management theory has been explored within the Islamic banking sector. Given the new literature on corporate branding and customer perception, this research can contribute very positively towards the subject area. This research would pave new research avenues to be explored and enhance academic contribution on the common subjects.
Purpose
– The purpose of this paper is to examine the reasons for the lack of research attention paid to the Middle East (ME) and Africa regions. In particular, this study seeks to identify the reasons for and implications of the paucity of ME- and Africa-based studies in high-quality international journals in the marketing field with a specific focus on the challenges in conducting and publishing research on these regions.
Design/methodology/approach
– The authors conducted a systematic review of the literature on the ME and Africa regions to identify papers published in 23 high-quality marketing, international business, and advertising journals. This search resulted in 301 articles, among which 125 articles were based on primary or secondary data collected from a local source in those regions. The authors of these 125 articles constitute the Delphi study sample. These academics provided input in an effort to reach a consensus regarding the two proposed models of academic research in both regions.
Findings
– This paper differs from previous studies, where academic freedom emerged as the most important inhibitor to conducting and publishing research. The most frequently mentioned challenges in conducting research in Africa were access to data, data collection issues, diversity of the region, and lack of research support infrastructure. For the ME, the most often described challenges included validity and reliability of data, language barriers, data collection issues, and availability of a network of researchers. Editors’ and reviewers’ low interest and limited knowledge were ranked high in both regions. South Africa, Israel, and Turkey emerged as outliers, in which research barriers were less challenging than in the rest of the two regions. The authors attribute this difference to the high incidence of US-trained or US-based scholars originating from these countries.
Originality/value
– To the best of the knowledge, no marketing studies have discussed the problems of publishing in high-quality international journals of marketing, international business, and advertising for either region. Thus, most of the issues the authors discuss in this paper offer new insightful results while supplementing previous research on the challenges of conducting and publishing research on specific world regions.
Islamic banking has been in practice for long but started receiving due attention and high popularity since last decade. It has received a warm welcome from all over the world and these banks operating on Islamic principles have been able to get a sizeable business not only in Islamic countries but in non-Islamic countries too. Despite exemplary advancements and achievements, there remains number of controversies over various underlying concepts and practices. This paper basically explores and highlights all those controversies and challenges which are in minds of different school of thoughts and are needed to be addressed and overcome if Islamic banking continues flourishing the way it is at present. The authors have also tried to suggest suitable remedies to overcome these challenges where appropriate.
Purpose
– This study examines social reporting by Islamic banks with special emphasis on themes related to social justice. By using critical theory and “immanent critique”, the study attempts to explain and delineate reasons for disclosures and silences in Islamic banks ' annual reports and web sites vis-à-vis social justice.
Design/methodology/approach
– The approach taken was a content analysis of annual reports and web sites of 19 Islamic banks.
Findings
– Islamic banks ' disclosures emphasise their religious character through claims that they adhere to Sharia ' s teachings. Their disclosures, however, lack specific or detailed information regarding schemes or initiatives vis-à-vis poverty eradication or enhancing social justice.
Research limitations/implications
– Limitations associated with content analysis of annual reports and internet web sites apply. This study focuses on Islamic banks ' social roles. Further studies of banks ' social roles in society in general are of interest.
Practical implications
– Drawing attention of Islamic banks and other stakeholders to the gap between the rhetorical religious and ethical claims of Islamic banks and their activities (as depicted through their disclosures) opens up the possibility of a positive change in Islamic banks ' actual social roles.
Originality/value
– The study fills a gap in both social accounting and Islamic accounting literatures with its emphasis on social justice and poverty eradication. The study contributes to the very scarce literature linking religion (especially Islam), critical theory, social accounting and Islamic accounting. It goes beyond previous research in Islamic accounting literature by exposing contradictions in the Islamic banking industry ' s rhetoric regarding their social role in society.
Purpose
The Sharia governance is topic that has generated much interest in the literature of Islamic banking industry. The Sharia supervision plays an essential role in the governance of Islamic banks. The Sharia Board (SB) which is peculiar to Islamic banks is considered as the principal component of the Sharia governance framework. The purpose of this paper is to examines the link between Sharia compliance, the form of Sharia supervision and the effectiveness of Sharia governance.
