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This study aims to develop and estimate the Musharaka demand and supply model for full-fledged Islamic banks to explore patterns and stability of Musharaka equilibrium in the market.

This quantitative study uses a deductive approach to explore financial statement-level data of 30 Islamic banks of six countries between 2012 and 2017.

The results show that the Musharaka market is stable when Musharaka demand is purchase price elastic and supply is sale price inelastic. It indicates that the current banking industry is unable to increase supply when there is an increase in Musharaka returns. In comparison, industry demand for Musharaka is increasing at a higher rate, corresponding to a decrease in Musharaka price.

This study is fundamental in estimating the market stable market returns and market quantity of Musharaka financing. If market returns and quantity deviate, market forces will push it to equilibrium.

The theoretical and empirical studies worked on the application and suitability of Musharaka financing. However, they failed to explain demand and supply forces in determining the level of Musharaka financing in the economy using empirical data. Without an equilibrium model, policymakers would be unable to predict the movement of the Islamic stock market index (the price of Musharaka financing) and the incidence of Musharaka financing. Further, it is not possible to apply expansionary intervention by policymakers if the stability of the market is unknown.

The purpose of this study is to understand the economic substance of Islamic banking transactions in South Africa and to analyse whether the economic substance is closely related to the legal form. Additionally, this study highlights the similarities and differences in the execution of Islamic banking transactions across different South African banks. The transactions analysed are deposit products of qard and Mudarabah and financing products of Murabaha, Ijarah and diminishing Musharaka.

The study was conducted through interviews with representatives from each of the four South African banks that offers Islamic banking products. Interviews were semi-structured and allowed interviewees to voice their perspectives, increasing the validity of the interviews.

The study found that specific Shariah requirements of Islamic banking transactions are considered and included in the legal structure of the contracts by all four banks offering Islamic banking products. However, the economic reality of these transactions was often significantly different from its legal form and was found to, economically, replicate conventional banking transactions. The study also found that all four banks offer Islamic banking products under the same Shariah principles, but in some instances (e.g. diminishing Musharaka), execute these transactions in different ways. This study is the first of its kind in South Africa.

While safeguards have been used to ensure the reliability and validity of the research, there remain a few inherent limitations which should be noted: interviewees, while chosen for their expertise and level of knowledge, may provide highly technical insight which may be difficult to interpret. Detailed technicalities were therefore excluded from this research. The regulatory environment of banks in South Africa, for example, regulation imposed by the Financial Service Board on all financial institutions in South Africa, has not been explored. However, the regulatory environment was brought to the readers’ attention to help illustrate certain themes. This research uses only Shariah requirements as detailed in Section 2.2 to analyse transactions. Fatwas (rulings) issued by the Shariah Boards of South African Islamic banks have not been included in this study and may be an area of future research.

This study is the first of its kind in South Africa. The study adds to the Islamic banking literature by analysing the real execution of Islamic banking transactions rather than the theoretical compliance with Shariah law.

This paper aims to examine the compliance of disclosure with the financial accounting standards of the Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI) related to Islamic financing products by Islamic banks in Bahrain and Qatar.

The study measures compliance using disclosure indexes. The disclosure indexes include the three financial accounting standards of Murabaha, Mudaraba and Musharaka. The data are collected from the annual reports of 24 Islamic banks in Bahrain and Qatar over a period of 2012-2015.

The paper found that Islamic banks in Bahrain and Qatar comply with AAOIFI financial accounting standards related to Murabaha, Mudaraba and Musharaka. However, there was a level of non-compliance in both countries. In addition, it found that the extent of compliance had increased over the 2012-2015 period. Also, the Murabaha standard had the highest mean of compliance. Moreover, the results showed that the Islamic banks in Qatar tend to have more compliance of overall Murabaha and Mudaraba disclosures compared to the Islamic banks in Bahrain.

The findings are preliminary and highlight that the issue is of high interest to Islamic banks and AAOIFI. Hence, it requires a detailed follow-up to form a complete picture that would assist AAOIFI and regulators gear their policies toward better quality disclosure by Islamic financial institutions. Even though the findings are encouraging, future research is recommended to enforce compliance with the AAOIFI financial accounting standards.

This is a pioneer empirical study that focuses on the level and trend of compliance with AAOIFI financial accounting standards related to the Islamic financing products of Murabaha, Mudaraba and Musharaka standards, especially in Qatar. Additionally, it is the first study comparing between the only two Gulf Cooperation Council (GCC) countries, i.e. Bahrain and Qatar, that mandatory apply the AAOIFI standards.

The purpose of this paper is to propose a financial instrument by combining two main contracts in Islamic finance with the aim to minimize risks involved in Islamic venture capital (IVC) activities.

A mathematical model and explanatory figures are provided to see how IVC firms can benefit from the combination of “Ijara” contract and “Diminishing Musharaka” contract to provide financing for start-up and high-tech companies.

