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Article
Publication date: 9 August 2021

Erhan Akkas and Hazem Al Samman

This paper aims to investigate and provide an objective appraisal of the impact of the COVID-19 outbreak on Islamic and conventional financial institutions and Islamic

Abstract

Purpose

This paper aims to investigate and provide an objective appraisal of the impact of the COVID-19 outbreak on Islamic and conventional financial institutions and Islamic windows in the Gulf Cooperation Council (GCC) countries.

Design/methodology/approach

The panel data techniques are conducted country-wise in each financial institution type: random-effect model, fixed-effect model and Hausman test.

Findings

The results of the first phase analysis that extends from 1 January 2020 to 30 October 2020 show that Islamic financial institutions are less exposed to the repercussions of the COVID-19 outbreak than the conventional and Islamic window financial institutions in Bahrain, Oman, Qatar, Saudi Arabia and UAE. Moreover, the Islamic financial institutions in Saudi Arabia and Oman have not been affected by the COVID-19 outbreak. The second phase analysis for the COVID-19 outbreak that extends from 1 November 2020 to 17 March 2021 confirms the disappearance of the negative impact of COVID-19 on Islamic financial institutions in Bahrain and Oman.

Practical implications

The findings present that Islamic banks are not as resilient in the COVID-19 pandemic as in the 2008 financial crisis. It can be suggested that regulatory authorities, financial institutions and other key policymakers in the GCC countries should focus on implementing regulatory reforms related to human capital, innovative products, research and development to further develop individuals, societies and institutions within the framework of Islamic ontology to be more resilient in such crises.

Originality/value

This paper provides a different perspective from existing literature on the pandemics and financial institutions by comparing the stock prices in Islamic and conventional financial institutions and Islamic windows in GCC countries during the COVID-19 pandemic. Therefore, this paper should be considered as a contribution to filling a gap in the literature.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 12 November 2020

Zakariya Mustapha, Sherin Binti Kunhibava and Aishath Muneeza

The purpose of this paper is to review the literature on Islamic finance vis-à-vis legal and Sharīʿah non-compliance risks in its transactions and judicial dispute…

Abstract

Purpose

The purpose of this paper is to review the literature on Islamic finance vis-à-vis legal and Sharīʿah non-compliance risks in its transactions and judicial dispute resolution in Nigeria. This is with a view to putting forward direction for future studies on the duo of legal and Sharīʿah non-compliance risks and their impact in Islamic finance.

Design/methodology/approach

This review is designed as an exploratory study and qualitative methodology is used in examining relevant literature comprising of primary and secondary data while identifying legal risk and Sharīʿah non-compliance risks of Nigeria’s Islamic finance industry. Using the doctrinal approach together with content analysis, relevant Nigerian laws and judicial precedents applicable to Islamic finance practice and related publications were examined in determining the identified risks.

Findings

Undeveloped laws, the uncertainty of Sharīʿah governance and enforceability issues are identified as legal gaps for Islamic finance under the Nigerian legal system. The gaps are inimical to and undermine investor confidence in Nigeria’s Islamic finance industry. The review reveals the necessity of tailor-made Sharīʿah-based regulations in addition to corresponding governance and oversight for a legally safe and Sharīʿah-compliant Islamic finance practice. It brings to light the imperative for mitigating the legal and Sharīʿah non-compliance risks associated with Islamic finance operations as crucial for Islamic finance businesses, Islamic finance institutions and their sustainable development.

Research limitations/implications

Based on content analysis, the review is wholly doctrinal and does not involve empirical data. Legal safety and Sharīʿah compliance are not to be compromised in Islamic finance operations. The review would assist relevant regulators and investors in Islamic financial enterprises to understand and determine the impact and potential ramifications of legal safety and Sharīʿah non-compliance on Islamic Finance Institutions.

Practical implications

This study provides an insight into the dimensions and ramifications of legal and Sharīʿah non-compliance risks of Nigeria’s Islamic finance industry. This study is premised on the imperative for research studies whose outcome would inform regulations that strike a balance between establishing Islamic financial institution/business and ensuring legal certainty and Sharīʿah compliance of their operations. This study paves way for this kind of research studies.

