Guest editorial

Citation

Masood, O. (2011), "Guest editorial", Qualitative Research in Financial Markets, Vol. 3 No. 2. https://doi.org/10.1108/qrfm.2011.40703baa.001

Guest editorial

Article Type: Guest editorial From: Qualitative Research in Financial Markets, Volume 3, Issue 2

About the Guest Editor Omar Masood is a leading Advisor and Trainer in the area of Islamic banking and finance world-wide to financial institutions as well as academic institutions. He is also a PhD Supervisor in area of banking, finance, corporate financial management, risk management, fund management, banking regulations, Islamic banking, international business and other finance, accounting and management related subjects with a number successful completions. Supervising a number of research students and holding visiting professorial roles in universities all over the world. Dr Omar Masood has authored over 60 peer-reviewed research papers, which have been published in international journals and conferences.

Islamic banking has seen rapid growth during the last two decades. There are many contributory factors for such growth, most notable of which are: the liberalization of financial regulation; globalization of financial markets; changes in technology; product innovation; the birth of several new Islamic States; and growing Islamic presence in the West. Product innovations have helped economists and religious scholars to develop new products in virtually all areas of banking and insurance, including many that were previously thought of as extremely controversial. There is no accurate data on the exact extent and volume of Islamic banking, but it is currently estimated that Islamic banks’ assets are worth between US$250 billion to US$800 billion, while there are nearly 300 Islamic financial institutions worldwide, including the “Islamic Windows” of conventional banks. The Islamic Sukuk (Bond) is the fastest growing product, with an estimated outstanding value of US$30 billion. In Pakistan and Malaysia, Shariah compliant funds have exceeded over 50 per cent of total market capitalization. Recently, Islamic banking is growing at approximately 15 per cent per annum. Much of the growth of Islamic banking reflects economic growth in the Islamic world, fuelled primarily by oil wealth. This growth has created an increasing middle-wealth segment and, hence, made banking a necessary service for a large, segment of the population rather than a service for the few, as had been the case some ten to 15 years earlier. The Islamic banking system is not only popular within Islamic banks themselves, but elements of it are increasingly being found in international and other conventional banks. Most international banks have now adopted Islamic banking in order to serve their new clients with their specific needs. Examples of such banks are Citibank and HSBC which developed their Islamic operations worldwide to expand their business.

Although interest in Islamic banking has grown considerably during the last decade, the Islamic banking industry is still evolving today. The financial world views “conventional” banking as a standard practice that is driven mainly by the profit maximisation principle. However, Islamic banking principles have been attracting increased attention from academic researchers and regulators – in both developing and developed countries – as a result of their distinguished micro-operating fundamentals. The prohibition of interest payments by Islamic Shari’ah (Islamic law) has made equity and profit-sharing the cornerstone of its operational structure activities. This ban on interest does not mean that capital is costless in an Islamic system; in fact, it recognises funds as a factor of production, but it does not allow the fundproviders to make a prior or pre-determined claim in the form of interest. This risk-sharing principle provides theoretically better long-term allocation of funds to investments with higher risk-return profiles and, subsequently, greater economic growth.

We have had an overwhelming response to the call for papers on Islamic banking; there will therefore be two issues of Qualitative Research in Financial Markets devoted to the topic. This is the first issue, while the second one will be published later in the year. The papers selected are of the highest quality and groundbreaking and I am sure will influence policy makers in the Islamic banking and finance sector in the near future. I would like to thank everyone who has contributed to it.

Omar MasoodGuest Editor