Design/methodology/approach
This paper compares two model of Sharia governance framework, the first is the decentralized model in the Gulf Cooperation Council (GCC) and the second is the centralized model in Malaysia.
Findings
The independence of the SB in their mission of supervision and the consistency of Sharia ruling are the principal components of an efficient Sharia governance structure. Centralized Sharia governance system, basically in Malaysia, seems to be beneficial to the industry in term of effectiveness and credibility of the Islamic banks.
Research limitations/implications
The research focuses exclusively on the qualitative analysis about the SB and Sharia governance in Islamic countries.
Practical implications
The model of centralization is able to strengthen the position and the independence of SB and can better examine the subjects of divergences between the whole of the SB in order to promote, in the long term, the consistency of Fatwas and interpretations between banks and regions.
Originality/value
To the best of our knowledge few studies have examined this subject in a comparative discussion between MENA and Southeast Asia region. This paper contributes to the literature on Sharia governance by considering the difference between these two regions in term of supervision model of Sharia rules and principles and its application in Islamic banking.
History as a discipline has been accused of being a-theoretical. Business historians working at business schools, however, need to better explicate their historical methodology, not theory, in order to communicate the value of archival research to social scientists, and to train future doctoral students outside history departments. This paper seeks to outline an important aspect of historical methodology, which is data collection from archives. In this area, post-colonialism and archival ethnography have made significant methodological contributions not just for non-western history, emphasizing the importance of considering how archives were created, and how one can legitimately use them despite their limitations. I argue that these approaches offer new insights into the particularities of researching business archives.
This study presents a history of the Islamic banking sector, its accountability and regulation in Pakistan, set in its contexts of the rise of Islamic banking internationally in a global finance marketplace alongside the localized Islamization of Pakistan’s economy. The historical analysis is informed by the Economic Theory of the State and the principles of Islamic theocracy, and examines the events leading to the establishment of the Islamic banking system in Pakistan, government accountability and regulatory strategies, and the market response. The findings reveal the complexity of attempts to reform Pakistan’s banking sector into a purely Islamic-based system and the contests between government, the central bank and religious authorities for the sector’s accountability, regulation and control. The re-emergence of a dual banking system and its accountability and regulation for both economic management and theocratic purposes illustrates the ongoing compromise and accommodation between national religious culture and a global financial environment.
In this paper, we present the current state of research in Islamic finance by focusing on three spheres of knowledge: Islamic banking, Islamic fund management, and risk management. We also discuss regulatory issues while systematically referring to conventional finance as a benchmark. We conclude by shedding more light on future research avenues.
Manuscript Type
Review
Research Question/Issue
We systematically review the corporate governance (CG) literature on the Middle East and North Africa (MENA), organize it into six main themes and their subthemes, and propose several opportunities for future research.
Research Findings/Insights
We highlight CG's unique characteristics in the MENA region as well as differences and similarities across MENA countries. We shed light on how organizations are governed in this region especially that their ownership structures are centered on families and the state, and that Islam plays a major role in their governance. Our review establishes a solid foundation for future research directed at CG practices in the MENA region and encourages policymakers and practitioners to improve CG in the region.
Theoretical/Academic Implications
To the best of our knowledge, this is the first systematic literature review covering CG in the MENA region. In an effort to encourage the continuing evolution of this research stream and augment its contributions to the broader CG literature, we develop an extensive research agenda focusing on several key topics that deserve further attention such as ownership and countries’ political regimes, family business and royal families, Sharia law, and executive compensation, among others.
Practitioner/Policy Implications
This review invites policymakers and investors to consider implementing better policies aimed at improving CG practices, specifically by fomenting transparency, developing financial markets, providing stronger protections for minority shareholders, and enhancing compliance with existing and new regulations.
Abstract
Purpose – The purpose of this paper is to focus on conceptualizing the origin of legitimacy, the legitimation process and its trustworthiness toward the people, regulators, society and stakeholders. In achieving the purpose of the study, an inclusive research gap concerning the roles of the Shariah Supervisory Board (SSB) as a Shariah regulatory authority or an internal mechanism of Shariah Governance Framework (SGF) in the development and formation of Islamic financial institutions (IFIs) would also be addressed.
