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Article
Publication date: 7 January 2019

Rashedul Hasan, Abu Umar Faruq Ahmad and Tamiza Parveen

The key purpose of this study is to make awareness for faithful Muslims who are interested to invest in Islamic capital markets so as to enable them making right decision…

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Abstract

Purpose

The key purpose of this study is to make awareness for faithful Muslims who are interested to invest in Islamic capital markets so as to enable them making right decision while considering investment in Sukuk over conventional interest-bearing bonds.

Design/methodology/approach

This study reviews past literature to analyse contemporary Sukuk risks and discusses several mechanisms to mitigate those risks.

Findings

The study shows that Sukuk can be good alternatives to conventional bonds. Sukuk structures need to be further developed to fulfil the Sharīʿah compliance requirements.

Research limitations/implications

This study is exploratory in nature, and as such, it seeks to identify the risks related to Sukuk issuance. Given this limitation, it did not provide empirical evidences relating to any specific category of Sukuk risks.

Practical implications

An in-depth knowledge of Sukuk risks would help both academicians and investors understand the potential problems related to Sukuk structures and take precautions in the early stage to prevent causes of being defaulted or bankrupt.

Originality/value

The risks related to Sukuk have been explored in all potential roots. This study has offered some significant techniques to prevent the relevant risks for investors’ benefits. Information being provided throughout this study is expected to serve potential investors in Sukuk as a guide to make right decisions and enable them to minimise the risk to secure healthy returns on their investments.

Details

Journal of Islamic Accounting and Business Research, vol. 10 no. 1
Type: Research Article
ISSN: 1759-0817

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Book part
Publication date: 16 June 2021

Abstract

Details

Monetary Policy, Islamic Finance, and Islamic Corporate Governance: An International Overview
Type: Book
ISBN: 978-1-80043-786-9

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Article
Publication date: 13 May 2020

Md Akther Uddin and Abu Umar Faruq Ahmad

This paper aims to compare and contrast the concept of conventional futures contract from the Islamic law of contract perspectives. The underlying theory and practice of…

Abstract

Purpose

This paper aims to compare and contrast the concept of conventional futures contract from the Islamic law of contract perspectives. The underlying theory and practice of Islamic finance is based on the principles of Islamic law of contract. Although the necessity of derivative instruments such as the case with futures contract is essential for developments in Islamic finance, the permissibility of using these instruments still remains a debatable issue.

Design/methodology/approach

The paper discusses arguments for and against using derivative instruments as in futures, for example, in light with the Qur’an and Sunnah (the Prophet’s traditions), as well as the views of classical scholars, jurists and contemporary researchers. Arguments for and against are analysed systematically to derive a logical conclusion.

Findings

The study finds that majority scholars consider futures contracts as non-compliant with the Islamic law due to the fact that selling something that does not exist, deferment in the both counter values, gharar or ambiguity and excessive risk taking, pure speculation and sale of one debt for another.

Research limitations/implications

The study focuses narrowly on conventional futures contract. Analysing other financial derivative contracts could be a future research endeavour.

Practical implications

The study has so far found the verdict of impermissibility of conventional futures contract in its current form as has been argued by majority scholars in the premise that they do not comply with the Islamic law. Policymakers and industry practitioners need to take this opinion of majority scholars while developing new Islamic financial derivatives.

Originality/value

To the best of the author's knowledge, the present research is the first attempt so far that explained the validity of conventional futures by analysing arguments of classical and contemporary jurists, scholars and researchers.

Details

International Journal of Law and Management, vol. 62 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 6 May 2021

Tauhidul Islam Tanin, Abu Umar Faruq Ahmad and Aishath Muneeza

This study explores the practical application of the Shariah screening process and how it could be enhanced by converging the same with the ethical screening of stocks.

Abstract

Purpose

This study explores the practical application of the Shariah screening process and how it could be enhanced by converging the same with the ethical screening of stocks.

Design/methodology/approach

This study adopts a qualitative research methodology by combining the qualitative descriptive approach and content analysis.

Findings

The findings of this research suggest that there is scope to converge ethical screening of stocks with Shariah Screening as the lex loci applicable to Shariah screening is derived from Shariah, which considers ethics as part of determining its rules.

Practical implications

The data from this study reveal several practical applications, the ultimate goal of which is to help the policymakers and stakeholders understand the relevance of the Shariah screening of stocks and get a streamlined screening process, paving the way to enhance the same using ethical screening criteria to develop its function to become much more relevant irrespective of the denomination of faiths.

Originality/value

This is original research, which is expected to contribute to understanding the extent to which Shariah screening can be enhanced by integrating the ethical stock screening dimension to it.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Abstract

Details

Monetary Policy, Islamic Finance, and Islamic Corporate Governance: An International Overview
Type: Book
ISBN: 978-1-80043-786-9

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Book part
Publication date: 14 December 2018

Abu Umar Faruq Ahmad, Aishath Muneeza, Mohammad Omar Farooq and Rashedul Hasan

Sukuk restructuring primarily aims at offering a debtor more latitude, in form and time, to settle his obligations. To meet Shari’ah requirements of transferring assets to…

