Islamic Finance Resources

Islamic Banking: a Growing or Shrinking Consumer Market in Kuwait?

2011-12-15T06:21:00.000Z

Islamic Banking: a Growing or Shrinking Consumer Market in Kuwait?
By Faten Jabsheh, Weam Behbehani, and Shaima Al-Shamali

Abstract: "The steady expansion of Islamic banks (IBs) has been the hallmark of the Muslim financial landscape of the 1980s and 1990s. With a network that covers over 60 countries and an asset base of over $166 billion, Islamic banks are currently playing an increasingly significant financial and developmental role in their respective economies. Islamic banking has gained increased attention in the GCC (Gulf Cooperation Council) over the past number of years, capturing a growing 13% share of total Islamic banking assets around the world. This paper questions the growth of Islamic banking activity in the GCC, and focuses on developing prospects for one GCC country, namely Kuwait. Using detailed survey instruments regarding the provision of various Islamic banking services, the results of this study affirm the hypothesis that Islamic banking is claiming a growing market share and consumer market in Kuwait."

Background Material: Islamic Interbank Benchmark Rate (IIBR)

2011-11-26T14:27:00.004Z

You can find additional information on the recently launched Thomson Reuters' Islamic Interbank Benchmark Rate (IIBR) through the various links below. This includes the main Islamic Benchmark website as well as various PDF documents included below.

Further details can be found on the following topics:
- Background
- Definition, methodology & criteria
- Timing of publication
- Contributor Panel
- Governance

Specific PDF documents include:
IIBR fact sheet
IIBR FAQ
IIBR Governance Procedures
Terms of Reference - Shariah Committee
Terms of Reference – Islamic Benchmark Committee
Shariah Opinion (English)
Shariah Opinion (Arabic)

Thomson Reuters launches the world's first Islamic Interbank Benchmark Rate (IIBR)

2011-11-23T04:34:00.000Z

Thomson Reuters launches the world's first Islamic Interbank Benchmark Rate (IIBR)

This is a welcome development for the Islamic Finance industry:

'Thomson Reuters today launched the world's first Islamic finance benchmark rate, designed to provide an objective and dedicated indicator for the average expected return on Shariah-compliant short-term interbank funding: The Islamic Interbank Benchmark Rate (IIBR).'

Further details in the official press release.

Harvard Islamic Finance Project DataBank

2011-11-12T00:43:00.000Z

The Harvard Islamic Finance Project (IFP) website contains reports of IFP events for the past sixteen years and the Databank with over 9,000 records which include bibliographic information along with abstracts on articles, books, book chapters, conferences and theses relevant to the field of Islamic finance and economics. In addition to these resources, a collection of Quranic verses and hadith as well as a glossary of terms related to Islamic finance are included.

Users can register and access the Databank free of cost at http://ifp.law.harvard.edu. The IFP also features an option for users to submit their own published work or any relevant items via "Submit Your Work" option on the menu bar.

Many thanks to Muhammad Hassaan Yousuf for highlighting this resource.

Economic Performance of the OIC Countries and the Prospect of an Islamic Common Market

2011-11-08T06:19:00.001Z

Economic Performance of the OIC Countries and the Prospect of an Islamic Common Market
By Kabir Hassan

Abstract: "This paper examines economic performance of the OIC member countries and analyzes the prospect of Islamic common market by analyzing trade data within a gravity model framework. There is scope of trade creation for OIC member countries if all impediments to trade and business can be eliminated. The paper also examines various sub-regional grouping within the context of gravity model, and finds that D8 comprising eight bigger OIC member countries is trade creating. For example, two countries in D8 block would trade 22 times more among themselves than two otherwise-similar country in outside the block would. The paper suggests a number of policy parameters which if followed will lead to more trade among member countries. The issue of Islamic common market should be examined further in light of new data and changed global perspectives. This paper is complements and extends Hassan (2002) and Hassan and Islam (2001), where similar conclusions were derived and policies were suggested."

5th International Islamic Capital Market Forum (IICMF)

2011-10-14T23:37:00.000+01:00

Risk Sharing: A Way Forward To Public Good
5th International Islamic Capital Market Forum (IICMF)
Kuala Lumpur on 10th November 2011

The IICMF is an effort by the SC to promote the Islamic capital market and serves as a capacity and knowledge building forum that addresses current issues, including strengths, challenges, risks and opportunities in the Islamic finance industry. The 5th IICMF will focus on a risk-sharing system as an alternative to the present fractional banking system from the perspectives of the economics, legal and Shariah.

The details on the event can also be viewed at http://www.sc.com.my/eng/html/icm/iicmf/iicmf_2011.pdf

Samples of Islamic Finance Contracts

2011-10-11T05:57:00.000+01:00

Samples of Islamic Finance Contracts
By Monzer Kahf

"The purpose of providing sample contracts of Islamic Financing is to show how these contracts are formulated and how the Islamic Financing principles are reflected in legal terms."

Intertemporal Test of Beta Stationarity Performance of Islamic Sector Structured Mutual Funds

2011-10-08T06:17:00.005+01:00

Intertemporal Test of Beta Stationarity Performance of Islamic Sector Structured Mutual Funds
By Mahmoud Haddad, Ghassem Homaifar, Said Elfakhani and Hikmat Ahmedov

Abstract: "The purpose of this research paper is to examine social Islamic mutual funds’ financial performance. Since Islamic mutual funds have only been around for the past two decades, most of the research on this topic is fairly new. In this study we apply the single factor model of Schwert and Seguin (1990) to a sample of Islamic mutual funds. The Islamic mutual funds market is one of the fastest growing sectors within the Islamic financial system. Several studies have investigated the characteristics of individual Islamic mutual funds (see Elfakhani, et al (2006), Elfakhani ,et al (2005), and Hassan, et al (2005). We are not aware of any studies that have applied the Schwert and Seguin methodology to Islamic mutual funds. Such an application is important because it allows for studying the impact of market volatility on the time variation of monthly betas and the corresponding returns. Using the S&P 500 and the FTSE Global Islamic indices on sector structured Islamic mutual funds, our results suggest that the volatility of the market and that of the Islamic mutual funds portfolio behave differently with inter and intra market proxies. There is also evidence that the volatility persistence of each Islamic mutual fund portfolio and its systematic risk are significantly related. Hence, the systematic risks of different portfolios tend to move in a different direction during periods of increased market volatility. As a result, we gain an insight into the return dynamics and the process by which Islamic mutual funds prices are determined."

Financial Guarantee as an Innovation Tool in Islamic Project Finance

2011-09-20T06:11:00.000+01:00

Financial Guarantee as an Innovation Tool in Islamic Project Finance
By M. Kabir Hassan & Issouf Soumaré

Abstract: "This paper proposes a model to study the arrangement of Islamic project finance with the participation of the government as a provider of loan guarantees. The owner-shareholders (musharaka certificate holders) initiate a project and raise funds by issuing Islamic profit-loss sharing mudaraba certificates. The government intervenes in providing financial guarantees in order to enhance the creditworthiness and increase the mudaraba capital capacity of the project. Our work raises several policy implications related to the structuring of Islamic project finance and the participation of both government and multilateral public agencies such as the Islamic Development Bank. It provides a unifying framework for the improvement of access to funds for Islamic projects and gives a rationale for government intervention in the arrangement of these projects."

Strategic Trends in the Islamic Banking and Finance Movement

2011-09-10T05:53:00.001+01:00

Strategic Trends in the Islamic Banking and Finance Movement
By Monzer Kahf

Survey: Perspectives on Trends in Islamic Finance

2011-08-16T11:43:00.000+01:00

Hello Global Islamic Finance Resources community,

We are a team of MBA students working on a research project revolving around trends of the Islamic Finance industry. We are hoping to gather some feedback and opinions from the GIFR community on some identified trends that we believe exhibit increasing prominence in shaping the industry for the future. We have prepared a short questionnaire that would take approximately 10 to 15 minutes to complete. Your responses would go a long way in assisting us in our research.

Thanks in advance!

Survey: Perspectives on Trends in Islamic Finance

Message from the President and CEO, INCEIF

2011-08-16T11:42:00.000+01:00

Maqasid al Shari’ah in the Prohibition of Riba and their Implications for Modern Islamic Finance

2011-08-08T15:36:00.000+01:00

Maqasid al Shari’ah in the Prohibition of Riba and their
Implications for Modern Islamic Finance
By Monzer Kahf

"This paper aims at re-visiting, from the angle of modern finance, the objectives of Shari’ah in regard to the prohibition of Riba and examining the consistency of such Fatawa with these objectives and whether there are any Shari’ah-intrinsic alternatives that satisfy the same finance purposes which such Fatawa thought to achieve."

Job Opportunities in Islamic Banking & Finance

2011-07-31T11:49:00.000+01:00

Job Opportunities in Islamic Banking & Finance
AIMS - Academy for International Modern Studies
July 2011

This is a periodic compilation of job postings and openings from a multitude of sources (all relevant to Islamic banking & finance), which can be found on the AIMS website. Hoping to highlight other similar sources in the future and feedback in this regard is also very welcome.

Can Islamic finance play key role in growth and prosperity?

2011-07-31T11:43:00.001+01:00

Can Islamic finance play key role in growth and prosperity?
By Mushtak Parker
Arab News
July 2011

"In perhaps one of her more potentially important speeches in recent times, Zeti Akhtar Aziz, governor of Bank Negara Malaysia, the central bank, stressed that the increasing internationalization of Islamic finance and the burgeoning trade and economic linkages between the emerging countries present an important opportunity for the industry to make a meaningful and enhanced contribution toward economic growth and prosperity of these countries."

A Different Kind of Consolidation in Islamic Finance

2011-07-28T11:21:00.005+01:00

A Different Kind of Consolidation in Islamic Finance
By Rushdi Siddiqui
July 2011

One of the most over-used words in Islamic finance is not standardization, scholars, regulations, etc., but 'consolidation'. Islamic banks, Islamic leasing companies, Takaful companies need to consolidate to reach size and achieve scale.

As larger capitalized entities, they can better compete with not just the Islamic windows and subsidiaries of conventional banks and insurance companies (like HSBC or Prudential) but eventually the larger conventional financial institutions for mandates on project finance, M&A, buyouts, and so on.

Then again, what about consolidation amongst the Islamic industry bodies, the likes of AAOIFI (Accounting and Auditing Organization of Islamic Financial Institutions), IIRA (International Islamic Rating Agency), IIFM (International Islamic Financial Market), and CIBAFI (General Council for Islamic Banks & Financial Institutions)?

