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Aims to consider the empirical works on Islamic financial design in the light of room for improvements.

Looks at the many aspects of the Islamic financial system and suggests some prudent and sound regulatory frameworks which are deemed necessary.

Finds that the more services that can be offered by the financial intermediaries, the greater the chances of producing more specialized financial services and diversification of financial institutions.

Paves the way for future scholars to examine the systems from the angle of efficiency, effectiveness, rules and regulations, and the present lack of a recognized legal and accounting system.

The purpose of this paper is to suggest a way to improve the effectiveness of Islamic micro‐financing in Indonesia.

The approach taken to measure and evaluate the effectiveness of micro‐financing is to point out the change of micro‐enterprises' business performance and then develop a concept based on the research findings and literature review.

The implementation of Islamic micro‐financing, which was preceded by selection process of micro‐enterprises and also accompanied by business control, incentive system, and construct good relationship, is effective in developing micro‐enterprises and improving the household income. However, an integrated program as an effort to improve the effectiveness of Islamic micro‐financing is still necessary.

Micro‐enterprises' development requires not only provision of financing in an interest free‐based system, but it also needs the provision of other services. For the purpose of holistic approach for micro‐enterprises' development and poverty alleviation, the spiritual development, especially via internalizing Islamic moral values in an entrepreneur's consciousness, is also necessary. In addition, poverty alleviation will be successful if Islamic financing is conducted in many areas, and the government takes part in this program.

This paper shows how, in the Islamic perspective, spiritual development is necessary in improving the effectiveness of financing.

The purpose of this paper is to discuss Islamic laws which are relevant to finance. More specifically, it covers the types of contracts as foundation for the distinctive Islamic financial products. The current institutional framework of financial institutions seems to be incompatible with the nature of these Islamic contracts.

This is a conceptual paper describing the link between finance and economic growth in the present of Islamic contracts, which have various types from contract of partnership, buy‐sale contract, to contract of usufructs. The nature of Islamic contract is to avoid riba (i.e. interest system), because it is unjust and prohibited, meanwhile under conventional system they rely very much on the interest system.

The conclusion of the paper is that the distinctive character of Islamic contracts applied by Islamic banking and finance relies mostly on the profit and loss sharing mechanism which contains the cooperative spirit, in the contracts such as mudharabah (profit‐sharing), musharakah (partnership). The development of equity partnership instruments in the financial system necessitates a different set of regulation and institutions in order to achieve Islamic goal through economic/financial activities.

This paper opines that the current framework of financial institutions does not match with the nature of Islamic contracts.

This paper suggests that a new framework for financial institutions is necessary in order to accomplish the maqasid‐al‐shariah, by implementing the true spirit of cooperative through various Islamic contracts. Consequently, the rules and regulations and other relevant elements also need to adjust.

The paper indicates a possible different consequence on the link between finance and growth in the presence of Islamic contracts, i.e. a more positive relation.

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.

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.

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.

This paper emphasises the derivation of Shariah risk over theoretical approaches. It does not include an explanation in the form of any empirical model.

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.

This paper aims to study the cross section of expected returns on Shari’ah-compliant stocks in Pakistan by using single- and multi-factor asset pricing models.

To estimate cross section of expected returns of Shari’ah-compliant stocks, the study uses capital asset pricing model (CAPM), Fama-French three-factor model and Fama-French five-factor model. Data for the period 2001-2015 on 217 companies are used. For the market portfolio, PSX-100 and Dow Jones Islamic Index for Pakistan are used.

The study could not find empirical support for CAPM using Lintner (1965), Black et al. (1972) and Fama and Macbeth (1973) approach. Nonetheless, the relation between beta and returns is positive in up-market and negative in down-market. The results of Fama-French three-factor and five-factor models suggest that size premium is positive and significant for explaining the cross section of stock returns of small size stocks, whereas value premium is positive and significant for explaining the cross section of returns of high value stocks.

The results suggest that fund managers can use Shari’ah-compliant stocks for portfolio diversification and for offering specialized investments given the positive market excess returns and the existence of size and value premium on Shari’ah-compliant stocks.

This is the first study on Fama-French (2015) five-factor model for Islamic capital markets in Pakistan.

