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Article

Mohammad Selim and Mohammad Omar Farooq

The purpose of this paper examines how the challenge of poverty can be effectively addressed by broadly adopting Islamic value based cooperative model (IVCM) where the…

Abstract

Purpose

The purpose of this paper examines how the challenge of poverty can be effectively addressed by broadly adopting Islamic value based cooperative model (IVCM) where the members come together to overcome and eventually eradicate the curse of poverty for themselves and for their future generations.

Design/methodology/approach

The elimination of poverty by adopting IVCM and its impact on the cooperative members, as well as its effects on major macroeconomic variables, are examined on the theoretical ground by using the general equilibrium model of demand and supply-side variables.

Findings

The IVCM for the elimination of poverty reveals that the poverty gap can be eliminated through resource mobilization, as well as by creating new and additional income, wealth and resources through collaborative efforts. Through cooperative organizations based on Islamic values and principles, eventually, the entire poverty pool can enjoy income-earning opportunities through employment or self-employment, as well as promoting skills and education, leading to breaking the vicious cycle of poverty.

Originality/value

Cooperatives in general and Islamic cooperatives, in particular, are not new in the discourse about poverty. Indeed, there are cooperatives throughout the Muslim world and beyond and there are many studies related to cooperatives and their role in development. However, this might be the first theoretical contribution that models the role and impact of cooperatives in a macroeconomic framework, and thus, advances the scientific repertoire of knowledge and understanding about the related discourse by developing a rigorous mathematical model.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 5
Type: Research Article
ISSN: 1759-0817

Keywords

Content available
Article

Mohammad Omar Farooq

The purpose of this paper is to explore the concept of rent-seeking behaviour and rentier state in the context of ẓulm (injustice and exploitation), which is one of the…

Abstract

Purpose

The purpose of this paper is to explore the concept of rent-seeking behaviour and rentier state in the context of ẓulm (injustice and exploitation), which is one of the key concerns in Islam in general and Islamic economics and finance in particular.

Design/methodology/approach

As a conceptual paper, it draws on the literature of rent-seeking as part of public choice theory and examines the potential vulnerabilities as well as existence of rent-seeking in Muslim-majority countries, where Islamic finance industry primarily operates.

Findings

The paper identifies several areas where both actual and potential rent-seeking exists.

Research limitations/implications

The paper is conceptual. Based on the analysis presented here further studies can be undertaken to determine the scope of rent-seeking and their impact in Muslim-majority societies.

Practical implications

Incorporating rent-seeking in the theoretical and conceptual framework of Islamic economics and finance can enhance understanding about ẓulm and its ubiquitous presence, as Islam has a firm stance to aspire to have a ẓulm-free society.

Social implications

Understanding rent-seeking behaviour can help appreciate why corruption, inequality and poverty are so entrenched, and why limiting the discourse to ribā (interest) ignores the broader scope of injustice and exploitation.

Originality/value

This might be the first focused paper that conceptually deals with rent-seeking behaviour, connecting the discourse about ribā-interest equation.

Details

ISRA International Journal of Islamic Finance, vol. 11 no. 1
Type: Research Article
ISSN: 0128-1976

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Article

Mohammad Omar Farooq, Fouad Meer and Basit Iqbal

An important Islamic imperative is prevention of concentration of wealth among a few so that wealth circulates widely to enhance shared prosperity. In contemporary…

Abstract

Purpose

An important Islamic imperative is prevention of concentration of wealth among a few so that wealth circulates widely to enhance shared prosperity. In contemporary economic discourse, inequality and concentration of wealth have emerged as among key causes of instability and crisis. Unfortunately, although Islamic finance has emerged as a Shari’ah-compliant industry, it does not seem to be connected with the Islamic concern about inequality and concentration of wealth. This paper aims to explore the issues of inequality and concentration of wealth in the context of Islamic finance.