Consolidation would make sense when there is an overlap of founding shareholders, overlap of conference content, when same scholars sit on boards of the various bodies, when there are resource-constraints resulting in operational challenges and hiring qualified human assets, and so on.

Finally, consolidation would make sense when the need of the hour is an industry body that not only sees the bigger picture and where they fit in as an important stakeholder in Islamic finance versus the present ‘silo’ approach, but also speaks with one ‘heavy’ voice.

Founding Stakeholders

If we look at the sampling of the founding shareholders of the above-mentioned industry bodies, there is an overlap with heavy weights of Islamic finance including the Islamic Development Bank (IsDB), Al Rajhi, Albaraka, and Kuwait Finance House (KFH). The vision for Islamic finance at the time period of conception and launch of these industry bodies was from 1991 (AAOIFI) to 2005 (IIRA), and now times have moved on and the bodies need to do likewise in order to stay relevant.

The IIRA’s website states its corporate profile as:

The Islamic International Rating Agency (IIRA) is the sole rating agency established to provide capital markets and the banking sector in predominantly Islamic countries with a rating spectrum that encompasses the full array of capital instruments and specialty Islamic financial products, and to enhance the level of analytical expertise in those markets.

IIRA publishes professional analytical research for its multiple constituencies. The research will set a high standard for the market, enhancing the level of understanding of the value of fundamental analysis in assessing default or investment risk. Seminars will be used to teach this type of analysis outside the rating agency.

Today, IIRA does not have the history, size and reach to be able to compete with established rating agencies involved in Islamic finance, like Standard & Poor’s, Moody’s or Fitch. More importantly, is there any point in reinventing the rating ‘wheel,’ as the rating agencies understand quite well the various risks associated with Sukuk contracts, Islamic funds, Islamic banks, and so on?

IIRA may need to look into the process of Shariah adherence of Islamic banks, Takaful, leasing, iREITs, and even Islamic stock exchanges (like the DFM). The focus on process may result in addressing one of the important issues in Islamic finance, the non-compliant Shariah risk.

The International Islamic Financial Market (IIFM) website states its mission as:

IIFM is the global standardization body for the Islamic Capital & Money Market segment of the IFSI. Its primary focus lies in the standardization of Islamic financial products, documentation and related processes.

IIFM has done a commendable job on standardization of documentation in an inclusive manner with industry practitioners whilst working and/or partnering with established conventional institutions like ISDA. The question becomes would it be more sensible and efficient for IIFM to work under the umbrella of an industry setting-body that produces standards requiring standardization/adoption?

The message from the Chairman of General Council of Islamic Banks & Financial Institutions (CIBAFI) on its website states:

CIBAFI was established, then, for 2 major roles: support and protect the industry. Support the industry through awareness and training, holding conferences, seminars and forums and providing the necessary information. Protect the industry so as to avoid, as much as possible, the obstacles and deviations in the course of the Islamic finance industry.

Today, there are a number of more prominent institutions, universities and for-profit initiatives, offering Islamic finance certification courses, training, seminars, and conferences. There are many Islamic finance conferences, from Euromoney in London to IIFF in Dubai to KLIFF in Malaysia, that have pre and post conference workshops.

Would it not make more sense to bring CIBAFI under the umbrella of an industry body that produces standards that are followed by training, seminars, and work-shops on them?

Finally, the most prominent Islamic finance industry body in the GCC is AAOIFI, with 84 standards [(a) 44 Shari'ah standards, (b) 26 accounting, (c) 5 auditing, (d) 7 governance, including on Shari'ah compliance and supervision processes, and (e) 2 codes of ethics] and nearly 200 members from 40 countries. The mission of AAOIFI, as stated on its website:

AAOIFI is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shari'a standards for Islamic financial institutions and the industry. Professional qualification programs (notably CIPA, the Shari’a Adviser and Auditor "CSAA", and the corporate compliance program) are presented now by AAOIFI in its efforts to enhance the industry’s human resources base and governance structures.

Here the question becomes, why only a handful of jurisdiction have mandatorily adopted the AAOIFI standards, including Bahrain, DIFC, Jordan, Lebanon, Qatar, Sudan and Syria? Has AAOIFI lost focus from its core mandate on accounting, auditing, ethics, governance and Shariah standards for Islamic finance to areas, like, stock screening for Shariah compliant companies?

AAOIFI is best positioned to be the umbrella Islamic finance industry body in GCC as its standards become globally adopted documents (IIFM) with a process review (IIRA), and promoted and protected with that understanding (CIBAFI).

The combination then results in a four-by-four Olympic relay race, where much work is done together before the race, and, at the event, the baton is seamlessly passed from one body to the next. For example, it results in one Islamic finance conference event with all the four bodies under roof and taking place in the various Islamic finance hubs to educate, make aware, and demystify.

In looking forward, stage 2, assuming AAOIFI is tasked with ‘acquiring and integrating’ these Bahrain-based industry bodies, there needs to be discussions for a merger of equals with Malaysia-based IFSB (Islamic Financial Services Board).

The IFSB website states:

The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors.

IFSB’s ‘prudential standards and guiding principles’ are targeted to the same stakeholders that AAOIFI ‘prepares accounting, auditing, governance, ethics and Shari'ah standards…’ for.

In stage 1, the Chairmen of these industry bodies need to put aside their egos for a bigger cause: promote and protect Islamic finance under one strong industry body.

Development of Islamic Banking with Reference to UAE

2011-07-27T14:56:00.003+01:00

Development of Islamic Banking with Reference to UAE
Fayaz Ahamed
June 2010

Abstract: Banks play an important and active role in the economic development of a country. The global financial system (GFS) is a financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level. Islamic banking is a classical concept. Islamic banking system has emerged as a competitive and a possible substitute for the conventional banking system during the last three decades. Islamic Banking is no longer limited to specialized institutions and has expanded both geographically and in product richness, with structured credit finance receiving most of the attention. Greater importance of the General Council for Islamic Banking and Finance Institutions (GCIBFI), the Islamic Financial Service Board (IFSB), the Islamic International Rating Agency (IIRA) and the Accounting and Auditing Organization of Islamic Finance Institutions (AAOIFI), will add consistency in accordance to Islamic laws [shariah] interpretations by religious boards and the primacy of bankable governing law as a matter of form remain essential to further growth of Islamic banking.

Islamic banking transactions are governed by the codes of the shariah, which prohibits interest and regulates that income, must be resulting as return from capitalist investment. This present study analyses the Islamic banking operations currently practiced in Global banking system. This paper explains the fundamental legal principles of Islamic Banking, which includes a brief review of the current state of Islamic banking development and provides the analysis of Islamic Banks with their acquired results. The paper suggests a Global organization that would allow Islamic banks to develop in compliance with its Islamic laws [shariah] principles.

Have Islamic Banks Been More Resistant than Conventional Banks to the 2007-2008 Financial Crisis?

2011-07-24T06:09:00.000+01:00

Have Islamic Banks Been More Resistant than Conventional Banks to the 2007-2008 Financial Crisis?
By Khawla Bourkhis and Mahmoud Sami Nabi

Abstract: "The recent global financial crisis has induced a series of failure of many conventional banks and led to a renewal of Minsky (1986)’s critics about the inherent instability of the fractional-reserve banking. In this context, many economists advocate for the return to narrow banking and/or for favoring the development of Islamic banking supposed to be more resilient to the financial crises. This paper attempts to answer empirically the two following questions: i) Have Islamic banks (IBs) been more resistant than their conventional peers (CBs) to the 2007-2008 financial crisis? ii) Could the presence of Islamic banks in a conventional banking system enhance the overall systemic stability? The main findings are the following. Before the financial crisis, IBs were more profitable than CBs. Then, in 2007-2008, only the large IBs remained more profitable than the large CBs. However, IBs became less profitable in 2009 when the crisis’s pass-through to the real economy had sufficiently increased. Moreover, we show that CBs were more resistant to the crisis than IBs. Hence, IBs illustrated a degree of resilience and stability during the first (financial) wave of the crisis. However, they have been impacted during the second (real) wave because of their higher exposure to real estate and their limited reliance on risk sharing instruments. Nevertheless, we find a positive externality of large IBs on the soundness of large CBs which could be justified by their asynchronous reactions to the crisis."

The International Role of Islamic Finance

2011-07-20T14:50:00.002+01:00

The International Role of Islamic Finance
QFinance
By Andreas Jobst

Executive Summary

Islamic finance has become mainstream, with more than US$800 billion of assets worldwide. However, it still faces distinct developmental challenges from economic and legal constraints associated with sukuk, banking-specific issues, and fragmented financial regulation.

Although Islamic capital markets and banking have defied the impact of the financial crisis, some negative effects were felt in 2008 and are likely to inhibit further expansion.

Despite current challenges, most of which arise from the infancy of the industry, Islamic finance has promising long-term prospects.

Report Card of Islamic Indices

2011-07-12T13:47:00.000+01:00

Report Card of Islamic Indices
By Rushdi Siddiqui
Business Times
July 2011

"Islamic equity indices, 1.0, became a global ‘instrument’ in 1999, with the launch of the Dow Jones Islamic Market Index (DJIM). But, what progress, if any, has been made in the last 11 years on Islamic indexing?"

Read more: Report card of Islamic indices

Risk Management in Islamic and Conventional Banks: A Differential Analysis

2011-07-09T16:15:00.001+01:00

Risk Management in Islamic and Conventional Banks: A Differential Analysis
Amanat Ali Jalbani and Salman Ahmed Shaikh
Journal of Independent Studies and Research
July 2009

Abstract: "Islamic banking is interest-free banking which makes it necessary for Islamic banks to take active part in the operations of the business, i.e. share profits as well as losses. Banks including Islamic banks prefer to take minimum risk. On the surface, it may seem that Islamic banks face more risk and hence, will have more volatile or even negative returns on their assets.

This paper analyzes the risk management procedures of Islamic banks by giving a differential analysis of risk management discussing only the unique characteristics of risk management in Islamic Banking. The usual credit assessment procedures and BASEL are not discussed. This paper looks at the comparative performance of Islamic banks and conventional banks by using ROE as the benchmark."

The Constitution and Islam: Are Tax Reforms Possible to Facilitate Islamic Finance?