Design/methodology/approach – The paper implements an analytical approach to investigate the legitimation process of SSB, and its presence, significance, as well as credibility to the stakeholders.
Findings – This study proposes an additional authority of legitimacy, namely, SSB/Shariah regulatory authority, along with regulators, professionals and people. These could be derived from the internal
mechanism of Shariah Governance (SG) practices of IFIs. The study also proposes another type of legitimacy (ethical/Shariah legitimacy) that derives from the organizational SG practices through its internal
mechanisms. The formation of SSB is mandatory and more significant for the isomorphic identification of IFIs, SG system, legitimacy and broader acceptance to stakeholders.
Research limitations/implications – The rational argument shows that SSB legitimates the overall functions of IFIs, SG practices, processes and structures. It is more apposite because it has substantial
validity, dominance, recognition and acceptability along with three external bodies. Besides, IFIs and their SG do not have the proper value to the general people, society, regulators and other stakeholders
without the legitimization of SSB. Thus, theorists and academicians may consider SSB as the fourth party of legitimacy along with three legitimacy providing authorities (regulators, professionals and
people).
Originality/value – The paper focuses on illustrating and extending the border knowledge concerning the legitimacy from SG and how do SSBs legitimize IFIs and enhance their credibility to the general people,
government, society and other stakeholders. The paper first clarified the internal legitimacy concerning SGF and contributed to the area of Islamic finance, legitimacy, institutional theory, legitimacy theory and internal legitimacy.
Keywords Legitimacy theory, Shariah supervisory board, Acceptance,
Islamic financial institutions, Institutional theory, Shariah governance, Internal legitimacy.
Paper type Literature review
Purpose
In this paper family entrepreneurship and its banking support in Kuwait is discussed, as one of the wealthiest countries in the world. In the beginning is provided an overview of the Kuwaiti context of entrepreneurship and small- and medium-sized enterprises (SMEs), followed by discussion of family businesses' profile and benefits to the economy and society. The paper discusses the banking sector in Kuwait and its contribution to the development of family entrepreneurship and the small business sector in Kuwait.
Design/methodology/approach
For purposes of this study a multiple case study approach and a snowballing sample was used.
Findings
Even that, Kuwait is considered as an Islamic country, from the answers and comments that were received from our research, we concluded that most of the family businesses cooperate with conventional banks, instead of Islamic banks.
Practical implications
Several supporting products are described and analysed in this paper, which can help family business and SMEs' owners where to address when a support is needed. Also are provided information on similarities and differences between Islamic and conventional banking.
Originality/value
This paper is one of the first papers that discusses family businesses and entrepreneurship in Kuwait and the support they receive from Islamic and conventional banks. It provides original quotes from family business owners regarding this topic.
This article explores the mechanisms of persuasion in Islamic finance that may have helped support the growth of this market. Our theoretical model may explain those factors which may influence a customer to select an Islamic financial product. For complex decisions where a person may not fully understand the background concepts such as with finance or Arabic terminology, product quality may be judged based on information in advertising and prior knowledge. Our model shows that Islamic bankers can use the customer’s “coarse thinking” process when advertising products. They may be a means to make products appear more religiously (Shariah) compliant. The equilibrium level of persuasive strategies proposed help reinforces the impact of persuasion for Islamic banks.
JEL Classification: JEL: G21, G11, M31
For centuries following the spread of Islam, the Middle East was far ahead of Europe. Yet, the modern economy was born in Europe. Why was it not born in the Middle East? In this book Jared Rubin examines the role that Islam played in this reversal of fortunes. It argues that the religion itself is not to blame; the importance of religious legitimacy in Middle Eastern politics was the primary culprit. Muslim religious authorities were given an important seat at the political bargaining table, which they used to block important advancements such as the printing press and lending at interest. In Europe, however, the Church played a weaker role in legitimizing rule, especially where Protestantism spread (indeed, the Reformation was successful due to the spread of printing, which was blocked in the Middle East). It was precisely in those Protestant nations, especially England and the Dutch Republic, where the modern economy was born.
