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The purpose of this paper is to propose the development of return forecasting model for mudharabah time deposit product in Islamic bank based on artificial neural networks (ANNs).

The analysis consists of two main elements. First element is the identification and selection of significant macroeconomic variables that determine return volatility of mudharabah time deposit in Indonesian Islamic bank industry. Second element is the implementation of appropriate ANNs model according to neural networks properties, and model evaluation based on simulated return predictions of mudharabah time deposit product in Bank Syariah Mandiri (RR‐BSM).

It is shown that monthly changes of return can be predicted quite well. The model provides a satisfactory result in forecasting RR‐BSM for 12 months ahead with 95.22 per cent accuracy. These results suggest that the ANNs can be applied as an adequate tool to help depositors in predicting future return of mudharabah time deposit product.

There is believed to be no other empirical study of Islamic banks that exclusively examines the utilization of ANNs to forecast time deposit return as well as return from other investment instruments.

The global financial crisis of 2008 still has an impact on the financial systems around the world, for which funding liquidity has been mentioned as one of the main concerns during that period. This study aims to consider the impact of and extent to which the funding structure of Islamic banks along with deposit structure, macroeconomic variables, other bank-specific variables, including alternative funding mix variables (in terms of funding structure measured as financing/deposit ratio), could play a part in explaining the financial conditions and predicting the failures and performances of Islamic banks in the case of Malaysia under the distress created by the global financial crisis.

Multivariate logit model was used with a sample including 17 full-fledged Islamic banks in Malaysia for the period from December 2005 to September 2010 by using quarterly data.

This study found that the funding mix variable (financing/deposit ratio), the composition of deposits, alternative bank-specific variables and alternative funding mix variables are statistically significant. In contrast, none of the macroeconomic variables is found to have a significant impact on bank liquidity. In the final models, the variables that showed significant performance were selected as explanatory variables. The results of McFadden R-squared for both selected models showed an excellent fit to predict the Islamic banks’ performance.

This empirical study contributes to the literature in two ways: to the best of the authors’ knowledge, this is the first study to examine the role of the funding structures of Islamic banks in determining their performance; and it also examines the effect of deposit composition (the mudharabah and non-mudharabah deposits) on Islamic banks’ performance.

The purpose of this paper is to discuss Islamic laws which are relevant to finance. More specifically, it covers the types of contracts as foundation for the distinctive Islamic financial products. The current institutional framework of financial institutions seems to be incompatible with the nature of these Islamic contracts.

This is a conceptual paper describing the link between finance and economic growth in the present of Islamic contracts, which have various types from contract of partnership, buy‐sale contract, to contract of usufructs. The nature of Islamic contract is to avoid riba (i.e. interest system), because it is unjust and prohibited, meanwhile under conventional system they rely very much on the interest system.

The conclusion of the paper is that the distinctive character of Islamic contracts applied by Islamic banking and finance relies mostly on the profit and loss sharing mechanism which contains the cooperative spirit, in the contracts such as mudharabah (profit‐sharing), musharakah (partnership). The development of equity partnership instruments in the financial system necessitates a different set of regulation and institutions in order to achieve Islamic goal through economic/financial activities.

This paper opines that the current framework of financial institutions does not match with the nature of Islamic contracts.

This paper suggests that a new framework for financial institutions is necessary in order to accomplish the maqasid‐al‐shariah, by implementing the true spirit of cooperative through various Islamic contracts. Consequently, the rules and regulations and other relevant elements also need to adjust.

The paper indicates a possible different consequence on the link between finance and growth in the presence of Islamic contracts, i.e. a more positive relation.

This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.

The analysis in this paper adopts a qualitative content analysis approach to review the existing literature on Islamic deposit insurance and propose a new model.

The proposed model includes a revised scheme. In the event of a bank failure, the funds used to reimburse depositors of the failed bank are divided into two distinct categories. The first category includes nonrepayable premiums that have been previously paid by the failed bank and managed by the Islamic deposit insurance agency or Islamic deposit insurance corporation. The second category comprises qard hasan, an interest-free loan provided by the Islamic deposit insurance agency or Islamic deposit insurance corporation using the deposit insurance funds from the collective pool of premiums of other banks.

The proposed model ensures that well-managed banks are not unfairly burdened by the failures of their poorly managed counterparts, thus preventing a sense of unfairness and inefficiency. Implementing the proposed model may result in higher business practices and risk management standards, ultimately leading to better depositors’ protection and banking system’s stability.

This paper offers a significant contribution to the limited literature on Islamic deposit insurance. The proposed model enriches the discourse and offers valuable insights for the future development of Islamic banking.

This paper aims to describe, compare and analyze liquidity policies from the central bank of Indonesia, particularly reserve requirements, with respect to Islamic as well as conventional banks.

This paper provides some critical assessments on the policy applied by the central bank of Indonesia to both Islamic and conventional banks with regards to the reserve requirements applied in the Indonesian banking system. The analysis is based on whether both policies (Islamic and conventional) provide fairness to the banks as well as whether those policies support the real sector. In addition, the current global practice is also briefly described as a justification of the important and relevance of the current study.

The authors find that the policy imposed on the Islamic banks is designed to boost the real sector, compared to that of conventional banks. For the policy with respect to Islamic banks, it recognizes the banks which have been doing well in their main role as financial intermediaries and “punishes” them when they fail to do so. This policy could not be found in the context of conventional banks.

The authors argue that the current approach used for Islamic banks can also be adopted and imposed on conventional banks. This leads to a more stable financial system, since it supports the real sector.