2011-07-06T04:30:00.007+01:00

The Constitution and Islam: Are Tax Reforms Possible to Facilitate Islamic Finance?
Brett Freudenberg, Griffith University - Griffith Business School
Dr. Mahmood Nathie, Griffith University
Revenue Law Journal, June 2011

Abstract: "Islamic banking and finance is emerging in global financial markets and governments seek to facilitate it. This article focuses on whether it is constitutionally possible for Australia to implement reforms to facilitate faithbased financial transactions.

There have been calls for Australia to become a financial hub – particularly in South East Asia. One aspect of this is the recognition of Islamic finance as an alternative in the marketplace. This would include ensuring that tax laws are synchronised with Islamic tenets on financial transactions and do not hinder such alternatives.

Being different to conventional finance, Islamic finance has attracted interest and scepticism, partially because of the lack of understanding and the paucity of academic research on the subject. While the idea of facilitating faith-based finance may seem economically rational, a fundamental question needs to be addressed: is it appropriate for Australia’s tax laws to be amended to facilitate what may be construed to be the furtherance of any religion? This article considers the theoretical considerations of tax and religion and assesses the implications of Islamic finance in light of Australian constitutional law."

SC receives awards for ICM efforts (and MIFC eNewsletter)

2011-07-03T16:04:00.009+01:00

SC receives awards for ICM efforts

The Securities Commission Malaysia (SC) has received the prestigious "Outstanding Contribution to the Development of Islamic Capital Market" award at a dinner held in conjunction with the 5th London Sukuk Summit from 8-9 June 2011. The SC’s Islamic Capital Market consultant Wan Abdul Rahim Kamil was also recognised with an award for “Outstanding Leadership in Islamic Finance”.

Read the rest of the MIFC eNewsletter here (June edition).

The award recognises the depth and breadth of Malaysia’s Islamic capital market and the pivotal role played by the SC in this regard. Accounting for 72.5% of global Sukuk issuances by domicile in 2010 and 65% of global sukuk outstanding by domicile as at December 2010, Malaysia’s pole position in the global Sukuk market was widely recognised by all the event. With its compounded annual growth rate (CAGR) of 22.2% from 2000-2010 and an expectation of double digit growth over the coming ten years, Malaysia was also acknowledged at the Summit as the engine for Sukuk market growth.

The awards were received on behalf of the SC and Wan Abdul Rahim Kamil by Dato Dr Nik Ramlah Mahmood, Managing Director of the SC who had earlier presented to the forum on the growth and diversity of Malaysia’s Sukuk market.

Established to help raise the standards in the Islamic finance sector and to set the highest benchmarks for the industry globally, the London Sukuk Summit Awards underline the international community's recognition of the important role the SC has played and will continue to play in the development and growth of Islamic finance and Sukuk in particular.

Islamic Economics: Notes on Definition and Methodology

2011-06-27T05:35:00.000+01:00

Islamic Economics: Notes on Definition and Methodology
By Monzer Kahf

"This paper aims at examining the implications of different suggested definitions of Islamic economics, exploring its scope and attempting to outline its methodology."

Job Opportunities in Islamic Banking & Finance

2011-06-24T02:33:00.001+01:00

Job Opportunities in Islamic Banking & Finance
AIMS - Academy for International Modern Studies
June 2011

This is a periodic compilation of job postings and openings from a multitude of sources (all relevant to Islamic banking & finance), which can be found on the AIMS website. Hoping to highlight other similar sources in the future and feedback in this regard is also very welcome.

The 1997-98 East Asian Financial Crises: an Islamic Perspective

2011-06-21T06:06:00.000+01:00

The 1997-98 East Asian Financial Crises: an Islamic Perspective
By Adam B. Elhiraika

Abstract: "This paper examines the causes and policy implications of the 1997-98 financial crises in East Asia from an Islamic perspective. The paper suggests that the crises may be better understood as consequences of internal contradictions in the interest-based financial system as regards risk and return sharing between financiers and entrepreneurs. The analysis challenges orthodox policy prescriptions and concludes that the Islamic principle of partnership in finance, which calls for profit and loss sharing and emphasizes the need for project finance, seems to provide the ingredients for the long-sought solutions."

Residual Income Models and the Valuation of Conventional and Islamic Banks

2011-06-18T03:13:00.000+01:00

Residual Income Models and the Valuation of Conventional and Islamic Banks
Doctoral thesis, University of Surrey
Schoon, Natalie (2005)

The Stability of Islamic Banks During the Subprime Crisis

2011-06-15T03:51:00.000+01:00

The Stability of Islamic Banks During the Subprime Crisis
Aniss Boumediene, Université Paris I Panthéon-Sorbonne - Institut d'Administration des Entreprises de Paris (IAE Paris)
Jerome Caby, ICN Business School
December 2009

Abstract: "This empirical study examines the stability of Islamic banks during the subprime crisis. It covers a sample of fourteen Islamic banks and fourteen conventional banks. The conditional variance (volatility) of returns was used to measure stability. The E-GARCH and GJR-GARCH asymmetric models were used to estimate volatility due to their ability to take into account the leverage effect. The results of this study show that conventional bank returns were highly volatile during the crisis period, while Islamic banks saw their volatility - initially low - increase during the crisis, though to a much more moderate extent. These results corroborate both the hypothesis that Islamic banks were at least partially immune to the subprime crisis and the underlying hypothesis that Islamic banks are not subject to the same risks as conventional banks - although, due to their links with the real economy, they do eventually suffer the consequences of the subprime crisis."

Problems and Prospects of Islamic Banking: a Case Study of Takaful

2011-06-13T08:08:00.000+01:00

Problems and Prospects of Islamic Banking: a Case Study of Takaful
Ahmad, Mohd Izhar; Masood, Tariq and Khan, Mohd Saeed
April 2010

Abstract: "The paper is an attempt to analyse the working of Takaul in the world and its popularity in the insurance sector in the world. Keeping in view of Sharia we have also tried all possible aspects of insurance system popular in the world and tried to look at its possibility to familiarize more amongst Muslims of the world. It is observed that customer awareness remain low, however this is often attributed to a limited understanding of Islamic finance in the banking and insurance world. We wish to have a proper salesmanship and advertisement of Islamic banking system in India and all around the world."

Exploring the Optimal Method of Penetration into the Saudi Islamic Investment Banking sector

2011-06-11T01:59:00.000+01:00

Exploring the Optimal Method of Penetration into the Saudi Islamic Investment Banking sector
Banker Middle East Magazine
By Mohammed Khnifer (MSc,MBA,CIFP)

This research paper highlights the potential which lies within the opportunities offered by the under-developed Saudi Islamic investment banking sector.

The Importance of Shari’Ah Supervision in Islamic Financial Institutions

2011-06-09T08:17:00.000+01:00

The Importance of Shari’Ah Supervision in Islamic Financial Institutions
Hussain Gulzar Rammal
University of South Australia - International Graduate School of Management
Spring 2006

Abstract: "Islamic financing differs from conventional financing in that it prohibits the payment or receipt of interest. The concept of interest-free financing existed prior to the advent of Islam and was embraced in ancient Arabia. The concept was officially launched in the 1970’s by the Organization of Islamic Countries (OIC) and introduced in most Muslim nations and some Non-Muslim nations. But while it has experienced phenomenal growth rate, the Islamic financial system has been criticized for failing to incorporate the true spirit of Shari’ah in their actions. Islamic financial institutions are also divided over the interpretation of which products are considered halal (acceptable under Islamic law). In order to overcome some of these issues, financial institutions dealing with Islamic products are required to utilize the services of a Shari’ah adviser or a Shari’ah Supervisory Board (SSB). The paper recommends a more collaborative effort between the central banks of Muslim nations and regulatory organizations."

Islamic Finance: Business as Usual

2011-06-07T05:26:00.001+01:00

Islamic Finance: Business as Usual
By Monzer Kahf

"The objective of this paper is to define Islamic finance and compare it with conventional finance. This will be done on theoretical and empirical grounds based on practice in the MiddleEast and Southeast Asia.

As the title indicates, this article argues that Islamic finance is essentially “business as usual” because the requirement of the Islamic law in financing transactions are developed and derived by human rationale and these transactions are set in a way that makes them consistent with the human nature."

Do Islamic Banks Employ Less Earnings Management?

2011-06-05T06:03:00.000+01:00

Do Islamic Banks Employ Less Earnings Management?
Majdi Anwar Quttainah, Laing Song and Qiang Wu

Abstract: "In this paper, we examine 1) whether Islamic banks are less likely to manage their earnings, and 2) how the corporate governance system, especially Shari’ah Supervisory Boards (SSBs), impacts the earnings management behaviors within Islamic banks. Using a sample of Islamic Banks and a matched non-Islamic Banks in the ERF region, we find that first; Islamic Banks are less likely to conduct earnings management as measured by both earnings loss avoidance and abnormal loan loss provisions. Second, there is no significant difference between Islamic Banks with and without SSBs in terms of earnings management. Third, several SSB characteristics and board characteristics, such as SSB size, Auditing Organization for Islamic Financial Intuitions (AAOIFI), and outside board members, are important determinants of the earnings management for Islamic Banks with SSBs."

Enhancing Transparency and Risk Reporting in Islamic Banks

2011-06-03T03:22:00.000+01:00

Enhancing Transparency and Risk Reporting in Islamic Banks
Doctoral thesis, University of Surrey
Noraini Mohd, Ariffin (2005)

Islamic Bond Issuance - What Sovereign Debt Managers Need to Know

2011-05-31T08:20:00.000+01:00

Islamic Bond Issuance - What Sovereign Debt Managers Need to Know
Prepared by Andreas Jobst, Peter Kunzel, Paul Mills, and Amadou Sy
IMF Policy Discussion Paper
Monetary and Capital Markets Department
July 2008

Abstract: "Recent years have witnessed a surge in the issuance of Islamic capital market securities (sukuk) by corporates and public sector entities amid growing demand for alternative investments. As the sukuk market continues to develop, new challenges and opportunities for sovereign debt managers and capital market development arise. This paper reviews the key developments in the sukuk market and informs the debate about challenges and opportunities going forward."