Design/methodology/approach

This paper addresses a number of queries: Are Islamic banks, as the dominant component of the industry, helping to improve inequality and concentration of wealth and thus offer a better framework to deal with instability and crisis? Is the ownership structure of Islamic banks conducive to meeting the Islamic imperative regarding inequality and concentration of wealth? Using secondary data, this research illuminates the pertinent issues in light of the experience of Bahrain as one of the hubs of Islamic banking and finance.

Findings

The paper finds that the ownership pattern of Islamic banks in Bahrain lends credence to the entrenched, not-so-unexpected concentration of wealth.

Research limitations/implications

This study is based on data of one country. Further studies on other countries will help illuminate the relevant patterns and issues.

Practical implications

Inequality and concentration of wealth are among central economic issues in contemporary economic discourse. Because of the significant impact of such inequality and concentration, societies need to be more aware of these impacts and devise ways to address it.

Social implications

Inequality and concentration of wealth have fundamental social implications, as the issues of poverty, deprivation, exploitation, etc. are inseparable from concentration of wealth (accompanied by concentration of power), and widening wealth gap can cause or induce major socio-political upheaval.

Originality/value

Although inequality and concentration of wealth are robust fields of inquiry, this might be the first work addressing the issue of concentration of wealth in the context of Islamic finance in general and Islamic banking in particular.

Details

International Journal of Ethics and Systems, vol. 35 no. 3
Type: Research Article
ISSN: 2514-9369

Keywords

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Article

Mohammad Omar Farooq

The purpose of this paper is to provide a critical appraisal of the theme of zulm (injustice/exploitation) in light of the Islamic finance literature and the general…

Abstract

Purpose

The purpose of this paper is to provide a critical appraisal of the theme of zulm (injustice/exploitation) in light of the Islamic finance literature and the general attitude and approach of the Islamic finance industry and its advocates.

Design/methodology/approach

Based on an expanding theoretical and empirical knowledge base about Islamic finance and banking movement, and the emerging understanding about the role of profit and corporate behavior, a critical analysis of the role of riba, interest and profit in widespread injustice and exploitation is presented.

Findings

On the basis of the behavior of the Islamic finance industry, it seems that the industry's current practices are either neutral to the issue of injustice/exploitation or mirrors the tendencies of the conventional finance. Furthermore, when comparing the exploitative role of interest and profit, the latter seems to be more consequential than generally understood and acknowledged.

Research limitations/implications

Islamic economics/finance literature should have more empirical research in identifying and understanding the nature of exploitation in the contemporary world and in how the current practices or tendencies are minimizing or abetting the challenge of exploitation.

Practical implications

The larger goal of the Islamic finance and banking movement should be to be in harmony with the maqasid of Islam to minimize zulm (injustice/exploitation) in the society.

Social implications

The larger goal of the Islamic finance and banking movement should be to be in harmony with the maqasid of Islam to minimize zulm (injustice/exploitation) in the society.

Originality/value

While the literature of Islamic economics and finance is rather robust, this might be the first work that critically examines the riba‐interest reductionism, especially to focus on its implication for attention of the industry being away from exploitation in general and the relationship between profit and exploitation in particular.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

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Article

Mohammad Omar Farooq

The purpose of this paper is to examine the phenomenon of debt culture in the conventional financial systems and then to compare the existing or emerging trends in the…

Abstract

Purpose

The purpose of this paper is to examine the phenomenon of debt culture in the conventional financial systems and then to compare the existing or emerging trends in the Islamic finance industry. It provides critical insight into why economic policies that are delinked from some fundamental wisdom about sustainable lifestyle might be increasingly less effective.

Design/methodology/approach

The paper identifies various areas of impact of the debt culture and provides qualitative analysis based on relevant data.

Findings

The data presented in the paper shows that the Islamic finance industry is clearly biased in favor of debt-creating modes, which is expected to lead to promoting the same kind of debt culture as experienced in the conventional financial system.

Research limitations/implications

Finding comprehensive and current data for Islamic financial institutions is a challenging task. The IFIs are not as transparent as their conventional counterparts in sharing relevant data and information.

