Search results

The skyrocketing rise of Islamic banking is noticeable in not only Islamic countries but also non-Islamic countries during the past few decades. Many conventional banks have started Islamic banking generally by maintaining separate branches/windows and occasionally by pursuing a complete conversion strategy. Following the global trend, two of the full-fledged Islamic banks adopted a conversion strategy consecutively in 2004 and 2008 in Bangladesh. The number of the conversion case is still limited. At this backdrop, this study aims to identify the incentives in the conversion strategy into Islamic banks.

Using the secondary data from the annual reports of the sample banks for both pre- and post-conversion periods, this study adopts the “case study” approach upon the comparison with the performance of conventional banks and other types of Islamic banks.

It is apparent that higher reserve requirement for conventional banks provides the incentive for the conversion into Islamic banks given with less reserve requirement. Under the protective regulatory framework, these converted Islamic banks may have enjoyed the rent for learning during the initial phase after the conversion, even though majority of the funds of these banks are collected from high-cost mudaraba time deposits. Basically, the credit strategy of the converted banks has been quite conservative, resulting in the concentrated portfolio selection on the asset-backed financing. However, the recent engagement of these banks in the Shari'ah-based participatory financing makes their performance a bit vulnerable.

It is becoming difficult to justify a protective regulatory framework for incubating infant Islamic banks if the rent for learning given under the framework would not encourage them to challenge and absorb the risk and uncertainty associated with Shari’ah-based participatory financing. The current mode of profit–loss sharing (PLS) makes it difficult for the regulators to create an appropriate incentive for Islamic banks to challenge the equity-based financing.

The number of the conversion case is limited. Less has been done to investigate the reasons why the conventional banks opt for the conversion into Islamic banks, particularly in Bangladesh.

The purpose of this paper is to construct an investment account holders' transparency and disclosure (IAH-T&D) index based on the new and revised accounting standard for investment accounts of the Accounting and Auditing Organization for Islamic Financial Institutions Standards (AAOIFI) (2020). It also aims to measure and compare the compliance level with IAH-T&D over years and between countries.

This study uses the content analysis method to analyze the content of 270 annual reports across 30 Islamic banks (IBs) in 10 Middle East and North Africa countries during the period from 2010 to 2019.

This study introduces a new IAH-T&D index which consists of 27 items representing four categories: investment accounts disclosure (11 items), incentive earnings disclosure (1 item), allocations and reserve disclosure (4 items) and general requirements for disclosure (11 items). The analysis shows that the level of IAH-T&D is 51%. The level of compliance varies over the years and across countries.

To the best of the authors’ knowledge, this is the first study that offers an original self-constructed-T&D index that could enhance future research related to determinants and consequences of IAH-T&D practice in IBs.

This study aims to shed light on Shari’ah supervisory boards (SSBs) and the possibilities of Islamic banks to reduce the tax avoidance. Performance and Shari’ah compliance have been extensively studied; however, tax avoidance remains a challenge.

SSB characteristics, based on resource dependence theory, influence tax avoidance, including SSB size, educational level, expertise, reputation, remuneration and turnover. The samples were obtained from Islamic banks in Indonesia and Malaysia (2010–2020) using the data panel method.

Islamic banks avoid taxes through the effective tax rate and book tax difference. SSBs who have more expertise play a role in investigating the complexity of tax avoidance, and SSB reputation, who is a member of the Islamic bank regulator, understands immorality, resulting in reduced tax avoidance. Moreover, the recruitment system has been effective, as SSBs with more expertise have become more prevalent. Meanwhile, SSB from a Shari’ah background works only in regulated areas, simplifying Shari’ah compliance, in particular, attestation of financial reporting. A heavy workload is created by cross-membership, resulting in the neglect of the immoral value of tax avoidance. The calculation of tax avoidance also includes remuneration and bank assets.

Given the uniqueness of Islamic banks contributing to social welfare, tax regulators need to review the appropriateness of fees that can be treated as taxes. Tax regulators can join hands with Islamic bank regulators on this review.

To the best of the authors’ knowledge, this study is one of the first to examine the characteristics of SSBs and Islamic banks on tax avoidance. Separating Islamic banks by country enriches the analysis.