The proposed instrument could be considered as an alternative solution for IVC firms. It represents a low level of risk with a stable income in the beginning of the project. In addition, it allows benefiting from the possible development of start-up and high-tech companies with a smooth exit from the capital of the financed company without the intervention of another investor. It is also considered as a motivational instrument for the entrepreneurs, because it allows benefiting from a grace period on the one hand and from a lower cost of financing compared to other type of funding on the other hand.

Some studies have concentrated on identifying and understanding the concept, the operation and the challenges of IVC industry. The study is considered among few studies that provide a practical model for IVC firms, which takes account of the different stages of venture capital process. The instrument can promote the development of IVC firms and give alternative financing opportunities to Muslim entrepreneurs.

The current model provides a truly revolutionary solution for young Muslim entrepreneurs who do not accept to be financed by the proposed instruments of venture capital (VC) firms such as convertible bonds and warrants. On the other side, it provides an alternative solution for IVC firms to the already offered products such as “Musharaka”, “Mudharaba” and “Wakalah” contracts. An expert in “Fiqh Al-Muamalat” (Islamic law of transaction) assessed the Sharia compliance of the model.

This paper aims to examine how homes can be purchased and financed by using Ijara-based diminishing Musharaka (IDM) modes of financing and thus both the home buyer (HB) and Islamic Bank (IB) become joint owners and share rental income jointly according to their respective shares. Such practice can help to avoid interest-based mortgage financing and eliminates excessive risks of bankruptcy as it often happens in conventional interest-based system.

A mathematical model as well as rental income, payments and share schedules for IDM will be developed where both the HB and IB will initially own the home. As the HB gradually pays off the principal amount, his or her share will increase while the share of the IB will gradually decrease as stipulated in the contract. Eventually, the HB will buy back all the shares and thus will own the home without paying for mortgage interest and taking excessive risks of foreclosures or living in constant fear of losing home over approximately 20 to 30 years of the tenure of the mortgage payments.

The HB can own home without paying any interest and without taking excessive risks of foreclosures. The HB is not borrower rather partners in business. In addition, the HB can minimize the total payments compared to interest-based mortgage financing. In the current IDM model, payments are flexible, and the HB will not be required to make regular installment payments, rather he or she receives regular rental income if the HB chooses not to live in the home. Even if HB lives in the home, part of the home can be rented, and the HB will receive regular share of rental income in each month. The HB will not lose the home even if he does not pay any installment while in interest-based mortgage system, the HB may lose the home if the HB stops installment payments even for a couple of months after paying for 29 years for 30 years mortgage. IDM mode of financing is risk free and worry free, and it instantaneously creates rental income for the HB, like any other business.

The current IDM model is one of the most recent, and unique approach of home financing, and it is extremely flexible and free from many restrictions compared to the existing similar models. Many of the existing diminishing Musharaka models impose many restrictions on the HB, such as the HB cannot even own or rent the place, cannot remodel or rebuild the place unless the HB pays off all the outstanding price of the home. If the current flexible IDM model is implemented, it will be truly revolutionary and even the people from other faith group will be extremely interested to join as HB and buy their homes by pursuing IDM mode of financing because it is risk free as well as it will free HB from the financial slavery of monthly installment payments for about two to three decades, especially during the most important and most valuable prime life time of the HB. The IDM model will unveil a potential and a promise to financial freedom by removing all constraints and preconditions in purchasing and financing homes.

The purpose of this paper is to analyse the extent of the contribution of the current Islamic financial system to society in terms of social responsibility (SR) required by the concept of social maslahah.

The paper adopts a critical analytic approach in considering the reasons of the failure of the social dimension of Islamic financial intermediation based on real figures of selected Islamic banks.

Concepts of SR and corporate social responsibility (CSR) are not enough to describe Islamic Banks' responsibilities. Also, this failure cannot be understood only with reference to the “external environment”, i.e. competition‐driven, capitalistic market conditions; but it is also closely related to the transformation of Islamic finance into an almost exclusively murabaha‐based Islamic banking, which promotes more individual maslahah than social maslahah. Compared to the murabaha, other product structures such as mudaraba and musharaka seem to be better instruments for expanding welfare and alleviating poverty.

There is a close relationship between Islamic banking contracts and social contribution of Islamic banks. This paper provides some practical solutions in this context. Also, empirical evidence derived from several conventional and Islamic banks supports these arguments.

This paper is the first to analyse the reasons for the social failure of Islamic Banks and to recommend substantial solutions in this scope and also offers practical help to practitioners of Islamic banking on the issue of social contribution of the Islamic banking business.

Islamic financing is based on the ideology of Islam, proposing a different economic system than capitalism. The essence of Islamic financing lies in trading of goods, provision of services and/or investment under profit and loss sharing. This study aims to examine legal forms and economic substance of the contracts used by the Islamic financial industry.