Originality/value

The findings and discussions provide a guide for regulators and researchers on the identification and mitigation of legal and Sharīʿah non-compliance risks in Islamic finance via a literature review. This study, the first of its kind in Nigeria, advances the idea that research into legal and Sharīʿah non-compliance risks of Islamic financial entities is key to mitigating the risks and fostering the entities and their businesses.

Details

International Journal of Law and Management, vol. 63 no. 2
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 13 April 2015

Lutfullah saqib, Mueen Aizaz Zafar, Khurram Khan, Kellie W. Roberts and Aliya Mueen Zafar

This paper aims to study Qard-al-Hasan (QH) (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of…

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Abstract

Purpose

This paper aims to study Qard-al-Hasan (QH) (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of Riba (interest)-free agricultural financing for Muslim farmers of Islamic countries like Pakistan.

Design/methodology/approach

This paper is a study of QH (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of Riba (interest)-free agricultural financing for Muslim farmers of Islamic countries like Pakistan.

Findings

The study reports that Riba-free financing is essentially needed by poor Muslim farmers who, owing to prohibition of Riba, do not rely on interest (Riba)-based financing. The study also shows that QH is a viable option for fulfilling this need and is beneficial for the farmers as well as for the Islamic banks or financial institutions.

Research limitations/implications

The case of QH as a potential mode of agricultural financing, as presented in this paper, is based on a theoretical or conceptual framework. The findings need to be further substantiated with empirical evidence. A future study, based on reliable empirical data would certainly add value to the subject.

Originality/value

Islamic banks and financial institutions typically rely on Musharakah (partnership), Murabaha (sale with profit), Ijarah (leasing), Salam (advance payment sale), Istisna’ (manufacturing contract), etc., and they rarely use QH as a mode of financing. Despite its huge utility, QH is practically non-existent in its application as an agricultural financing instrument. This paper presents a case for QH that can be adopted by Islamic banks or financial institutions for provision of the much needed financing for the small farmers of Islamic countries, as well as those living in non-Islamic countries.

Details

Journal of Islamic Accounting and Business Research, vol. 6 no. 1
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 18 October 2018

Murat Ustaoğlu

This study aims to investigate the participation bankings’ financial services with the Islamic precepts in consideration of the doubts and questions in the minds of the…

Abstract

Purpose

This study aims to investigate the participation bankings’ financial services with the Islamic precepts in consideration of the doubts and questions in the minds of the public and religious people on this matter. The study further analyzes the differences between the conventional and Islamic financial services. The PBing, referred to as interest-free banking services, is analyzed in respect to Turkey and the public awareness on these practices are also surveyed empirically to offer some plausible findings and conclusions.

Design/methodology/approach

Data in this study are collected via survey method. The participants are picked randomly in the study. The priority of the study is the level of public awareness in terms of education level and financial preference. The findings are further empirically analyzed. The participants have been categorized based on their education level, income level and their religiosity. The significance between the Pearson’s chi-square test and the responses has also been tested. Only significant results have been included in the study.

Findings

The findings in the study suggest that the “Islamic” identity of the Islamic finance (IF) institutions has been hurt seriously and that a growing number of people now start considering these institutions as “non-Islamic.” The IF institutions which emerged to respond to the needs of the religious people who are keen to comply with the precepts of Islam have converged to their counterparts in the conventional banking system, particularly in secular countries like Turkey.

Originality/value

Some studies focusing on the consumers in Muslim countries reveal that the greatest expectation out of the Islamic Finance is that it will help the Islamic financial thought take root. One of the initial goals of it is to meet the financial expectations of the Muslims who are eager to follow the Islamic rules in their economic activities. But today, whether IF fulfills this major objective remains unclear. This study offers some empirical view on problem. Participation banks are also considered institutions of IF, which is part of the conventional banking system in Turkey. These institutions have been criticized because of the similarities to the banks in the conventional system, the proximities between the interest rates in the regular banks and the profit shares of these institutions and the unpopularity of the profit-loss sharing (PLS). Critics particularly argue that it is not proper to call these institutionsIslamic.” Currently, whether these banks are truly Islamic remains a controversy. This study analyzes the public perception of the IF as IF institutions by reliance empirical findings through survey. For the analysis, a diverse group of participants selected randomly (in terms of age, income, education and religiosity) in Turkey has been surveyed. The significance in the responses to the questions in the survey was measured empirically to draw conclusions based on the responses and the empirical results.