The purpose of this study is to investigate the role of Auditing and Accounting Organization for Islamic Financial Institution (AOIFI) governance disclosure on the performance of Islamic financial institutions (IFIs) through systematic literature review approach.

This study is based on the review of literature related to the AAOIFI accounting standards downloaded from Scopus database. This study includes review of 126 research articles, 10 review papers, 9 book chapters and 5 conference papers related to different roles played by AAOIFI in providing standards for accounting, auditing, governance and ethics for global IFIs.

The findings of this study suggest that AAOIFI has played a critical role in developing the accounting standards for the IFIs and contributed positively to the overall growth of the Islamic finance industry.

AAOIFI has played a critical role in issuing and development of accounting and auditing standards and has contributed positively to the financial performance of IFIs. Research gaps are identified, and there is a need to work on these gaps.

This study will contribute to the understanding the role of AAOIFI in issuing and development of accounting and governance standards and future research agenda based on a thorough review of literature.

This paper aims to draw on the bank rent approach to evaluate the existing pattern of financing of Islamic banks and to propose a fairly new conceptualization of Islamic bank rent.

The bank rent theory is adopted to generate the theoretical underpinnings of the issue. After that, empirical evidence from the banking sector of Bangladesh is used to support the arguments.

Repeated transactions under murabaha are observed in the Islamic banking sector of Bangladesh. The asset-based financing gives the Bangladeshi Islamic banks relatively higher Islamic bank rent opportunity for protecting their “franchise value” as Shari’ah-compliant lenders, while responding to the periodic volatility in transaction costs of profit-and-loss sharing.

The bank rent approach suggests that the murabaha syndrome can be ironically justifiable. On the other hand, the current profit-and-loss sharing risk provides an idea of the difficulty in assuming the participatory financing with higher credit risk in practice. Islamic scholars and the regulatory authority need to design an appropriate financial architecture which can create different levels of rent opportunities for Islamic banks to avail the benefit from the variety of Islamic financing as declared by Islamic Shari’ah.

This paper introduces a fairly new concept of “Islamic bank rent” to make sense of the murabaha syndrome. This approach also contributes to clarifying the unique risk and cost to be compensated with the spreads that Islamic banks are expected to earn. To draw empirical evidence, as far as it could be ascertained, the data of both Islamic banks and conventional banks with Islamic banking windows/branches are used for the first time.

This paper aims to assess recent trends in lending modes and to address the reasons for and consequences of changes in Bangladesh’s Islamic banking sector.

Theoretical discourse is used to generate an underpinning for the issues covered by the study. In addition, empirical evidence from the banking sector, including the information derived from interviews with the staff of three Islamic banks, is presented to achieve the research objectives.

The findings clearly demonstrate that the Islamic banking sector has experienced a paradigm shift from participatory financing to asset-based financing. In particular, the murabaha mode of financing dominates the current lending structure, which follows the general trend of the global Islamic banking sector.

It is necessary to concentrate on the potential negative outcomes of the trade-based murabaha mode of financing in a developing country such as Bangladesh, as banks have less incentive under protective rent (profit) opportunities to train the experts to screen and monitor projects in other socially desirable sectors such as agriculture and manufacturing including the small and medium enterprises.

Despite substantial growth of the Islamic banking sector, less research has been conducted to shed analytical light on the operations of Islamic banks from the perspective of loan disbursement to identify the disparities, if any, in between theory and practice in countries where both Islamic and conventional banks operate simultaneously. Using country-specific evidence, this study contributes to the debate by highlighting the paradigm shift of Islamic banks from participatory financing to the dominance of asset-based murabaha and other modes of lending, by identifying the fundamental causes that contribute to such a shift and by highlighting the consequences of such changes.

This study aims to investigate the link between corporate governance (CG) and organisational growth in Indonesian Islamic banks. Moreover, this research exposes the root causes of stagnancy in Indonesian Islamic banks from a governance perspective.

This study used quantitative data such as secondary and primary data. This study used panel data analysis and examined managers’ perspectives of CG elements to show Islamic banking growth in Indonesia. The panel data set was extracted from 24 Indonesian Islamic banks’ annual reports from 2016 to 2018.

This study found that the number of Sharia supervisory boards, board commissioners’ meetings, board quality, incentive and compensation significantly and positively affected Islamic banks’ growth in Indonesia. Meanwhile, board independence was significant but negatively impacted Indonesian Islamic banks’ growth.