Alternate link (SSRN)

Banking Behavior of Islamic Bank Customers: Perspectives and Implications

2011-05-25T04:19:00.011+01:00

Banking Behavior of Islamic Bank Customers: Perspectives and Implications
Saad A. Metawa, Associate Professor of Finance, University of Bahrain
Mohammed Almossawi, Assistant Professor of Marketing, University of Bahrain

Abstract: "Describes a study designed to investigate the banking behavior of Islamic bank customers in the state of Bahrain. The study sample comprised 300 customers. A comprehensive profile analysis and a series of chi-square tests were conducted to reveal key characteristics and patterns: the majority of Islamic bank customers are well educated; approximately 80 per cent are between 25-50 years of age; more than 50 per cent of the surveyed customers have maintained their current banking relationship with Islamic banks for more than six years; customers’ awareness and usage rates are quite high for savings accounts, current accounts, investment accounts and automated teller machines; customers were found to be most satisfied with the products/services they use most, with the investment accounts receiving the highest satisfaction score; Islamic bank employees received the highest satisfaction score among the elements of the service delivery system; the two most important bank selection criteria were adherence to the Islamic principles, followed by the rate of return."

Question time: Revival, reach of Islamic finance

2011-05-21T06:53:00.000+01:00

Question time: Revival, Reach of Islamic finance
By Rushdi Siddiqui
Business Times
May 2011

"It's polling time once again in Islamic finance but, today, we survey two major developments, Arab revolution and death of Osama Bin Laden (OBL), and examine the consequences, if any, on Islamic finance in the Maghreb and anti-syariah sentiment countries."

Read more: Question time: Revival, reach of Islamic finance

Islamic Finance and Sharia Compliant Transactions in India and Abroad: A Comparative Study

2011-05-18T08:05:00.000+01:00

Islamic Finance and Sharia Compliant Transactions in India and Abroad: A Comparative Study
Tanay Nandi, National Law University Jodhpur (NLUJ)
Satabdee Mohanty, Gujarat National Law University
July 2010

Abstract: "One of the fundamental principles governing Islamic financing is that the receipt of interest is prohibited. This is categorically stated in the Qur'an: "Those who devour Riba (interest) will not stand except as stands one whom the devil hath driven to madness by (his) touch" (II:275) In an investment environment, Riba is interpreted as any return on money that is predetermined in amount and therefore includes modern day interest-based financing. Islamic principles allow instead for the replacement of interest by a return that is dependent upon the profitability of the underlying investment.

In addition, Islamic principles permit the financing of sales by means of deferred payment at a premium to the spot price. Modern scholars have also encouraged asset-backed finance where the return to the financier is linked either to the provision of an asset to the client or to the acquisition of an asset from the client. In all of the above a clear linkage emerges between the earning of returns and the assumption of risk.

But, in India it is in the embryonic stage. However, there are some non-banking cooperative societies being operated across the India that follows the fundament finance law. But, still no Islamic banks as per Reserve Bank of India’s norms have been settled in India.

This paper starts off by examining the banking structures with an Islamic finance window in other countries such as UK, Malaysia, Hong Kong etc, and goes on to examine the causes for its negligible presence in India and ends with emphasizing the need for a greater participation from the bankers in India in support of Islamic Finance."

E&Y: World Takaful Report 2011

2011-05-15T13:34:00.001+01:00

Ernst & Young’s World Takaful Report 2011
The fourth edition of Ernst & Young’s World Takaful Report 2011: Transforming Operating Performance, was unveiled recently.

Financial Guarantee as Innovation Tool in Islamic Project Finance

2011-05-13T02:13:00.001+01:00

Financial Guarantee as Innovation Tool in Islamic Project Finance
Issouf Soumaré, Laval University
Kabir M. Hassan, University of New Orleans
February 2006

Abstract: "This paper proposes a model to study the arrangement of Islamic project finance with the participation of the government as provider of loan guarantees. The entrepreneur (musharakah) initiates a project and raises funds by issuing Islamic profit sharing debt instruments (mudarabah). The government intervenes in providing financial guarantees in order to enhance the creditworthiness and increase the debt capacity of the project. Our work raises several policy implications related to the structuring of Islamic project finance and the participation of both government and multilateral public agencies such as the Islamic Development Bank. It provides a unifying framework for the improvement of access to funds for Islamic projects and gives a rationale for the government intervention in the arrangement of those projects."

Islamic Economics, What Went Wrong?

2011-05-11T01:43:00.006+01:00

Islamic Economics, What Went Wrong?
By Monzer Kahf

"Is Islamic economics independent from economics? Does it make a paradigm of its own? Does it depend of a set of assumptions and analytical tools that is different from economics? Does it make a discipline of its own?"

Risk & Return of Islamic Stock Market Indexes

2011-05-09T01:21:00.003+01:00

Risk & Return of Islamic Stock Market Indexes
Conference Paper
Sam Hakim and Manochehr Rashidian
2002

Abstract: "The Dow Jones Islamic market index - US (DJIMI) tracks the stocks of corporations compatible with Islamic law. A parallel and unrestricted counterpart of DJIMI is the Wilshire 5000 Index (W5000) which tracks the price performance of the largest 5000 US companies. Of that index, approximately 75% of the companies fail to meet the Islamic criteria, leaving only approximately 700 companies as potential candidates for inclusion in the DJIMI. Using cointegration techniques we place the DJIMI under analytical scrutiny and ask (1) how has this selection restriction affected the performance of Islamic investments represented by the DJIM index? (2) is the DJIM index less diversified than the DJW index? (3) if so, to what extent has the limited diversification affected its risk and return? (4) and finally, what dynamic correlation and long-term relationship exist between the two indexes over time."

Islamic Finance: an Ethical Alternative to Conventional Finance?

2011-05-07T01:11:00.004+01:00

Islamic Finance: an Ethical Alternative to Conventional Finance?
Discussion Paper
ACCA - The Association of Chartered Certified Accountants ACCA

Islamic Finance : An Ethical Alternative to Conventional Finance ? – explores the basic tenets of Islamic finance, the role of the UK in leading its development and whether it is a serious alternative to conventional finance.

True and Fair View - An Islamic Perspective

2011-05-04T03:18:00.000+01:00

True and Fair View - An Islamic Perspective
Doctoral thesis, University of Surrey
Bucheery, Raja Ali M (2001)

Grooming Gen Y for Islamic Finance - Tweeting Islamic Finance

2011-05-01T04:41:00.052+01:00

Grooming Gen Y for Islamic Finance
Tweeting Islamic Finance
By Rushdi Siddiqui
Global Head, Islamic Finance & OIC Countries, Thomson Reuters

Unless Islamic finance is made relevant to young people, it will struggle to gain popularity and grow in strength in the future.

Read the full article here.
I was fortunate to be part of the Bold Talks 2011, a conference about people who have had their human spirit tested and overcame their breaking points. There was an ex-Guantanamo Bay prisoner, Moazzam Begg, ex-Guantanamo Bay guard who converted to Islam, T.J. Holdbrooks, and globally recognized Stanford University professor, Philip Zimbardo, known for the Prison experiment.

The experiment was a study of the psychological effects of role playing as prisoners and prison guard, and showcased the eventual abuse and ensuing torture towards the weak when there is absolute power without accountability.

Obviously, these three speakers can draw and command the emotional attention of any audience in almost any part of the civilized world with their real-life touching experiences.

I was asked to present on Islamic finance in the context of the interest or public goodstory of this niche market. But, a presentation on the prohibition of interest, and the history of Islamic financing was not going to magnetize a large, emotionally charged Gen Y audience.

While Islamic finance is theoretically about social justice, equity and fairness, the inclusion of the financially disenfranchised, stewardship of the environment, this was not going to captivate the audience attention.

However, it is humour, not money, that ultimately builds bridges between people of different ages, interests, ethnicities, religions, and backgrounds. A colleague from Islamic Finance Resources, a leading blog in Islamic finance, suggested some one-liners:

1. If Islamic finance was a fruit, it would be a Durian, some love it and some hate it.

2. If Islamic finance was a vehicle, it would be a steam engine, noisy, slow, steady, but will get you to your eventual destination.

3. If Islamic finance was an actor, it would be Bruce Dern (or Gary Oldman), great talent but always gets the role of bad guy.

4. If Islamic finance was a gadget, it would be the handphone (or walkman), an excellent invention but one that must continually reinvent itself before going obsolete.

But my presentation could not be 30 minutes of Islamic finance stand-up comedy -- there was not enough material to fill the allotted time.

While the presentation received only polite applause, the Bold-Talks event raised an important question for Islamic finance and the Halal Food industry: what is the Islamic finance story that will bind today and tomorrow generations together?

After listening to photo-journalist, Joy Tessman, speak about the BP oil disaster of 2010 in Gulf of Mexico, I soon realized it is the environment. Today, not one Islamic bank is member of the Equator, Carbon and/or Climate Principals, yet, the GCC has one of the largest carbon footprints. Additionally, if we look at today's 560 plus Islamic funds, not one Islamic fund comes to mind.

Where is the environmental Corporate Social Responsibility (CSR) of the Islamic finance as stewards of the earth? Islamic banks will finance and fund projects, infrastructure to real estate development via syndicated loans or Sukuk, but where are there environmental impact covenants?

Imagine Bold-Talks 2020, the keynote presentation is from a CEO of a financial institution that solely financed an infrastructure project in a densely populated African Muslim country encountering decades of civil and ethnic strife. He shared the emotional challenges of overcoming government corruption to lobbying various hostile tribal elders threatening his personal life to explaining the benefits to future generations of $500 million water, education and healthcare project that complied with Equator Principles.

He happened to be the head of the world's first Islamic mega-bank that used long term Sukuk financing which was oversubscribed by pension funds, hedge funds, and family offices in G20 countries. It showcased not only ROIs for investors, but, more importantly, exhibited the human interest of Islamic finance.

Today youths want to be part of and lead investing, and if Islamic banks are not prepared to move from Murabaha, then depositor democracy will not only punish them with withdrawals, but also encourage local conventional banks to lead. The excuse of an embryonic stage of Islamic finance carries less weight each passing day in their eyes.

During recent travels to UAE, Bahrain, Malaysia, Indonesia and few other Muslim countries, I believe I met the future social of Islamic finance. This generation is not contented with the bylaws of their Islamic bank, they want the optional, corporate social responsibility (CSR) to become obligatory to yield social returns.

Their benchmarks are Google, YouTube, Twitter and Facebook (or GoYouTwitFace), where they use information in real time to float trail balloon of ideas in real time. Their attention span is short and patience is even shorter (they want it Right here, Right Now), yet they are also compassionate for transformational ideas. For example, I suspect many of the Islamic banks today would be examined without mercy on what makes them compliant by the Muslim youth of today.