Details

International Journal of Ethics and Systems, vol. 34 no. 4
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 19 September 2019

Weng Foong Chang, Azlan Amran, Mohammad Iranmanesh and Behzad Foroughi

This study aims to explain how institutional, cultural and corporate factors affect the sustainability reporting quality (SRQ) of financial institutions and to test the…

Abstract

Purpose

This study aims to explain how institutional, cultural and corporate factors affect the sustainability reporting quality (SRQ) of financial institutions and to test the moderating effect of equator principles (EP).

Design/methodology/approach

The annual reports of 100 financial institutions were examined for the year 2016 using content analysis. The multiple regression technique was used to test the proposed relationships.

Findings

The results show that the quality of sustainability reports is higher among financial institutions in developed countries. Furthermore, institutions that practice Islamic values and those that integrate corporate social responsibility values into their mission and vision have higher levels of SRQ. Privately owned institutions also have higher quality of sustainability reporting in comparison to government-owned ones. Adopting the EP has a greater effect on the SRQ of non-Islamic financial institutions in comparison to Islamic ones.

Practical implications

The results of the study will be useful in enabling managers of financial institutions to become knowledgeable about the factors that lead to higher SRQ. The findings also have implications for policymakers’ development of sustainability reporting regulations and for the development of effective enforcement of regulations.

Originality/value

These outcomes contribute to the literature on SRQ exploring the importance of institutional, cultural and corporate factors on the extent of SRQ and testing the moderating effect of EP.

Details

International Journal of Ethics and Systems, vol. 35 no. 4
Type: Research Article
ISSN: 2514-9369

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Article
Publication date: 10 August 2015

Wan Hakimah Wan Ibrahim and Abdul Ghafar Ismail

– The aim of this paper is to discuss the similarities and differences of both conventional and Islamic financial institutions from various institutional perspectives.

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4065

Abstract

Purpose

The aim of this paper is to discuss the similarities and differences of both conventional and Islamic financial institutions from various institutional perspectives.

Design/methodology/approach

This conceptual paper describes the insights held by the financial institution theory which is discussed from the perspectives of the economics of the financial institution, legal environment, the political aspect of an institution, the philosophical underpinning, the components of institution and also the ethical role of institution. Then, this paper will proceed to justify the similarities and differences that have been observed between both institutions.

Findings

Discussions in this paper will reveal that specifically specific similarity is prevalent on the nature of the supervisory role. The differences between both institutions from the aspects of business organization, economic roles and law of origin have also been found.

Research limitations/implications

The similarities and differences that are established on both institutions will affect the structure of the financial contract and the design of financial systems.

Originality/value

The paper will contribute a new knowledge specifically on the design of the Islamic financial contract based on Shariah law at the initial phase.

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Article
Publication date: 20 January 2020

Mohamed Ahmed Kaaroud, Noraini Mohd Ariffin and Maslina Ahmad

The purpose of this study is to examine the extent of audit report lag and its association with governance mechanisms in the Islamic banking institutions in Malaysia.

Abstract

Purpose

The purpose of this study is to examine the extent of audit report lag and its association with governance mechanisms in the Islamic banking institutions in Malaysia.

Design/methodology/approach

The extent of audit report lag is defined by the number of days from a company’s financial year-end to the signature date on its audit report. The sample of the study comprises 112 observations of Islamic banking institutionsfinancial reports for the period 2008-2014. A balanced panel data analysis is performed to analyse the association between the extent of audit report lag and governance mechanisms.

Findings

The findings show that the extent of audit report lag for the sample selected ranges from a minimum period of 7 days to a maximum period of 161 days, and the extent of audit report lag is approximately two months on average. A fixed effects analysis indicates that audit committee expertise and audit committee meeting have significant association with the extent of audit report lag. On the other hand, board independence, audit committee size and Shari’ah board expertise have insignificant association with the extent of audit report lag. In addition, one control variable (Islamic bank size) is found to be significantly associated with longer audit report lag.

Practical implications

The findings provide useful feedback for Malaysian policymakers on the past and current practices of financial reports and of governance mechanisms. The findings of the study would help the policymakers in monitoring the Islamic banking institutions’ compliance with financial reports submission requirements. The policymakers perhaps could relook into governance mechanisms that reduce the extent of audit report lag in the Islamic banking institutions and implement regulations to strengthen them.