Historical research in accounting and management, hitherto largely neglected as a field of inquiry by many management and accounting researchers, has experienced a resurgence of interest and activity in research conferences and journals over the past decade. The potential lessons of the past for contemporary issues have been rediscovered, but the way forward is littered with antiquarian narratives, methodologically naive analyses, ideologically driven interpretation and ignorance of the traditions, schools and philosophy of the craft by accounting and management researchers as well as traditional and critical historians themselves. This paper offers an introduction to contributions made to the philosophies and methods of history by significant historians in the past, a review of some of the influential schools of historical thought, insights into philosophies of historical knowledge and explanation and a brief introduction to oral and business history. On this basis the case is made for the philosophically and methodologically informed approach to the investigation of our past heritage in accounting and management.
Purpose
In relation to the critical problem, this paper aims to present an understanding of the agency theory and the stakeholder theory from the perspective of the Islamic principles. Indeed, a thorough examination of the theoretical background explaining corporate governance from the Islamic perspective is necessary to conduct research analysing corporate governance in Islamic banks.
Design/methodology/approach
The authors followed a critical review discussion; this method takes into consideration presenting important theories and comparing those theories with Islamic perspective.
Findings
The authors presented important arguments on the difference between ordinary theories to explaining corporate governance and Islamic perspective. The paper browsed into whether the Shariah Supervisory Board is a fit with the agency theory by explaining the agency theory and how it differs from the Islamic banking concepts. The paper involved an analytical review on stakeholder theory and presented a critique and the rationale as to why there is ample room for the Shariah Supervisory Board to be considered a fit with the stakeholder theory, as the Shariah Supervisory Board is an independent body influencing the firm.
Originality/value
The paper is of important value to those conducting research in the area of governance in Islamic banks; they may find it beneficial in terms of underlining theory building their research framework.
Using the post-colonial perspective of hybridity, this article analyses how two British companies, the Burmah Oil Company (BOC) and Burmah Shell (BS) adapted to changes in the socio-economic environment from Indian independence in 1947 until 1970. Post-colonial theory is useful in exploring the continuing imperial influence, the changing relationship between BS, BOC and the Government of India (GOI) and the impact of this on the operations of BOC and BS post-independence. The approach recognises that the relationship between BOC, BS and the GOI was complex with differing levels of co-operation and tension existing between the three parties throughout the period.
Purpose: This study examines the phenomenon of fatwā shopping, its effect on consumer trust in Islamic finance products and the need for effective consumer protection regulations in the Islamic finance industry.
Design/methodology/approach: The methodology used in this study is qualitative research which draws significantly from relevant regulations on financial consumer protection through analytical method to identify common themes on fatwā shopping and consumer trust in the relevant literature.
Findings: This study finds that the increasing practice of fatwā shopping through clandestine searches by some Islamic banks to get their new products endorsed by leading Sharī‘ah scholars requires proper legal regulation to avoid a total erosion of trust in the entire Islamic finance industry.
Research limitations: Though fatwā shopping is practiced in the Islamic finance industry, it is always difficult to get some desperate Islamic bankers to agree to this; hence, this study does not portend to examine the evidence on fatwā shopping, but it seeks to bring to the fore the effect of fatwā shopping on consumer trust in Islamic financial services, and the need for effective consumer protection regulations.
Practical implications: This study is expected to provide an invaluable guide and policy framework for emerging and promising jurisdictions on the need to regulate fatwā shopping through effective legal framework based on some best practices identified in the study.
Originality/value: Though there have been a number of studies relating to fatwā shopping, focusing on the need for effective consumer protection regulations in the Islamic finance industry will enrich the existing literature and have significant implications for the future of the industry.
The economic history of the Middle East and North Africa is quite extraordinary.