The knowledgeable and internet savvy Gen Y, using social media as their default communication mode, will (1) not be afraid to bring scrutinizing transparency and accountability, (2) share and flush out transformational ideas from cut and paste ideas and, so, (3) Islamic banks need to not only understand the environment of their future customers, but, more importantly, create an atmosphere where they are polled as the admired company young people want to work for!

Islamic banks need to make themselves relevant for tomorrow's customers, by appealing to today's youth movement comprised of human interest, social returns and impact investing.

The ball is in the Islamic bank court, please do not dribble off the feet!

Attitudes, Perceptions and Motivations of Libyan Retail Consumers toward Islamic Methods of Finance

2011-04-29T07:49:00.000+01:00

Attitudes, Perceptions and Motivations of Libyan Retail Consumers toward Islamic Methods of Finance
Alsadek Gait, Andrew C. Worthington
March 2009

Abstract: "This paper reports the results of a survey of 385 Libyan retail consumers in December 2007-February 2008 used to gather attitudes, perceptions and motivations towards Islamic methods of finance. The results indicate that while most respondents have at least some knowledge about some aspects of Islamic finance, specifically Musharakah (full-equity business partnerships) and Quard Hassan (interest-free benevolent loans), they are generally unaware of many other related products. Nonetheless, most respondents (85.9%) are potential users of Islamic methods of finance at the retail level, though potential use varying markedly according to age, level of education, employment, income and nationality. Factor analysis reduces the large number of variables that determine retail consumers' attitudes, perceptions and motivations towards Islamic methods of finance to just four determinants: namely, community service, profitability, religion and unique services. Discriminant analysis shows that religion and community service are the most important factors determining the potential use of Islamic methods of finance by retail consumers in Libya."

Islamic Banking in Indonesia: Lessons Learned

2011-04-27T03:36:00.001+01:00

Islamic Banking in Indonesia: Lessons Learned
By Rifki Ismal, Directorate of Islamic Banking, Bank Indonesia
April 2011

This is a paper prepared for the Annual Meeting on Trade and Development, United Nations of Conferences on Trade and Development, April 6th-8th, 2011, in Geneva, Switzerland.

Abstract: "In Indonesia, Islamic banking shows a progressive performance with a robust performance of banking indicators. Its operations engage non bank financial institutions, Islamic money and capital market and takaful (Islamic insurance) with the ultimate target of financing the real sector and improving the economy. However, there are still some challenges to be solved in particular the small market share, lack of human resources and, lack of product development. Some recommended actions are proposed in the paper to mitigate those problems and foster the development of the Islamic banking industry."

Dispute Resolution in Islamic Banking and Finance: Current Trends and Future Perspectives

2011-04-25T02:19:00.001+01:00

Dispute Resolution in Islamic Banking and Finance: Current Trends and Future Perspectives
Umar Aimhanosi Oseni
International Islamic University of Malaysia (IIUM)
August 2009

Abstract: "The current legal framework for dispute resolution in the Islamic banking and finance industry in developing countries may not adequately serve the purpose for which the financial institutions were set up. Meanwhile, the Islamic legal framework for dispute resolution has established rules for financial disputes as recognized under the classical law. This paper examines the current practice of dispute resolution in Islamic banking and finance with case analyses of selected Muslim countries. From our findings, disputes emanating from this industry are heard by the conventional courts and tribunals which, in most cases, do not have the requisite expertise. It is argued that since Islamic banking and finance disputes are sui generis, the panel of judges must be composed of experts in the field. The paper concludes that a legal framework should be established for dispute resolution in countries where Islamic banking and finance is being implemented. For a proper Islamization of the banking and finance sector, disputes arising from this sector should not be subjected to the convoluted conventional rules. The paper proposes a legal framework for dispute resolution in the Muslim world based on hybrid processes of Alternative Dispute Resolution (ADR) recognized in Islamic law."

Taking Takaful to the next level - The Malaysian Experience

2011-04-23T07:35:00.001+01:00

A new publication, Special Report: Taking Takaful to the next level - The Malaysian Experience, is available on RAM's website.

Please click here to view the publication.

AIMS - Job Opportunities in Islamic Banking & Finance

2011-04-21T07:34:00.002+01:00

Job Opportunities in Islamic Banking & Finance
AIMS - Academy for International Modern Studies
April 2011

This is a periodic compilation of job postings and openings from a multitude of sources (all relevant to Islamic banking & finance), which can be found on the AIMS website. Hoping to highlight other similar sources in the future and feedback in this regard is also very welcome.

Risk and Stability in Islamic Banking

2011-04-20T07:43:00.009+01:00

Risk and Stability in Islamic Banking
Pejman Abedifar, Philip Molyneux, Amine Tarazi
April 2011

Abstract: "This paper investigates risk and stability features of Islamic banking using a simultaneous modeling framework and a sample of 456 banks from 22 countries between 2001 and 2008. We find no significant difference between Islamic and conventional banks in terms of insolvency risk. The results on credit risk suggest that Islamic banks write-off credits more frequently or/and have lower loan recoverability compared to conventional banks. We also observe that Islamic banks benefit less than conventional banks from the negative impact of asset size on both their credit and insolvency risks. Our results are robust to different samples, estimation procedures, risk variables and other modeling specifications."

A Universal Platform for Shari'a Compliant Equity Screening

2011-04-18T07:42:00.000+01:00

A Universal Platform for Shari'a Compliant Equity Screening
Oxford Islamic Finance & Dar Al Istithmar
White Paper
July 2009

Muslim BRIC has arrived

2011-04-13T11:42:00.000+01:00

Muslim BRIC has arrived
By Rushdi Siddiqui
Business Times
April 2011

"On April 4, Thomson Reuters, along with their partners, IdealRatings, and World Halal Forum launched the SAMI Halal Food index. The SAMI Halal food index stands for Socially Acceptable Market Investments.

The index is about the beginning of convergence between Islamic finance and Halal industry. But, more importantly, its about Muslim country inward investing as Muslims, presently as 'consumer investors' in these halal food firms become shareholder investors.

Now, within the 'BRIC context,' SAMI stands for Saudi, Ankara, Malaysia and Indonesia. Without getting into the multitude of economic and financial numbers for these four countries on GDP growth, inflation, foreign direct investment, exports, debt capital market development, population growth patterns, and so on, we have a compelling established emerging market that happens to be Muslim countries on the old Silk Road."

Read more: Muslim BRIC has arrived

Thought Leadership: the Neglected Essence of Islamic Finance

2011-04-11T04:07:00.000+01:00

Thought Leadership: the neglected essence of Islamic Finance
Director, Hatim El Tahir
Deloitte’s Islamic Finance Knowledge Center
August 2010

"Have Islamic Financial Institutions (IFIs) around the world, including the Gulf region, been so busy structuring products and services that they have overlooked the importance of communicating the essence of Islamic Finance?"

This is quite possibly the most important issue facing the industry today and has the potential of being the main determinant of its future.

The Implementation of Accounting Standards for Islamic Banks: a Study of Preparers' and Auditors' Opinions in Sudan

2011-04-06T03:16:00.003+01:00

The Implementation of Accounting Standards for Islamic Banks: a Study of Preparers' and Auditors' Opinions in Sudan
Doctoral thesis, University of Surrey
Mustafa, Badreldin G (2003)

Opalesque Islamic Finance Intelligence - Sixteenth Issue

2011-03-22T08:08:00.001Z

We have compiled a great mix of content for this edition of OIFI (download the PDF version), and we start with our Editorial's anecdotal perspective of the MENA region. Having repeatedly received inquires regarding consumer appetite for Islamic finance products, our Featured Resource section compiles various country studies on consumer awareness, behaviour and perception.

Mudaraba applied in the context of microfinance is the theme for the Featured Structure segment, as scrutinized by practitioner Azhar Nadeem. Hdeel Abdelhady provides an operational perspective to Islamic finance in Lex Islamicus - with particular emphasis on governance and Shariah Board reports (SBRs).

Having spent time in Matsushima (one of the three famous "views" of Japan) in the north of Miyagi prefecture, it is a welcome coincidence that the Kulliyyah Korner features the research of Kyoto-based Nagaoka Shinsuke. Our best goes to him and everyone in Japan.

The Industry Snapshot offers a further analysis of Education based on the EPL concept (Education, Perception, Liquidity), as seen by strategist Joy Abdullah. This is followed by Douglas Clark Johnson who shares his perspective on Bahrain in our Opinion Column.

We hope you enjoy the sixteenth edition of OIFI and as always we are glad to hear from our readers and welcoming all comments & feedback. Remember that you can visit our online archive (see reference link) for access to our ever-growing databank of Opalesque Islamic Finance Briefing as well as all of the back issues of Opalesque Islamic Finance Intelligence.

Download the complete issue of Opalesque Islamic Finance Intelligence here.

Alternatively you can read each article separately in the OIFI Archive:
Editor’s Note: In the Name of Egypt
Featured Resource: The Islamic Finance Consumer
Featured Structure: Islamic Business Contracts and Microfinance A case of Mudaraba
Lex Islamicus: Operational Excellence is the Key to Unlocking Lasting Value in Islamic Finance
Kulliyyah Korner: On the Theoretical Dichotomy of Islamic Finance
Industry Snapshot: E.P.L. in Islamic Finance - Education (Extra Time)
Opinion Column: Bahrain: Time to be Truly Business-Friendly

Call for Papers - Eight International Conference on Islamic Economics & Finance

2011-03-19T11:47:00.010Z

Eight International Conference on Islamic Economics & Finance
"Sustainable Growth and Inclusive Economic Development From An Islamic Perspective"
Doha, Qatar
December 25-27, 2011

Call for Papers: The global economy continues to face the perennial problems of poverty, persistent youth unemployment, excessive inequalities of income and wealth, high levels of inflation, large macroeconomic and budgetary imbalances, exorbitant debt-servicing burdens, inadequate and aging public utilities and infrastructure, skyrocketing energy prices, and growing food insecurity. The reoccurring regional and global financial crises further intensify and magnify these problems particularly for the underprivileged segments of the world population. As a result, many countries are at the risk of failing to achieve the Millennium Development Goals (MDGs) set by the United Nations. However, some countries also present optimistic experiences to share, and from which useful lessons can be drawn for shaping the future economic scene in other countries.