Originality/value

Unlike the majority of prior studies that investigated the association between the extent of audit report lag and governance mechanisms, this study provides two contributions. First, to the authors’ knowledge, this study is the first piece of research that examined the association between governance mechanisms and the extent of audit report lag in Islamic banking institutions. Second, the study examined the association of new governance variable, namely, Shari’ah committee expertise which has not been previously examined in the literature of audit report lag.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 1
Type: Research Article
ISSN: 1759-0817

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Book part
Publication date: 14 December 2018

Shatha Qamhieh Hashem and Islam Abdeljawad

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic…

Abstract

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic resilience of three types of banks: fully fledged Islamic banks, purely conventional banks (CB), and CB with Islamic windows. The authors use the market-based systemic risk measures of marginal expected shortfall and systemic risk to identify which type is more vulnerable to a systemic event. The authors also use ΔCoVaR to identify which type contributes more to a systemic event. Using a sample of observations on 27 publicly traded banks operating over the 2005–2014 period, the authors find that CB is the least resilient sector to a systemic event, and is the one that has the highest contribution to systemic risk during crisis times.

Details

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

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Book part
Publication date: 20 May 2019

Murniati Mukhlisin and Leny Nofianti

Islamic financial institutions offer a different paradigm from conventional institutions. From corporate governance (CG) viewpoint, it embodies a number of interesting…

Abstract

Islamic financial institutions offer a different paradigm from conventional institutions. From corporate governance (CG) viewpoint, it embodies a number of interesting features since equity participation and profit-and-loss sharing arrangements form the basis of Islamic financing. These financial arrangements imply different stakeholder relationships and governance structures, and distinct from the conventional model since depositors have a direct financial stake in the bank's investment and equity participations. On top of that, the Islamic bank is subject to an additional layer of governance since the suitability of its investment and financing must be in strict conformity with Islamic law and the expectations of the Muslim community. Other form of governance such as accounting standards have also been an issue whether they have met the reporting requirement of Islamic financial institutions that carry title as “Islamic” as there is no uniformity. Therefore, there should be concerted efforts to revisit the existing good CG and accounting standards for Islamic financial institutions.

Details

Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice
Type: Book
ISBN: 978-1-78973-007-4

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Article
Publication date: 10 February 2021

Marziana Madah Marzuki, Abdul Rahim Abdul Rahman, Ainulashikin Marzuki, Nathasa Mazna Ramli and Wan Amalina Wan Abdullah

The purpose of this paper is to investigate the effects and challenges of the new amendment of International Financial Reporting Standards (IFRS) 9 in Malaysia from the…

Abstract

Purpose

The purpose of this paper is to investigate the effects and challenges of the new amendment of International Financial Reporting Standards (IFRS) 9 in Malaysia from the perspectives of regulators, auditors, accountants and academicians in Malaysian Islamic financial institutions. For the purpose of this study, this paper focuses on the recognition criteria perspective of the standard, which provides a basic understanding of the financial reporting framework.

Design/methodology/approach

Using 10 series of semi-structured interviews undertaken with key individuals in regulatory bodies, audit companies, full-fledged Malaysian Islamic Banks and Malaysian higher learning institutions.

Findings

The findings revealed that IFRS 9 strengthens International Accounting Standards 39 in terms of relevance and reliability, recognition of financial instruments and identification of business models. Nevertheless, Islamic financial institutions face challenges in terms of a faithful representation of fair value, substance over form, identification of financial instruments before recognition criteria and the extent of the role of risk management in reducing manipulation in identifying business models.

Research limitations/implications

This study provides implications to regulators and standard setters in Malaysia to enhance the quality of financial reporting framework and practices in Islamic financial institutions in this country using IFRS 9.

Practical implications

Practically, the findings of this study can be used by the regulators to resolve the issues that arise in adopting IFRS 9 among Islamic financial institutions to further enhance financial reporting quality.

Originality/value

The findings of this study are very important to ensure that the adoption of IFRS among Islamic financial institutions are in line with Sharīʿah principles. To date, no studies have been done on the challenges of adopting IFRS 9 among Islamic financial institutions in Malaysia.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

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