A detailed examination of the global banking laws and regulatory systems that govern Islamic finance. From Iran, where all banking is Shari'ah compliant, to Malaysia and the gulf, where Islamic financial institutions compete with conventional banks, Rodney Wilson examines how Islamic financial institutions are licensed and governed by common and civil law. Covering Islamic banks, takaful operators, fund management and Shari'ah-compliant securities, it examines how their assets and liabilities differ from their conventional counterparts and what the implications are for risk management. Key Features. • Detailed examination of Islamic banking laws • Evaluation of regulatory systems governing Islamic finance • Global coverage including the Islamic world and countries with Muslim minorities • Examples of the deposit and financing terms and conditions offered by leading Islamic banks.
This manuscript examines relations between China and the Middle East in historical context. It highlights some of the most important events that characterize the ties between China and the Middle East, and examines their relationship in key areas that include energy, trade, arms sales, culture and politics. The centre of China's relations with Israel is arms sales and advanced technology, while the core of Sino-Saudi relations is oil. Iran and China are tied with deep historical, civilizational, cultural and political relations, but China's current interests in Iran centre on oil. Relations between China and the United Arab Emirates (UAE) centre on trade. The UAE serve as a primary hub for Chinese business corporations not only in the Gulf or the wider Middle East, but also in Africa and the world. China's relations with Algeria have been based on political co-ordination since the early days of the Algerian War of Independence and the early days of the People's Republic of China. China provided Algeria with political, diplomatic and military support to accomplish its national liberation from France. Since then, their partnership has developed. Finally, the book develops a tridimensional approach in which China's ties with Middle Eastern countries are viewed as an outcome of interaction between three actors in each situation. The book reaches the conclusion that China's national interests in the Middle East are only increasing, and it is anticipated that Sino-Middle Eastern relations and strategic partnerships will be enhanced in the near future, provided that China is not perceived as undermining the Arab Spring. Key Features • Offers an in-depth analysis of Chinese-Middle Eastern relations • Assists students and scholars in understanding the uniqueness of the Chinese model of engagement in the Middle East • Explains why most Middle Easterners prefer China's engagement to Western engagement • Explores the future of Sino-Middle Eastern relations.
Monumental changes are taking place in the Arab Middle East, raising hopes that political and economic freedoms will take hold in this troubled region. Citizens of this region have the opportunity to choose political ideologies that can fuel innovation and entrepreneurship, which ultimately can transform their economies and improve their quality of life. They will also have to connect with the rest of the world to attract talent, capital, new technology, and modern systems of management and organization. In this article, I sketch out some of these changes and the opportunities they offer management scholars. I also outline the key challenges scholars are likely to encounter and how to address them.
This paper considers the interaction between Shariah advisors, regulators, Shariah conscious ethical investors and an Islamic bond issuing firm. The model shows that due to higher Islamic instrument cost, the Islamic bond industry’s existence is contingent upon a Shariah conscious ethical investor base that can absorb the lower Shariah premium. The results also suggest that competition amongst Shariah advisors along with issuer fatwa shopping results in non-compliant (or less than fully compliant) Islamic financial instruments. This study contributes to Islamic finance theory by suggesting that apart from market incentives and stronger regulations, the Shariah compliance challenge is dependent on Shariah conscious ethical investors.
Malaysia's plans to become a transnational hub for Islamic finance represent an effort to mobilize religion to create new global networks for the circulation of capital. This article first contextualizes such efforts within the broader contours of Malaysia's political history, addressing the classification of ethnicity and religion by both the colonial and postcolonial states. The article describes how Islamic finance is defined by practitioners in Malaysia and explains the key features they invoke to distinguish it from what they call “conventional finance”. Finally, it identifies the steps undertaken by the state to make the country a global center of Islamic finance. As the recent financial crises have shaken confidence in North Atlantic financial systems, Malaysia is geographically and culturally well-positioned between two emergent economic regions currently at the forefront of global economic growth.
This article argues that a cultural and narrative perspective can enrich the business history field, encourage new and different questions and answers, and provide new ways of thinking about methods and empirical material. It discusses what culture is and how it relates to narratives. Taking a cultural and narrative approach may affect questions, sources, and methodologies, as well as the status of our results. Finally, a narrative approach may contribute to our historical understanding of entrepreneurship and globalization.