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Article

Mohammad Ashraful Ferdous Chowdhury, Chowdhury Shahed Akbar and Mohammad Shoyeb

The purpose of this paper is to examine the linkage between Islamic financing principles and economic growth (EG) by taking into consideration two Islamic Financing…

Abstract

Purpose

The purpose of this paper is to examine the linkage between Islamic financing principles and economic growth (EG) by taking into consideration two Islamic Financing Principles: Risk Sharing and non-risk sharing separately.

Design/methodology/approach

The data for this study are obtained from the annual reports of all Islamic banks from Bangladesh using Bank scope database and annual report for the period 1984-2014. The research uses an Autoregressive Distributive Lags (ARDL) approach. For robustness, this study also employs a continuous wavelet transform approach.

Findings

The empirical findings reveal that the risk sharing instruments are positively related to the EG of the country. On the other hand, non-risk sharing instruments are negatively related to the EG of the country.

Research limitations/implications

The dominant use of non-risk sharing-based financing has undermined the greater possibility of Islamic banking to contribute more to the EG of the country. Banks and other financial institutions need to pay greater attention to systemic risk created by risk transfer and apply risk sharing methods of financing more vigorously to achieve greater equity, efficient allocation of resources, stability and growth of the financial system and welfare of the society as a whole.

Originality/value

This study has advanced the knowledge by examining the issue of Islamic financing principles and EG. This is probably one of the first attempts to find the linkage between Islamic financing principles and EG by taking into consideration two portfolios: risk sharing and non-risk sharing separately and provide significant insights for policy makers, market players and academicians.

Details

Managerial Finance, vol. 44 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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Article

Md. Mahmudul Alam, Chowdhury Shahed Akbar, Shawon Muhammad Shahriar and Mohammad Monzur Elahi

Because of chronic financial crises experienced during past several decades repeatedly and a failure to protect investors’ rights as a result, the world is looking for an…

Abstract

Purpose

Because of chronic financial crises experienced during past several decades repeatedly and a failure to protect investors’ rights as a result, the world is looking for an alternative form of stock market for quite some time so that interests of all relevant stakeholders can be safeguarded. At the same time, from the perspectives of devout Muslims, the current form of stock market restricts a Muslim to make investments in the market because of several unsatisfying provisions from the viewpoint of the Islamic law known as Shariah. This study aims to provide the criteria under which conditions of the Islamic Shariah permit making investments in the stock market. Hand in hand with that primary discussion, it has been eluded briefly why the Islamic Shariah principles offer a better alternative against conventional practices of the stock market.

Design/methodology/approach

This is a descriptive study based on the literature review.

Findings

This study explores the basic Islamic principles of investment in the stock market by revisiting the norms laid down by Shariah and current global practices of Islamic stock market and indexes.

Originality/value

This study will work as a guideline for investors and market authorities to understand the original Shariah rulings and the benchmark rulings for investment or establishing full-fledged Islamic stock markets, indexes and mutual funds.

Details

Qualitative Research in Financial Markets, vol. 9 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

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