Practical implications

The paper highlights and analyzes a problem – i.e., the debt culture. Dealing with this problem would be indispensable in the long run for any credible as well as sustainable solutions to contemporary crisis.

Social implications

Debt culture is more than an economic phenomena. The paper identifies/analyzes several areas, including consumption explosion, speculation, ethics, that are related to debt culture.

Originality/value

This is probably the first research paper that looks into the issue of debt culture in the context of Islamic finance. The contemporary, ongoing global crisis underscores the kind of conventional problems that Islamic finance needs to avoid.

Details

International Journal of Social Economics, vol. 42 no. 12
Type: Research Article
ISSN: 0306-8293

Keywords

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Article

Mohammad Omar Farooq and Md. Hasib Reza

The purpose of this paper is to apply technical analysis to some leading Islamic indices and explore if these indices are amenable to the same kind of analysis as applied…

Abstract

Purpose

The purpose of this paper is to apply technical analysis to some leading Islamic indices and explore if these indices are amenable to the same kind of analysis as applied to conventional indices and whether technical analysis, in contrast with fundamental analysis, produces distinct or superior return.

Design/methodology/approach

In this paper, some basic tools of TA to Dow Jones Islamic Market US Index (IMUS) is applied in comparison with the three major market indices: Dow Jones Industrial Average, S&P 500 Index and NASDAQ 100. For TA, we apply moving averages, MACD and Stochastics as indicators. The paper is written particularly for those with interest in Islamic finance, but not necessarily familiar with TA. This paper thus also explores some Shariah-related issues in effectively applying TA.

Findings

The comparative analysis shows that the performance based on IMUS can be improved, when TA is applied.

Research limitations/implications

Robust tools of TA play an important role in market research. This paper probably is the first to apply TA in the context of Islamic finance. Because the scope of this paper is limited (only Dow Jones Islamic USA Index and comparison with three leading market indices), more in-depth research is needed and possible, which it is hoped this paper will encourage.

Practical implications

The successful application of the basic TA tools to Islamic index will encourage the practitioners of Islamic finance to research and explore further uses and effectiveness of TA on other Islamic products.

Originality/value

This paper is probably the first application of TA to Islamic finance markets, written especially for those who take active interest in the financial market from Islamic perspective.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 7 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

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Book part

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

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Article

Sayd Zubair Farook and Mohammad Omar Farooq

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Originality/value

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.

Details

Journal of Islamic Accounting and Business Research, vol. 2 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

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Article

Ahmad Asad Ibrahim, Radwan Jamal Elatrash and Mohammad Omar Farooq

The purpose of the paper was to explore the issue of hoarding and dishoarding in a modern context, especially as it relates to circulation of wealth, an important economic…

Abstract

Purpose

The purpose of the paper was to explore the issue of hoarding and dishoarding in a modern context, especially as it relates to circulation of wealth, an important economic objective from the Islamic viewpoint.

Design/methodology/approach

This paper presents a survey of scholarly positions on the issue of hoarding and circulation of wealth from Islamic perspectives and analyzes how these positions affect the shaping of financial and economic dimensions of life in our contemporary time. The paper draws on the primary sources, the Qur'an and hadith, and examines the positions of the classical and contemporary scholars, especially in the context of the growing interest in finance, the financial system and economy from the Islamic perspective.

Findings

The paper identifies the fact that the notion of hoarding (kanz) needs significantly revised understanding, as money as a concept and tool has evolved substantively in modern times. It also examines variant positions regarding the concept of hoarding and finds more merit in favor of the position that paying zakat is not enough to be exempted from the Qur'anic implications about hoarding. It also identifies and examines securitization, such as sukuk, as an important tool for better circulation of wealth.

Originality/value

Hoarding and dishoarding are not widely explored topics in contemporary literature on Islamic economics and finance. This paper makes a valuable contribution in its attempt to highlight the problem of hoarding and the challenge toward greater circulation of wealth.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 7 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

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Abstract

Details

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

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