This study contributes to enhancing the growth of Islamic banks in Indonesia and helps find the solution to Islamic banks’ problems. Hence, this study contributes to Islamic banks’ literature and banking policies, stakeholders, regulators and government.

Most studies have examined the growth of Islamic banking only from the financial and economic perspectives, while studies undertaken from the perspective of organisational growth and governance are still limited.

Recent calls by prominent Islamic scholars to shift the focus of Islamic finance away from bond‐like sukuk have been met with great unease by bankers in the industry. Islamic Financial Institutions, which hold the majority of all sukuk issued, face deposit side constraints on the types of returns they distribute, due to a need to match returns to market‐based deposit interest rates. Hence, it is in their interest to hold assets that provide stable benchmark‐based returns. The purpose of this paper is to provide an outline of an incentive‐based regulatory mechanism to encourage Islamic banks to reconcile their intended normative structure (profit and loss sharing) with the operational and pragmatic realities within which Islamic banks exist.

The paper traces the regulatory infrastructure and in particular Islamic Financial Services Board regulations on Capital Adequacy for Islamic Banks and provides recommendations for technical improvements to particular aspects of the regulations.

The paper provides practical regulatory recommendations on the capital adequacy regime implemented by central banks that could potentially align more effectively with the intended form of Islamic bank's operational structure, either as an investment bank or as a commercial bank.

By aligning the activities of Islamic banks with their intended operational structure through the implementation of a system of regulatory incentives as recommended in this paper, may help in quelling the increasing tide of criticisms of the current Islamic banking model which has deviated from its intended form. More importantly, if such regulation is implemented, it could also lead to enhanced systemic stability, since Islamic banks will be more resistant to economic shocks that affect the system.

While there are studies that research the effect of the capital adequacy ratio, none really provide practically implementable recommendations that align the Islamic bank business model with its intended objectives.

The purpose of this paper is to examine the level of understanding of Islamic banking concepts and the factors that influence Islamic banking adoption in Malaysia, based on Rogers’ (1983; 2003) Diffusion of Innovation. Specifically, the impact of perceived attributes and other variables (understanding, consumer innovativeness and bank personnel’s professionalism) on Islamic banking adoption is examined.

A quantitative approach using a sample of 200 working MBA students in a leading public university in Malaysia was used. The instrument used was a self-administered questionnaire survey.

The level of understanding of various Islamic banking concepts is below average. A logistic regression reveals that the understanding of Islamic banking concepts and perceived advantage significantly influences the adoption of Islamic banking services.

The small sample size of 200 individuals may render the findings ungeneralizable. Future studies may use a larger sample from across Malaysia and incorporate other independent variables, such as religiosity and Islamic financial literacy.

The Malaysian government can provide tax incentives and conduct educational roadshows on Islamic banking. Educating prospective consumers on the advantages of Islamic banking as opposed to conventional banking would provide more objective benefits that would boost the adoption of Islamic banking.

The results of this paper will be useful for Islamic financial institutions to increase their marketing and promotional efforts to keep pace with stiff competition within the industry.

The purpose of this paper is to assess whether Islamic banks are transparent regarding profit (and loss) sharing to investment account holders. Another objective is to appraise whether Islamic banks' performance affects management incentives to distribute profit (and loss) to investment account holders.

To investigate the research issue, the authors conducted an empirical study. Data of 25 global operating Islamic banks have been collected and analyzed for the period 2006-2010. The authors also developed a mathematical model based on the generalized least-squares principle.

The research results showed that enhancing transparency will prevent Islamic banks from shadowing their profit allocation practices and place investment account holders in a better position to manage their invested funds. The study also showed that bettering Islamic banks’performance will induce them to manager profit-sharing investment account holders’ funds under bonafides.

The main limitation is data availability. The maximum number of Islamic banks that disclose financial data covering the period of 2006-2010 limited the scope of the study to 25 banks.

The findings are very valuable for designing policies and standards as well as for the enforcement of these standards to improve transparency in Islamic banking.

The study outcome is vital to many parties involved in the Islamic banking field and can be taken as a strong foundation to make appropriate actions that would help grow and sustain Islamic banking development globally.