The Developing Role of Islamic Banking and Finance: From Local to Global Perspectives: Volume 95

Subject:

Table of contents

(19 chapters)
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List of Contributors

Pages vii-viii
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About the Editor

Pages ix-xi
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Introduction

Pages xiii-xv
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Purpose

This chapter’s goal is to define the kind of seeds to be planted for moving forward in the safe and stable drive toward a leading central banking role directed at achieving a sustained Islamic banking and finance development within the global financial system. The system witnessed the input of Islamic banking with its fruitful contribution as a feasible banking structure in both implementing agreed reforms and shaping the next steps directed toward crisis prevention and crisis resolution.

Approach and Methodology

The adopted approach is based upon scientific conceptual basis as well as the practical experience related to the central banking role and Islamic banking evolution. This chapter will define the strategic role of Central Banks and highlight the conceptual basis governing the leading role of central banks as well as the practical basis derived from our central banking and Islamic banking experience.

Contribution

In light of the conceptual and practical basis for enabling an efficient and effective role of Central Banks as a regulatory body in shaping the future of the Islamic Financial System. Legal, institutional and managerial strategic determinants for this role have been defined.

The analytical work of this chapter crystallises in a pioneering initiative the main determining factors governing the role of central banks as the main regulatory body for Islamic banking, and how this role could be effective in affecting the future role to be played by the Islamic banks in the global financial system. Also, to this end, the integrated required role by central banks, public policies, multilateral institutions and Islamic banks are illustrated.

Findings

Energy and cooperative hard work and commitment from all players, including the regulators of Islamic banks supported by public policies, international and multilateral institutions and members of the Islamic banking family is thought to be the main determining factor for transforming the Islamic banking family into one that will make the Islamic people and all humanity – through the global financial system – live with more stability, welfare and happiness.

Purpose

This chapter aims to explore the Shari’ah governance rules applied in the Malaysian Islamic banking arena and the effect of Islamic Financial Services Act 2013 on it.

Design/Methodology/Approach

This is a legal exploratory study primarily focused on library research.

Findings

Shari’ah governance is a concept that has been developed and applied gradually in Malaysia and the new Islamic Financial Services Act 2013 has taken it to the next level. However, this does not mean that it has resolved the problems in Shari’ah governance that existed before the enactment of the act.

Originality/Value

Islamic Financial Services Act 2013 is a new statute that repealed Islamic Banking Act 1983. As such, not many have reviewed this new piece of legislation. This chapter will give insight into the evolution of Shari’ah governance as part of corporate governance of Islamic banks in Malaysia and will help explain the most recent developments in this arena along with the challenges.

Purpose

The financial crisis at the end of the past decade resulted in downturns in stock markets and the collapse of many large banks around the world. It encouraged economists worldwide to consider alternative financial solutions. Attention has been focused on Islamic finance as an alternative model. This study examines the performance of Islamic banks in 10 Middle Eastern and North African (MENA) countries over the period of 2005–2010.

Methodology/Approach

It is an intertemporal analysis where it compares the profitability, liquidity, risk and solvency, and efficiency of 43 Islamic banks before and after the financial crisis.

Findings

The results show that the financial crisis negatively affected the performance of Islamic banks. The profitability and liquidity of Islamic banks in Gulf Cooperation Council (GCC) countries decreased drastically after the crisis. Islamic banks in non-GCC countries were efficient and more profitable compared to GCC countries. However, they took excessive risk during and after the financial crisis. The chapter concludes that Islamic financial institutions are not immune from the effects of the global recession.

Originality/Value

The financial crisis has led to a greater recognition of the importance of liquidity risks. Reinforcing regulations and setting up a strong liquidity management framework are needed to improve the Islamic financial industry.

Objective

The purpose of this chapter is to provide a description of the integration of Takaful in the domestic market, based on experiences in regional markets, focusing on the explanation of factors that could enhance the position of Takaful in certain areas.