This paper aims to integrate Islamic and mainstream economics framework towards a more realistic understanding of Muslim consumption behaviour.

The model incorporates some of the Islamic institutions like period-wise deduction of Zakat from endowments. It also includes bequests which could be significant given the Islamic injunctions on inheritance distribution and the significance placed on the institution of family. Furthermore, the model integrates the assumption that consumption opportunity set will axiomatically filter out the prohibited consumption goods from the consumption set in both contemporaneous and inter-temporal consumption.

Zakat ensures contemporaneous redistribution from endowment surplus households (those having Zakatable endowments above Nisab) to endowment-deficient households (those having Zakatable endowments below Nisab). The lifetime resources are scaled down for endowment surplus households because of the payment of Zakat in both periods and leaving bequests in old-age period, while the lifetime resources are scaled up for endowment deficient households because of the receipt of Zakat in both periods and receiving the bequests in youth.

The authors show how some of the Islamic principles and institutions can be integrated in the mainstream economics framework, especially in research studies where the objective is to understand and describe reality rather than persuasion and idealization.

The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy.

Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate.

This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel.

The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets.

The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia.

To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

This study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods.

The authors comparatively analyze the performance of mutual funds using measures, such as tracking error, Sharpe ratio (1966), Treynor ratio (1965), M-square measure by Modigliani and Modigliani (1997) and information ratio. The authors also use market timing and selection measures, such as Treynor and Mazuy model (1966), Henriksson and Merton (1981) model and Fama’s decomposition approach (1973).

The authors find that Islamic equity funds are as much competitive as conventional equity funds. All Islamic equity funds have positive Sharpe ratio, Treynor ratio and net selectivity measure. Islamic equity funds are slightly less risky in general. Islamic equity and income funds generally have positive Jensen's Alpha and a positive market timing ability. However, the authors find that Islamic income funds generally underperform the market due to less Shari’ah-compliant investment class assets in the market.

It will help the industry players to assess their strategic positioning with regard to the commercial competitiveness of Islamic investments.

The authors take considerably large sample of 60 funds in Pakistan as compared to previous studies and also cover recent period (2006-16). For income funds, the authors construct an original benchmark index based on price and dividend data and use that in performance assessment.

This paper aims to discuss the application of waqf (endowment) in the social finance sector for funding social and development projects and services.

The study is qualitative. It reviews literature and provides descriptive data to present its main idea.

Most Muslim-majority countries are generally income-poor, and the governments are generally weak in their tax collection, effective governance and capacity for development spending. Private sector financial institutions are scarce and mostly cater to the people who can meet the income-based lending criteria. Thus, the institution of waqf can fill the gap as a social finance institution by providing intermediation services for effectively utilising perpetual social savings. Flexibility in the rules of waqf enables it to serve beneficiaries directly or through financial institutions and to provide a wide range of social services.

This conceptual research highlights the need and potential of waqf without discussing the regulatory and operational details of how to effectively institutionalize it in different regions.

The institution of waqf can harness the potential of selfless charitable giving in an effective way for better economic impact in the targeted social segments of society.

The paper suggests the establishment of waqf-based training and vocational centres which will increase opportunities of self-employment and contribute in upward social mobility of beneficiaries.

This study aims to examine the consumption behaviour in Organization of Islamic Cooperation countries.

Using time series and panel data, this study estimates rational expectations permanent income hypothesis model and the intertemporal elasticity of substitution, and examines the response in consumption to expected and unexpected changes in income.

The evidence supports the phenomenon of loss aversion. The response of consumption to unexpected income changes is statistically significant in only one-third of the countries in the sample. Conversely, the response of consumption to expected income changes is statistically as well as economically significant in one-fourth of the countries in the sample. The intertemporal elasticity of substitution is also statistically insignificant in majority of OIC countries in the sample.

The evidence in support of loss aversion in preferences could help in explaining the low penetration of equity-based risk sharing instruments in Islamic finance.

The excess sensitivity of consumption to income suggests that redistribution efforts to enhance incomes of poor households could help in enhancing their consumption levels.

The study takes a comprehensive sample across time and space for OIC countries as compared to previous studies and also adjusts the budget constraint for Zakat.