The Eighth International Conference on Islamic Economics and Finance is jointly being organized by the Qatar Foundation’s Faculty of Islamic Studies (QFIS) through its Islamic Economics and Finance Center, the Islamic Development Bank Group through its Islamic Research and Training Institute (IRTI), and the International Association for Islamic Economics with the support of other stakeholders. The Conference will provide a platform for dialogue and discussions between policymakers, academics, researchers, graduate students, and practitioners to address the problems of poverty alleviation, inclusive economic growth, and macroeconomic stability from the perspective of the Islamic Economics and Finance discipline. The Conference will be held for three days during December 25 – 27, 2011 in Doha, Qatar.
Theoretical and empirical research papers are invited in Arabic and English languages for submission to the Conference in the following and related areas, subject to the conditions described in this announcement.

Tickets and Hotel: One author of each accepted paper will be paid by IRTI round-trip economy class air tickets, and hotel stay, including food during the conference.

Dates to Watch:
Submission of abstracts with CVs April 15th
Decision of Academic Committee May 5th
Submission of First Draft of Papers July 15th
Decision of Academic Committee August 15th
Submission of Final Draft October 10th

Download Call for Papers:
http://www.qfis.edu.qa/files/pdf/Eigth%20Int%20Conf%20Call%20for%20Papers.pdf

With sincere thanks to Dr. Taruqullah Khan for highlighting this information.

Sharia One: Careers in Islamic Finance

2011-03-16T05:42:00.000Z

Given the size and success of our Blog and LinkedIn group, we are often approached by individuals and companies who want to promote their products and services. We like to add value to our members – not spam you with commercial offerings of no relevance to you or the Islamic finance industry. Unless we can perceive a real added value and benefit to you, we just don’t bother.

Occasionally we stumble across something that we think will be of value and benefit to you and the Islamic finance industry.

Islamic Banking Job Opportunities: ShariaOne.com is the largest financial career website for the Islamic banking and finance industry, featuring fresh new jobs listed everyday from leading employers and recruiters. They have all kinds of Islamic banking related roles – so if you've got the skills it's only a matter of time before finding a match.

ShariaOne.com allows you to find all the leading Sharia compliant financial careers in one dedicated place. They currently have over 100 new jobs and access is free for job-seekers. So if you’re in the market for a new job, or are curious on who’s hiring – check it out here:

www.ShariaOne.com

Islamic Securitisation: Part II - A Proposal for International Standards, Legal Guidelines and Structures

2011-03-14T03:23:00.000Z

Islamic Securitisation: Part II - A Proposal for International Standards, Legal Guidelines and Structures
Mohammad Saad Lahlou, University of Westminster, School of Law
Joseph Atangan Tanega, University of Westminster, School of Law
June 2007

Abstract: "The authors propose that international standards for cross-border Islamic Securitisations be established to help overcome legal uncertainties. Given the principles of Sharia law, templates for a number of Islamic financial instruments are examined together with some examples of successful international transactions."

Islamic Securitisation: Part I - Accommodating the Disingenuous Narrative

2011-03-11T11:21:00.000Z

Islamic Securitisation: Part I - Accommodating the Disingenuous Narrative
Mohammad Saad Lahlou, University of Westminster, School of Law
Joseph Atangan Tanega, University of Westminster, School of Law
May 2007

Abstract: "The article examines the fundamental principles, substance versus form, and operational elements of Islamic finance as applied to Islamic securitisation. We review some central aspects of the ideological and spiritual tradition of Sharia compliance as applied to a typical asset backed securities transaction."

The Relationship between Jakarta Islamic Index and Other Selected Markets

2011-03-08T03:12:00.000Z

The Relationship between Jakarta Islamic Index and Other Selected Markets: Evidence from Impulse Response Function
Irfan Syauqi Beik, Lecturer and Researcher at the Department of Economics, Bogor Agricultural University, Indonesia
Wisnu Wardhana, Postgraduate Student of the International Islamic University Malaysia, Researcher of ISEFID (Islamic Economic Forum for Indonesia’s Development)

Abstract: "The financial crisis, which was triggered by the subprime credit in the United States, is probably the most severe crisis for the last century. It has affected many countries in the world including Indonesia. In spite of worsening financial market in recent months, Indonesia has a great potency to be a hub for international Islamic finance. This paper attempts to analyze Indonesia’s Islamic Stock Market, namely Jakarta Islamic Index (JII), in relation with other Islamic as well as conventional stock markets in Malaysia and the United States, especially during the subprime crisis which started in early 2006. This research uses daily closing data of stock price indices obtained from Bloomberg database from January 1, 2006 until December 31, 2008. It employs time series analysis of cointegration and impulse response function. The results show that there is no long run relationship between Indonesia’s capital market and both Malaysia and the US markets. For investors, the results will give them choices for their investment portfolio. Meanwhile, in Indonesia’s perspective, this should be an opportunity for promoting its capital market as the potential destination for profitable investment. In the short run, the JII is significantly affected by the shock or disturbance taking place in the other markets. However, the results also indicate that the JII is the least volatile and more stable market."

Islamic Hedging: Gambling or Risk Management?

2011-03-05T03:09:00.008Z

Islamic Hedging: Gambling or Risk Management?
Saadiah Mohamad, Universiti Teknologi MARA, Malaysia
Ali Tabatabaei, Universiti Teknologi MARA (UiTM)
August 2008

Abstract: "Although there is a lack of consensus regarding derivatives and the development of sharia-compliant funds to mimic hedge funds in order to tap the global surplus liquidity especially the Gulf petrodollar, sharia scholars are generally agreeable that hedging is permissible and necessary as a risk management tool. However, there is still considerable debate regarding the kind of instruments that could be sharia-compliant. This paper looks at the main forms of hedging and examines the debate surrounding the use of derivatives in Islamic financial markets. The paper then looks at alternatives for sharia-compliant hedging mechanisms and in particular examines an Islamic financial derivative of Bai Salam that can mimic a short sale in a conventional option, but with potential for becoming a more superior risk management tool."

Central banking and monetary management in islamic financial environment

2011-03-02T03:05:00.001Z

Central banking and monetary management in islamic financial environment
Hanif, M. Nadim and Sheikh, Salman
July 2010

Abstract: "Continuous growth in Islamic finance calls for studying the framework in which the monetary policy maker (i.e., central bank) performs its functions. Central banks in Muslim countries are using various instruments for monetary policy purpose including interest rate. As a result, Islamic financial institutions (IFIs) are facing issues in benchmarking the price of financial instruments. Acceptable solution to benchmarking lies in the presence of a real economic activity in the base of any proposal and its feasibility for business performance when put against conventional banking. This paper presents empirical evidence of statistical equivalence of nominal GDP growth rate and official interest rate for ‘advanced,’ ‘all,’ and some Muslim countries. We propose nominal GDP growth rate as benchmark for pricing domestic financial transactions of IFIs as well as for pricing external bilateral/ multilateral loans. The paper also suggests nominal income targeting as monetary policy regime and provides a liquidity management mechanism for banking system in Islamic financial environment."

Are Islamic Investment Certificates Special? Evidence on the Post-Announcement Performance of Sukuk Issues

2011-02-27T02:15:00.002Z

Are Islamic Investment Certificates Special? Evidence on the Post-Announcement Performance of Sukuk Issues
Christophe J. Godlewski, University of Strasbourg, LaRGE Research Center; EM Strasbourg Business School
Rima Turk Ariss, Lebanese American University
Laurent Weill, Université Robert Schuman Strasbourg III; University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)
April 2010

Abstract: "The last decade has witnessed rapid expansion of Islamic financial instruments, notably with the proliferation of Islamic investment certificates called Sukuk. Sukuk generally represent the Islamic financial instrument equivalent to conventional bonds. We evaluate the economic differences between these financing techniques and appraise the implications on the future expansion of Sukuk. We use a market-based approach to investigate whether investors react differently to the announcements of issues of Sukuk and conventional bonds. We find that the stock market is neutral to the announcement of conventional bonds, but we observe a significant negative stock market reaction to the announcement of Sukuk. We explain this different stock market reaction using the adverse selection mechanism, which favors Sukuk issuance by lower-quality debtor companies. Unlike arguments presented in prior literature, our results support the view that differences exist between Sukuk and conventional bonds because the market is able to distinguish among these securities."

The Deloitte Islamic Finance leaders survey in the Middle East

2011-02-24T01:53:00.000Z

The Deloitte Islamic Finance leaders survey in the Middle East
Benchmarking Practices
Biannual Survey - 2010
Deloitte’s Islamic Finance Knowledge Center

"In order to best serve the interests of its clients and the Islamic Finance practice generally, the Deloitte’s Islamic Finance Knowledge Center (Deloitte ME IFKC) seeks to implement an evidence-based approach to the evolution of Islamic Finance Thought Leadership (IFTL).

This is the first Deloitte Islamic Finance leaders survey in a biannual series targeted at industry practitioners and leaders of Islamic Financial Institutions (IFIs) in the Middle East. The survey is based on interviews conducted with industry leaders between April and June 2010.

In general, this report is designed to provide industry stakeholders-regulators, standard-setters, Islamic financial institutions (IFI), investors, and practitioners with a portrayal of the trends and issues prevailing in the current economic environment."

The Economics of Islamic Finance and Securitization

2011-02-21T03:40:00.000Z

The Economics of Islamic Finance and Securitization
Andreas A. Jobst
International Monetary Fund (IMF) - Monetary and Capital Markets Department (MCM)
Journal of Structured Finance, Vol. 13, No. 1
February 2007

Abstract: Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring shariah-compliant securitization seems straightforward. This paper explains the fundamental legal principles of Islamic finance, which includes the presentation of a valuation model that helps distil the essential economic characteristics of shariah-compliant synthetication of conventional finance. In addition to a brief review of the current state of market development, the examination of pertinent legal and economic implications of shariah compliance on the configuration of securitization transactions informs a discussion of the most salient benefits and drawbacks of Islamic securitization.

Voices of the Unheard - Salvaging the Next Generation of Islamic Bankers

2011-02-20T01:56:00.003Z

Voices of the Unheard - Salvaging the Next Generation of Islamic Bankers
Islamic Business & Finance Magazine
By Mohammed Khnifer (MSc,MBA,CIFP)

The silent generation of unemployed Islamic financiers. The Author warns the Islamic finance industry that it is about to lose its second generation of bankers.

AIMS - Job Opportunities in Islamic Banking & Finance

2011-02-19T23:51:00.000Z

Job Opportunities in Islamic Banking & Finance
AIMS - Academy for International Modern Studies
February 2011

This is a periodic compilation of job postings and openings from a multitude of sources (all relevant to Islamic banking & finance), which can be found on the AIMS website. Hoping to highlight other similar sources in the future and feedback in this regard is also very welcome.