Abstract

Sukuk restructuring primarily aims at offering a debtor more latitude, in form and time, to settle his obligations. To meet Shari’ah requirements of transferring assets to Sukuk holders in asset-based Sukuk, the originator usually transfers the beneficial ownership to the issuer special purpose vehicles (SPV). However, in asset-backed Sukuk, the originator sells the underlying asset to an SPV and Sukuk holders do not have recourse to the originator in the event of defaults. Among some key unresolved Shari’ah issues in this regard is whether a change of contract necessitates entering a new contract. Other related issues that conflict with the tenets of Shari’ah are: (1) Sukuk structuring on tangible assets and debts; (2) receiving the full title by the Sukuk holders to the underlying assets in the event of default in case of securities that are publicized as asset backed; (3) Sukuk’s similarity with interest bearing conventional bonds: (a) capital guarantee by the originator or third party, (b) the originators’ promise to repurchase Sukuk at face value upon their redemption, and (c) providing internal and external credit enhancement. The Shari’ah-compliance of the above-mentioned clauses and structures of Sukuk remain debated among the Shari’ah scholars. Based on some specific cases, this study examines the Shari’ah viewpoint on sukuk restructuring and potential solutions to these unresolved Shari’ah issues in light of the past and recent declaration of some Sukuk defaults as non-Shari’ah complaints. Undoubtedly, resolution of these and other unresolved issues pertaining to Sukuk defaults can help strengthen the confidence of investors in Islamic capital market structures.

Details

Management of Islamic Finance: Principle, Practice, and Performance
Type: Book
ISBN: 978-1-78756-403-9

Keywords

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Book part
Publication date: 19 December 2016

Abu Umar Faruq Ahmad

Sukuk are popular means for governments to raise money through sovereign issues, and for corporations to obtain finance through corporate sukuk offerings. The purpose of…

Abstract

Purpose

Sukuk are popular means for governments to raise money through sovereign issues, and for corporations to obtain finance through corporate sukuk offerings. The purpose of this study is to critically examine the issues revolving around various aspects of sukuk such as regulation, performance and future challenges from different Asian market jurisdictions.

Methodology/approach

Using various sukuk structures and other literatures, this chapter critically investigates some general legal and regulatory requirements for sukuk issuance, its required infrastructure in various jurisdictions in addition to some other relevant important issues to generate cash flows and raise finance through Islamic capital market (ICM) operations without violating the tenets of Sharī’ah in sukuk structures which ultimately helps the economic growth of the Asian region.

Findings

The study finds that in many Asian countries, a separate and specialised regulatory framework, as demanded by sukuk, is lacking and this instrument is treated under the same regulations as of conventional capital markets and their instruments. Some of the regulations may be appropriate for ICM and sukuk, however, most of these regulations need proper modification in order to treat sukuk with clear understanding.

Practical implications

Being part of a niche and new area of Islamic finance in the global financial market a plethora of confusion exists regarding various aspects of sukuk including regulation, performance and future challenges particularly in Asian jurisdiction where sukuk are largely in operation. Findings from this study can be used as a reference to understand the need of the proper modification of conventional regulations, the performance of sukuk in better ways, and meeting other relevant challenges.

Originality/value

Although the demands for having specialised regulatory framework of sukuk, or at least amendments in the current framework for conventional bonds is gaining momentum worldwide in order to accommodate sukuk in the capital markets according to their peculiar nature, it has not caught much attention of researchers and practitioners involved with Islamic finance. Therefore, this study is expected to add value to regulation, standardisation and performance of sukuk in the Asian market, and it deals with the obstacles in the growth of sukuk, which were not extensively covered earlier by the researchers and the Islamic finance industry practitioners.

Details

Advances in Islamic Finance, Marketing, and Management
Type: Book
ISBN: 978-1-78635-899-8

Keywords

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Abstract

Details

Monetary Policy, Islamic Finance, and Islamic Corporate Governance: An International Overview
Type: Book
ISBN: 978-1-80043-786-9

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Article
Publication date: 8 February 2016

Umar A. Oseni and Abu Umar Faruq Ahmad

The paper aims to examine significant developments in the institutional framework for dispute resolution in the Islamic finance industry in Malaysia. Malaysia, as part of…

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1669

Abstract

Purpose

The paper aims to examine significant developments in the institutional framework for dispute resolution in the Islamic finance industry in Malaysia. Malaysia, as part of its efforts to consolidate its enviable Islamic finance industry, has strengthened its institutional framework for dispute resolution.

Design/methodology/approach

Data for this study were collected from both primary and secondary legal sources. Through a conceptual legal analysis, the institutional frameworks of dispute resolution in the Malaysia’s Islamic finance industry are studied.

Findings

The study finds that Malaysia is far ahead of other jurisdictions by a significant margin in spearheading reforms in the emerging global Islamic finance industry. The dispute resolution framework has been largely affected by the recent reforms.

Research limitations/implications

Other jurisdictions may borrow a leaf from Malaysia’s initiative in providing a robust legal framework for dispute management in the Islamic finance industry.

Practical implications

Apart from adopting Malaysia’s framework and possibly adapting it to suit their specific local variations, other jurisdictions may also encourage Islamic financial institutions to incorporate effective dispute resolution processes in Islamic finance contracts.

Originality value

This study critically discussed most recent developments in the institutional framework on dispute resolution in the Islamic finance industry in Malaysia.

Details

International Journal of Law and Management, vol. 58 no. 1
Type: Research Article
ISSN: 1754-243X

Keywords

Abstract

Details

Monetary Policy, Islamic Finance, and Islamic Corporate Governance: An International Overview
Type: Book
ISBN: 978-1-80043-786-9

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