Methodology

The chapter describes the evolution of Takaful insurance in international and regional markets, and explains the articulation of this product in these markets. The chapter also provides an analysis of the Algerian market characteristics related to the Takaful product.

Value

This work will be based on an analytical research of emerging markets and their success factors; then it will be necessary to provide an overview of the product containing Takaful; and finally we will try to follow the experience of the national insurance market with the new product, supplied by the Salama Company, and determine the potential of Algeria in this area.

Findings/Prospects

This work offers an opportunity to understand the mechanisms needed to activate the local market and opens the prospects for effective integration of Islamic financial products gradually, in order to prepare for changes that would provide more financial products suited to the requirements of social development in the Algerian economy.

Purpose

The chapter aims to examine the challenges and the opportunities for the development of Islamic stockbroking in Malaysia.

Methodology

The chapter adopts library research to discuss the concept of Islamic stockbroking. It also employs a semi-structured interview with industry players to prognosticate the future development of Islamic stockbroking in Malaysia.

Research Findings

The study concludes that the future of Islamic stockbroking in Malaysia is very promising, triggered by drivers on both the supply side and the demand side. The large Muslim population, wealth and economic growth are among the key factors for the development of Islamic stockbroking from the demand side. On the other hand, the Shari’ah compliance of 89% of Malaysian stocks, Malaysia’s position as an Islamic finance hub and the natural progression of Islamic finance are all factors underpinning the future of Islamic stockbroking from the supply side. However, lack of qualified human resources, political inconsistency, information technology infrastructure, product innovation as well as public perception are obstacles to its development.

Value

This chapter will add new literature in contemporary Islamic finance, as not many studies have been done on the subject.

Purpose

This chapter discusses the opportunity of Islamic project financing implementation for public infrastructure development in Indonesia.

Design/Methodology/Approach

This chapter, firstly, reviewed existing literature on Islamic finance to explore the applicability of Islamic financing in infrastructure development. Interviews were conducted as the first stage of Delphi method approach. This was then followed by reviewing Indonesia’s government policies and regulations in infrastructure industry and Islamic financing.

Findings

This chapter enlightens the implementation of Islamic financing on infrastructure project financing in Indonesia. The findings indicate that the government policies and regulations on both infrastructure investment and Islamic financing support the implementation of Islamic project financing, whereas, an improvement is still needed in order to overarch infrastructure business and Islamic financing investment.

Research

Financing framework development for Indonesia infrastructure projects.

Limitations/Implications

The result reported comprises the preliminary study of Islamic project paper written based on published research papers and interviews. Furthermore, the data collected for the study are limited to the case of Indonesian infrastructure projects.

Practical Implication

Islamic financing in Indonesia infrastructure projects development has not been optimally implemented. Therefore, this chapter serves as a catalyst to explore alternative financial scheme such as Islamic financing for infrastructure development.

Originality/Value

This chapter highlights possibilities and obstacles in applying Islamic scheme to infrastructure project financing. This provides a framework to analyse the steps to implement Islamic financing successfully in infrastructure development.

Purpose

The purpose of this chapter is to reflect the impact of mergers and acquisitions processes on performance of Islamic banking industry in the United Kingdom through studying within.

Design/Methodology/Approach

The present research uses explanatory approach in order to examine the research problems, methodology used in the research is quantitative methods through calculating the long-term share prices performance of the UK Islamic banks’ sample. First, the researchers use the control Islamic bank in the event-time approach. The researchers calculate annual abnormal returns using the buy-and-hold abnormal return (BHAR) method over a period of five years, counting from the quarter of a year when the transaction is said to be effective.

Research Findings

The research findings found that there are significant differences in the Islamic mergers and acquisitions post-long-run performance of the UK Islamic banks to the control the crises that face the United Kingdom from 2007 to 2010. However, the acquiring Islamic bank in high-tech industries had a negative effect on their long-term performance.