Sector Report: Islamic Finance

2011-02-16T04:11:00.010Z

Sector Report: Islamic Finance
Global Finance
By Anita Hawser
February 2011

"The growing popularity of Islamic financing and an intensified focus on risk management in the global banking industry are prompting greater awareness of the need for a unified—and appropriate—regulatory regime."

The Small World of Islamic Finance

2011-02-14T02:41:00.000Z

The Small World of Islamic Finance
Shariah Scholars and Governance - A Network Analytic Perspective
Murat Ünal
Funds@Work
January 2011

This report raises a variety of questions relating to governance of Islamic Financial Institutions (pages 28 - 31) and some of them echo similar queries raised in an earlier editorial of Opalesque Islamic Finance Intelligence (see reference link).

ISRA Journal - Volume 2

2011-02-11T04:52:00.000Z

ISRA International Journal of Islamic Finance
Volume 2, Issue 2
December 2010

Volume 2 of the ISRA journal is now available online, you can find the table of contents here and download individual articles directly from their site, these include:

Academic Articles:

Juristic Analysis of the Profit Distribution Method
New Musharakah Model in Managing Islamic Investment
An Overview of Shari'ah Issues Regarding the Application of the Islamic Letter of Credit Practice in Malaysia
Case Studies of the Practice of Nomination and Hibah by Malaysian Takaful Operators
An Empirical Investigation into SMEs’ Perceptions of Credit Guarantee Corporation (CGC) Malaysia Berhad: A Case Study of the Islamic Guarantee Scheme in Malaysia

Practitioner's Articles:

Islamic Liquidity Management – The Malaysian Experience

Research Notes:

Shari'ah Parameters of Hiyal in Islamic Finance
Analytical Study of the Interaction Between Fatawa, Shari'ah Rulings, Resolutions and Conventional Laws in Contemporary Islamic Finance in Malaysia with Cross Reference to the Practices in Saudi Arabia, Pakistan and the Sudan
Capital Requirements and Banking Behaviour for Islamic Banks

Islamic Banking Windows - By Justice Mohammed Taqi Usmani

2011-02-08T02:41:00.000Z

Islamic Banking Windows
New Horizon Magazine, Issue No. 119
Justice Mohammed Taqi Usmani
May 2002

"It is well settled that the emergence of a full competitive market is always useful for the strength of an industry. There is no reason why Islamic banks should be an exception to this rule. If these windows perform well, it will persuade Islamic banks to perform better and if their performance is poor, they will never be able to stand before the Islamic banks as hard competitors."

The Impact of AAOIFI Standards and Other Bank Characteristics on the Level of Voluntary Disclosure in the Annual Reports of Islamic Banks

2011-02-06T03:09:00.001Z

The Impact of AAOIFI Standards and Other Bank Characteristics on the Level of Voluntary Disclosure in the Annual Reports of Islamic Banks
Doctoral thesis, University of Surrey
Al-Baluchi, Ahmed Ebrahim (2006)

IFRS vs AAOIFI: The Clash of Standards?

2011-02-04T23:36:00.000Z

IFRS vs AAOIFI: The Clash of Standards?
Mohamed Ibrahim, Shahul Hameed
Published in: International Accountant
March 2007

Abstract: “The Islamic financial industry needs a corresponding alternative set of accounting standards which can at best be harmonized, not standardized due to the different nature and activities of the Islamic banks and financial institutions. These standards already exist, developed by an industry led non profit organization based in Bahrain- the Accounting and Auditing Organization for Islamic Financial Institutions established in 1991. The IASB should reconsider its position and allow alternatives- live and let live, just as there is a need for differential reporting requirements for small and medium businesses.”

New kid in the block: QScience Journal of Contemporary Islamic Studies

2011-01-30T12:08:00.007Z

QScience Journal of Contemporary Islamic Studies
An interdisciplinary journal covering the following major themes in Islamic studies: Contemporary Islamic jurisprudence; Islamic history and civilization; Comparative religions and modern Islamic thought; Islamic economics and finance, Public policy in Islam. A Qatar Foundation Academic Journal.

Their first editorial article can be viewed here:
Islamic finance: some aspects of the research and policy nexus
Tariqullah Khan
December 2010

Abstract: "Islamic finance is a dynamic, practical and academic field of contemporary Islamic studies. It is based on the universally shared ethical values of transparency, fairness and justice and operates in conformity with the Shariah in the framework of laws existing in a jurisdiction. During the past 35 years Islamic finance has emerged as a way of financing production, projects and trade and facilitating the required financial intermediation and payments systems. The recent global financial crisis has increased interests in the Islamic finance business model. The focus has been on the products offered by Islamic finance, its architectural foundations, the unique risks of its assets and liabilities and its implications for the inclusiveness and stability of the interconnected financial systems. In the coming years we expect that these interest areas will remain in focus of the academic and policy research works in the field of Islamic finance. This note intends to highlight some of the pertinent themes in the research and policy nexus related to Islamic finance."

When Sukuk Default - Asset Priority of Certificate-holders vis a vis Creditors

2011-01-30T01:53:00.003Z

When Sukuk Default - Asset Priority of Certificate-holders vis a vis Creditors
Opalesque Islamic Finance Intelligence
By Mohammed Khnifer (MSc,MBA,CIFP)

The research explains how lawyers can structure sukuk that can save certificate-holders from the repercussions of what comes after default. That is Asset Protection of Certificate-holders vis a vis Creditors.

Opalesque Islamic Finance Intelligence - Fifteenth Issue

2011-01-22T03:05:00.000Z

The fifteenth edition of OIFI is here (download the PDF version) and you might notice our front cover is slightly different. Since inception we have avoided profiling any specific individual or personality, in part to differentiate OIFI with so many other finance publications and because our focus has always been poignant and relevant content (not to mention the fact that such portraits are cheesy too). This edition explores, among other things, the conscience of the industry as we ask ourselves: What is Islamic finance? What is the message being conveyed? Who can be part of this industry? How do we communicate the message more effectively? The front cover illustrates this puzzle (and hints to the answers).

Our Editorial tackles the approach we take not only to define Islamic finance but, increasingly, on how we communicate it to others. On the other end our Featured Resource is a short compilation of materials concerning Islamic Economics, an often distant topic to Islamic finance but one that is undergoing a similar revival and evolution.

The Featured Structure segment has Jhordy Kashoogie analyzing the debate behind the permissibility of trading sukuk, and this is further complemented by the Discussion Board which brings along feedback from practitioners on the same subject. Lex Islamicus welcomes back Hakimah Yacoob as she discusses financial criminology and financial victimology from the perspective of Islamic finance.

The Industry Snapshot introduces a recurring series of articles on EPL in Islamic finance (Education, Perception and Liquidity), which has been developed by Deloitte's Daud Vicary. Lastly the Opinion Column examines the growing concerns regarding career development and deployment of human capital in the industry, with Mohammed Khnifer highlighting some of the main obstacles faced by today's would-be Islamic bankers.

We encourage feedback from our readers and welcome comments & suggestions to make OIFI better. In addition, please remember that you can visit our historical archive (see reference link) for access to our ever-growing databank of Opalesque Islamic Finance Briefing as well as all of the back issues of Opalesque Islamic Finance Intelligence.

Download the complete issue of Opalesque Islamic Finance Intelligence here.

Alternatively you can read each article separately in the OIFI Archive:
Editor’s Note: Islamic Finance Incommunicado
Featured Resource: Islamic Economics
Featured Structure: Shari'a Polemics of Sukuk Trading
Discussion Board: Sukuk Trading - Deviation Between Theory and Practice?
Lex Islamicus: Financial Criminology v Financial Victimology in Islamic Practice
Industry Snapshot: E.P.L. in Islamic Finance - Education
Opinion Column: Voices of the Unheard - Salvaging the Next Generation of Islamic Bankers

The World Interfaith Harmony Week

2011-01-20T04:23:00.006Z

The World Interfaith Harmony Week

The World Interfaith Harmony Week is based on the United Nations General Assembly Resolution A/65/PV.34 for a worldwide week of interfaith harmony. It was proposed in 2010 by HM King Abdullah II and HRH Prince Ghazi bin Muhammad of Jordan. The World Interfaith Harmony Week will fall on the first week of February of every year and aims to promote harmony between all people regardless of their faith.

This week of observance might go unnoticed by the Islamic finance industry (letters of support come from all corners of the world, but few if any Islamic banks seemed to be aware of it), however we do hope that this same industry can serve as an example of how people from various faiths, backgrounds and nationalities can find a common ground. Read more about the World Interfaith Harmony Week on their official website (see reference link).

The FTSE Global Islamic and the Risk Dilemma

2011-01-17T11:27:00.000Z

The FTSE Global Islamic and the Risk Dilemma
Noor Hashim
American International University-Bangladesh, Office of Research and Publications
March 2008

Abstract: "Risk typically represents investments’ double-edged sword. Quantifying the adequate amount of risk to be assumed could be difficult, especially when “too much risk could turn out to be too little.” Under Islamic finance, managing risk is even more challenging. On the one hand, assuming high levels of risk is not encouraged. On the other, Islamic screening rules restrict investment and consequently stimulate risk. This paper considers the above dilemma by examining the effect of adopting screening rules on stock indices risk. The study, conducted using monthly data from FTSE Global Islamic, tests the hypothesis that the Islamic index yields adequate returns for the level of risk undertaken. Results show that the Islamic index surpasses the socially responsible index in performance while operating in line with the market. This risk assessment result does not resolve the dilemma but assures the economic appropriateness of the procedures adopted in managing the Islamic index."

Analysis of Short-Term Asset Concentration in Islamic Banking

2011-01-14T03:49:00.000Z

Analysis of Short-Term Asset Concentration in Islamic Banking
Abbas Mirakhor
International Monetary Fund (IMF)
October 1987

Abstract: In general the process of implementation of Islamic banking in the Islamic Republic of Iran and Pakistan appears to be proceeding with relative success. However, number of problems have surfaced during the transition period, among which is a tendency for short-term assets to dominate commercial bank portfolios. The negative effects on capital formation is one result of this portfolio behavior. The cause of this behavior is a set of regulations constraining profit-sharing activities of commercial banks. It is shown here that such regulations rather than reducing the risks of bankruptcies in the banking system may well increase them.