This paper is the first to analyze central bank policies with respect to banks (Islamic as well as conventional banks) in relation to their role as financial intermediaries.

This study aims to devise policies in implementing cash waqf system of Baitul Maal wat Tamwil (BMT) in Indonesia, enabling the BMT to optimize its commercial and social activities to better achieve outreach, sustainability and welfare impact.

This study uses the strategic assumption surfacing and testing (SAST) method, with three groups of knowledgeable respondents, including expert, BMT practitioner and regulator to formulate important and certain policies.

The results show that four types of policies are required to improve cash waqf system of BMT, including 12 internal strategic policies, 15 internal operational policies, 15 external strategic policies and 9 external operational policies, which were found to be within a “certain planning region.” All of these policies have been agreed significantly by each group of respondents, as well as by all respondents combined. The most important-certain policies include Shiddiq, Amanah and professional Nazir, inculcate Islamic values to BMT employees and members, standard operating procedure and standard operating management of cash waqf management, technical assistance for Nazir to manage cash waqf and IT systems for BMT-cash waqf administration.

The qualitative method used has its limitations, which could be improved by incorporating other methods. Moreover, the case and respondents are all Indonesian, so that the results are possibly only applicable to BMTs in Indonesia.

BMTs could adopt these policies in implementing their cash waqf management optimally.

The management of cash waqf by BMT could help improve the social activities of the Baitul Maal directly from social cash waqf and indirectly from productive cash waqf.

To the best of the authors’ knowledge, this is the first study using SAST method to determine policies needed by the BMT to upgrade its cash waqf management producing more social programs for the society.

The purpose of this study is to examine the impacts of product knowledge, perceived quality, perceived risk and perceived value on customers’ intention to invest in Islamic Banks. This study specifically examines an Islamic bank’s term deposits.

Structural equation modeling was used to analyze the data collected from 217 customers of an Islamic bank in Indonesia using an online survey.

This study highlights the central and dual roles of perceived risk as both the independent and the intervening variable that mediates the relationship between product knowledge and Muslim customer intention to invest in an Islamic bank’s term deposits.

This study only investigates term deposits as one type of investment in Islamic banks. This study contributes to the literature by examining the role of product knowledge, perceived quality, perceived risk and perceived value on Muslim customer intention to invest in Islamic term deposits.

The results of this study highlight the requirement for Islamic banks to educate customers to improve the depositors’ product knowledge because Muslim customers’ risk and value perception and intention are strongly influenced by product knowledge.

The investigation of perceived risk is particularly relevant for Islamic financial products because of the inherent nature of risk sharing in Islamic finance. This study investigates the role of product knowledge in influencing the Muslim customers’ perception of risk, quality, value and their intention to invest in Islamic bank term deposits. Ideally, the profit loss sharing concept (PLS) should be applied; however, in this context, revenue sharing is applied because of Indonesia’s central bank regulation.

This study aims to determine the characteristics of waqf-based Islamic financial institution (IFI) and subsequently propose some waqf-based IFIs.

This study uses the Delphi method, combined with the Likert scale, to determine and validate the agreed characteristics of waqf-based IFI models. Subsequently, based on the agreed characteristics, the authors propose waqf-based IFI models.

The results show that there are 28 important characteristics of waqf-based IFI, which respondents agree on 24 characteristics with significant Kendall’s concordance or rater agreement (W). The type of waqf-based IFI could be a bank, venture capital or cooperative; the business orientation should be a combination of commercial-social, and it could be implemented in the national, community or micro level. Based on the agreed characteristics, the authors propose several waqf-based IFI, including integrated commercial-social waqf-based bank, integrated commercial-social waqf-based venture capital and integrated commercial-social waqf-based cooperative.

Respondents of this study comprise experts and practitioners who reside in Indonesia so that the results of proposed waqf-based IFIs are most suitable to be implemented in Indonesia.

The conceptual framework and method used in this study could be applied to determine the characteristics of waqf-based IFI and propose the most suitable waqf-based IFI models in other countries.

This study starts with determining the essential characteristics of waqf-based IFI, which then be used to propose waqf-based IFI models.

The paper aims to compare the return on Mudhārabah deposits (ROMD) to the return on equity (ROE) in Islamic banks.

The summary statistics of the ROMD and the ROE is used to make a comparison between them with a sample of nine Islamic banks, from seven countries, over the last five years. Regression analysis is also undertaken to unveil the variables affecting the behaviour of ROMD and ROE at Kuwait Finance House.

The results show that the ROE tend to be at least two times higher than the ROMD. In most of the investigated cases the ROMD are more correlated to the corresponding conventional interest rate than to ROE. The regression analysis suggests that the return on assets affects more significantly the ROE than the ROMD.

The originality of the paper resides in the size of the sample and in the design and the findings.

In an attempt to enrich the literature of the efficiency of Islamic banks, this study aims to empirically investigate the efficiency of the fully fledged Islamic banks as well as Islamic windows in Malaysia.

This study measures the technical and cost‐efficiencies of these banks using the non‐parametric frontier method, data envelopment analysis (DEA).

The findings show that, on average, the efficiency of the overall Islamic banking industry has increased during the period of study. The study also revealed that, although the fully fledged Islamic banks were more efficient than the Islamic windows, they were still less efficient than the conventional banks. Finally, Islamic windows of the foreign banks were found to be more efficient than Islamic windows of the domestic banks.

The findings of this study will provide some empirical insights as to how these two modes of Islamic banks had fared in the competitive environment from 1997 to 2003.