Limitations/Implications

The present research has been applied for the Islamic banking industry in the United Kingdom after the Western Europe industry from 2007 to 2010.

Practical Implication

The main implementations of the present research is valuing UK banks carried out the Islamic mergers and acquisitions of a broad range of management disciplines encompassing the financial, strategic, behavioral, operational, and cross-cultural aspects of this challenging and high-risk activity.

Originality/Value

The Islamic mergers and acquisitions have placed a significant amount of value added on the motivation of large banks for engaging in banking mergers and acquisitions’ transactions.

Purpose

India is a home to the second largest Muslim population in the world. It is equally crucial to understand the attitude of non-Muslim population towards the interest-free banking in India. The firms desirous of entering into this nascent field in India are required to know the aspirations and motivations of both Muslims and non-Muslims with respect to interest-free banking. For a large number of Muslims interest-free banking may be a matter of adhering to their faith, but for the non-Muslim customers it has to address real issues like security, risk minimisation, profitability, etc.

Design/Methodology/Approach

The present study is an attempt to understand the perceptions of Indian customers towards Islamic banking. For this purpose, a representative sample of 259 respondents is surveyed with the help of a structured questionnaire developed for this purpose.

Findings

It has been found that there are differences in the attitude of Muslims and non-Muslims towards Islamic banking. Surprisingly both groups have a similar perception about the institutions of Islamic banking. Findings of the study reveal that the attitude of Indian customers can be classified into factors like awareness, ideology, implementation, features and institutions. Therefore, such factors should be considered seriously by the Islamic banks in designing their marketing strategies.

Research Limitations/Implication

This is a survey-based study. Hence a representative sample is mandatory. Due care has been taken to arrive at a sample size which is representative of the population; however, a large sample size shall lead to better results.

Practical Implications

This study can help decision makers to identify the major factors that may shape the attitude of Indian customers towards Islamic banks. This should also be of some help to the management of commercial banks in devising appropriate marketing strategies for reaching and attracting young customers.

Originality/Value

The originality of this study lies in the fact that it is a pioneering study in the Indian context which brings out the attitudinal differences between Muslims and non-Muslims with respect to Islamic banking. Further, the classification of attitude of Indian customers into factors like awareness, ideology, implementation, features and institutions adds to the originality of the study. Both these aspects of this study add value to the existing literature in the field of Islamic banking.

Purpose

Privatization is one of the ways governments consider to dispense with the consequences of governmental economy in the economic reforms. One of the complex matters that governments face is decision-making in privatization and choosing policies and methods that move the country’s economy toward more efficiency. Considering the importance and complexity of this issue, taking a comprehensive strategic perspective by the policy makers seems necessary for establishing successful privatization.

Method

Article 44 of the Islamic Republic of Iran’s constitution is the foundation of its privatization program and this study specifies the strategic requirements in implementation of privatization based on the mentioned article and other legal documents. Iran Privatization Organization (IPO) is the single executor of the program and we surveyed all members of the statistical population of this study, including all experts, supervisors, managers, deputies, and senior advisers of IPO to collect the required information by a questionnaire with some questions including strategic thinking, requirements, and results.

To analyze the data, at first, validity and reliability of the collected data, then the correlation between strategic thinking and requirements were tested and all strategic requirements of privatization were prioritized. We used tests such as Cronbach’s Alpha, Pearson Correlation Coefficient, Linear Regression, and Friedman to perform the study.

Annexes

Pages 181-197
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Author Index

Pages 199-202
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Subject Index

Pages 203-210
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DOI
10.1108/S1569-3759(2014)95
Publication date
2014-08-25
Book series
Contemporary Studies in Economic and Financial Analysis
Editor
Series copyright holder
Emerald Publishing Limited
ISBN
978-1-78350-817-4
eISBN
978-1-78350-818-1
Book series ISSN
1569-3759