To conclude on the objectives of the study, five most widely used contracts (modes/products), including Murabaha, Ijarah, Diminishing Musharaka, Sukuk and Mudaraba (deposits), were selected to test against the theory of the Islamic financial system.

It is found in the process that legally (legal form) contracts/products are in line with theory; however, economic substance is not very different from conventional counter parts.

Through application of alternative calculation measures/methods and proper training of human resources, Islamic financial institutions can shift economic substance of contracts in line with the theory of Islamic finance.

Islamic finance is an emerging area, and reasonably good amount of literature is available; however, perhaps, this is the only piece of work focusing on calculation methods, contributing in economic substance of contracts, being used in modern Islamic finance in addition to legal form as per essence of Islamic financial system.

This paper aims to draw upon existing debate over “financial sector rent” (bank rent) to analyze the current pattern of financing of Bangladeshi and Indonesian Islamic banks during the period of 2011 and 2015.

The empirical evidence through a comparative approach of analyzing the performance of Islamic banks with that of conventional banks in respective countries – two of the largest countries where majority of the population are Muslims – is drawn to demonstrate the objective.

While Islamic banks in Bangladesh are primarily concentrating on the murabaha (mark-up contract) mode of financing, some transactions under musharaka (partnership/equity-based contract) are observed in the Indonesian Islamic banking sector. This anomaly in Indonesia can be explained by the nature of their musharaka financing which is not of the purely “participatory” financing type. As a result, we can observe the quasi-murabaha syndrome in Indonesian Islamic banking sector. The concentration of asset-based financing including consumers’ financing (hire purchase) in the credit portfolio gives Islamic banks relatively higher Islamic bank rent opportunity for protecting their “franchise value” as Sharīʿah-compliant (Islamic law-compliant) lenders. However, Indonesian Islamic banks share a still infant Islamic banking market, and enjoy less rent opportunity under a severe competition with conventional banks.

The bank rent approach suggests that the syndrome observed both in Bangladesh and Indonesia can be ironically justifiable. Moreover, the mode of profit-and-loss sharing provides, in practice, an idea of the difficulty in managing the participatory financing embedded with high credit risk. Under this scenario, it is necessary for Islamic scholars and the regulatory authority to design an appropriate financial architecture, enabling Islamic banks to avail the benefit from a wider variety of Sharīʿah-based Islamic financing.

This paper expands the newly emerged concept of “Islamic bank rent” to make sense of the murabaha syndrome in Bangladesh and the quasi-murabaha syndrome in Indonesia. This approach also contributes to clarifying the unique risk and cost to be compensated with the spreads that Islamic banks are expected to earn.

Arafat and Rabin's famous handshake opened a new stage in the Middle East peace talks. Recent delays in the process have centered more around economic than political issues. Two main controversies revolve around means for distributing aid funds and the development of viable financial networks in the Israeli Occupied Territories. These agenda are reviewed from the viewpoint of promoting U.S. trade interests in the region. Islamic banks, if they are granted licenses by the Israeli government, may provide an effective means for distributing funds, while at the same time promoting U.S.‐Arab mercantile trade.

Islamic microfinance institutions (IsMFIs) have used diverse models and tools, as they seek to provide financial and non-financial support to the farming communities. A majortity of IsMFIs focus on provision of micro-credit to farmers alone as a means to enhance food security, following an approach similar to that of the conventional microfinance institutions. Others adopt a “finance-plus” approach and provide support in a multitude of areas other than finance, such as, technology, production, marketing, business development, capacity building, and thus, ultimately steering the project to success. The purpose of this paper is to examine the models and tools of Islamic agricultural finance for the rural poor that display major variations and draw lessons from a policy perspective.

The study undertakes a comprehensive review of the principles, modes and models of Islamic agricultural finance targeted at small-holder farmers. It uses a case study method to review several winning initiatives by IsMFIs across the globe. It highlights the various risks and challenges confronting the projects and how the same are sought to be mitigated.

Islamic agricultural finance for the rural poor involves a range of modes, mechanisms and institutional structures. Credit-based and sharing-based modes work well under specific conditions and there is no one-size-fits-all solution for financing the rural poor. Case studies of successful initiatives reveal that composite models involving the integration of philanthropy-based, not-for-profit as well as for-profit components may provide ideal solutions. Additional factors critical for success include provision of safety nets, involvement of community, non-financial support in a multitude of areas other than finance, such as, technology, procurement, production, marketing, business development and institutional capacity building.

The paper addresses a fundamental issue in financing the poor farmers in Muslim societies – whether to opt for a credit-based approach that would ensure greater outreach or to go for a holistic intervention involving financing of the entire value chain. The findings are based on personal interaction of the author with professionals directly involved in the projects.