Financial Intermediation in Muslim Community - Issues & Problems

2011-01-11T00:19:00.000Z

Financial Intermediation in Muslim Community - Issues & Problems
Ibrahim S. Alomar
Department of Economics, Qassim University, Saudi Arabia
2005

Abstract: "It is widely known that Muslim society inherited an interest based financial intermediation system from others instead of developing their own banking system. However, Muslim Economists and scholars around the world made efforts to have and develop their own financial intermediation since there was no initial working model to act upon, except the belief that interest-based financial intermediation might be replaced by an Islamic one on the basis of profit and loss sharing. During the last four decades, Islamic financial intermediation industry became a reality that the Muslim society around the world can see and practice. However, the Islamic financial intermediation in the world has been facing numerous problems & challenges. It raises a number of issues and potential problems which can be seen from the macro and micro operational point of view. Developing the Islamic financial intermediation depends on clarifying these issues and presenting them in order to focus on them studying and remedying. This paper aims to cover the ground of issues of Islamic financial intermediation that rose during its short age. Such issues prevent Islamic financial intermediation from its operating with its full efficiency level. Even no attempt to remedy these issues, presenting these issues and problems and classifying them according to their type is very valuable for sustained growth and development of the Islamic financial intermediation. Such work is a valuable contribution to build the Islamic financial intermediation industry on sound theoretical foundations."

The Rise and Fall of Gulf Finance House

2011-01-10T01:51:00.002Z

The Rise and Fall of Gulf Finance House
Islamic Finance News
By Mohammed Khnifer (MSc,MBA,CIFP)

This paper dissects the balance sheet and business model of Gulf Finance, and scrutinizes the existence of a "pre-exit premium" in their activities - on top of the usual exit fees and/or performance fees. The study suggests that this practice (uncommon even for conventional Private Equity businesses - much less for an Islamic Private Equity house) was pioneered by GFH and it is this same practice that brought them down to their knees.

How it all started: "Birth of the blog"

2011-01-07T13:56:00.000Z

Recently we were interviewed by Thomson Reuter's Global Head of Islamic Finance, Rushdi Siddiqui, to provide the back story of how the IFR Blog came into existence. You can read the full feature (entitled "Birth of the Blog") from the December edition of Islamic Business & Finance Magazine with the following link.

We hope that the interview provides insights on how the blog has developed, but most of all on the need to better disseminate information about Islamic finance and reduce the time/costs associated with searching for relevant industry information.

Many thanks to Rushdi Siddiqui for knocking on the IFR door!

Corporate Governance of Islamic Banks, Its Characteristics and Effects on Stakeholders and the Role of Islamic Banks Supervisors

2011-01-06T02:56:00.003Z

Corporate Governance of Islamic Banks, Its Characteristics and Effects on Stakeholders and the Role of Islamic Banks Supervisors
Doctoral thesis, University of Surrey
Al-Sadah, Anwar Khalifa Ibrahim (2007)

Monetary Operations and Government Debt Management Under Islamic Banking

2010-12-30T03:47:00.000Z

Monetary Operations and Government Debt Management Under Islamic Banking
V. Sundararajan, David Marston, Ghiath Shabsigh
International Monetary Fund (IMF)
September 1998

Abstract: This paper outlines the recent progress in developing Islamic financial instruments for the management of monetary policy and public borrowing requirements and provides details on new instruments currently being developed in the Islamic Republic of Iran and Sudan. The paper also touches on the institutional arrangements for interbank market operations and the design of effective central bank credit facilities that are needed under Islamic banking to support the development and operation of these new instruments.

Hedging in Islamic Finance

2010-12-28T13:32:00.000Z

Hedging in Islamic Finance

IRTI Occasional Papers

Sami Ibrahim Al-Suwailem

2006

Abstract: "The last decade witnessed an increasing trend in markets’ volatilities and financial crises. During the same period, derivatives, the most common instruments for hedging, have been growing at an exponential rate. Apparently, derivatives did not help stabilize markets and attenuate financial crises. This is not difficult to explain, since derivatives are also the main instruments for speculation. More than 97% of derivatives users are speculators, while less than 3% are hedgers. The challenge therefore is to search for instruments that allow for productive risk management without harmful speculation. This is the theme of Islamic finance that the paper explores. Based on Shari’ah rules of gharar, the paper therefore suggests several instruments for managing and hedging risks associated with Islamic modes of finance."

Managing Prudentially the Shariah compliance risk - Organized Tawarruq as an example

2010-12-20T01:49:00.000Z

Managing Prudentially the Shariah compliance risk - Organized Tawarruq as an example
Opalesque Islamic Finance Intelligence
By Mohammed Khnifer (MSc,MBA,CIFP)

A novel research that deals with Maslaha (public interest) and the Permissibility of Organized Tawarruq. It also shed light on the Shariah Governance issue and the Shariah Risk. It is a “must” read for any Shariah Risk officer.

Opalesque Islamic Finance Intelligence XIV

2010-12-16T11:44:00.000Z

Welcome to the fourteenth edition of OIFI (download PDF version), our last edition for the year, and as we look back at 2010 we sincerely thank everyone that has supported us along the way. The industry itself has much to look forward to in the coming years and this is the recurring theme for this edition. Our Editorial Section tackles the evolving role of AAOIFI as it pertains to governance and regulation of Shariah scholars. Our Featured Resource is a compilation of some the most noteworthy discussions from our online forum.

Mohammed Khnifer takes on our Featured Structure section with an extensive analysis on the implementation of Islamic deposit insurance, with particular attention given to Malaysia's IDI framework. This is promptly followed by Lex Islamicus where ISRA'a Hakimah Yaacob provides a fresh approach to the standardisation debate, including novel references to international conventions for the harmonisation of private law and coordination of civil and commercial matters.

The Industry Snapshot welcomes back Mobasher Zein as he continues his analysis of an Islamic commodity-backed currency with further attention given to the monetary framework that would be required to make this happen. Last but certainly not least Toby Birch shares his views on our Opinion Column with regards to the underserved retail market in Islamic finance and what are some of the obstacles that need to be addressed in coming years.

Always glad to hear from our readers and welcoming all comments & suggestions and please remember that you can visit our online archive (see reference link) for access to our ever-growing databank of Opalesque Islamic Finance Briefing as well as all of the back issues of Opalesque Islamic Finance Intelligence.

Download the complete issue of Opalesque Islamic Finance Intelligence here.

Alternatively you can read each article separately in the OIFI Archive:
Editor’s Note: AAOIFI's Perestroika
Featured Resource: Linkedin Discussions - Highlights of 2010
Featured Structure: Towards a Universal Islamic Deposit Insurance System
Lex Islamicus: Standardisation v Harmonisation: Towards Recognition?
Industry Snapshot: Islamic Dinar Revisited
Opinion Column: Ready for Retail?

ICM Quarterly Bulletin - September 2010

2010-12-16T03:47:00.000Z

Malaysian ICM Quarterly Bulletin
Securities Commission Malaysia
September 2010 Vol. 5 No. 3

The latest issue of the Malaysian ICM quarterly bulletin is here, published by the Securities Commission Malaysia (SC). Among the featured content you will find a couple of interesting articles, one on the ethics of disagreements and another on the concept of paying for a promise to buy/lease an asset (hamish jiddiyyah) in the context of an ijarah contract. This and previous issues of the bulletin are available on their online archive here.

Islamic Project Finance in The Kingdom of Saudi Arabia

2010-12-10T05:41:00.000Z

Islamic Project Finance in The Kingdom of Saudi Arabia
Craig Nethercott and Mohammed Al Sheikh – White & Case llp
Hissam Kamal and Sheikha Al Sudairy – HSBC Saudi Arabia Limited
July 2006

"...there was a common scepticism as to whether the products applied in Qatar, Oman and elsewhere in the Gulf could be used in Saudi Arabia. The full spectrum of Islamic financing products is commonly utilised in Saudi Arabia (mostly in retail banking), but never before had an Islamic financing product been used in a multi-sourced financing."

Rural Finance and Farmers' Indebtedness: A Study of Two Punjabs

2010-12-08T06:23:00.000Z

Rural Finance and Farmers' Indebtedness: A Study of Two Punjabs
Singh, Lakhwinder (October 2008)
Punjabi University

Abstract: "Economic development theory has recognized that access to finance enables economic agents of production to exploit growth opportunities. The governments of less developed countries since world war two have been striving hard to enacting suitable policies to enable rural households in accessing timely credit. This has led to a rise in the agricultural production and productivity. The pattern of economic transformation followed by less developed countries, which has squeezed agriculture sector surpluses without reducing the burden of population dependent in such economic activities. Consequently, the borrowing generally in such kind of economic transformation process becomes burden some. The modern development process in both the rural economies of Indian and Pakistani Punjab could also not able to replace the older money-lending system, which remained excessively exploitative. This process of financing rural economic activities can be called as double squeezing of agricultural households. An attempt has been made here to examine the growth, structure and deficiencies in the rural financial systems of two Punjabs during the period 1975-76 to 2003-04. Some suggestions related to public policy for providing timely and adequate credit have also been made."

Islamic Finance: A Therapy for Healing the Global Financial Crisis

2010-12-06T02:50:00.000Z

Islamic Finance: A Therapy for Healing the Global Financial Crisis
Miranti Kartika Dewi, Faculty of Economics, University of Indonesia
Ilham Reza Ferdian, International Islamic University Malaysia

Abstract: "Global financial crisis which hit many too-big-too-fail countries and financial institution in the world was mainly made happen by debt securitization. Derivative instruments resulted from this process obviously were not backed by real asset. When any party came up with investment on these instruments, the investment would never support the development of real sector economy, instead, it just worsen the situation by creating bubble economic. This condition becomes more harmful when the securitized debts default. This practice is strictly forbidden according to Islamic finance principles. It has inherent risk management tools to prevent the crisis. This paper attempts to examine the root of the financial crisis and find the solution from Islamic finance principles."

Sukuk- Building for a Solid Future

2010-12-06T01:37:00.003Z

Sukuk- Building for a Solid Future
Islamic Banking & Finance magazine
Final verdict: East Cameron sukuk holders win their case

Asset-based and asset-backed sukuk are contrasting instruments with different consequences in the event of default, as Mohammed Khnifer explains in his analysis of distressed high-profile sukuk and the judgement on East Cameron Gas. Also under the microscope is bankruptcy remoteness in sukuk issuance.

Creating an Effective and Efficient Regulatory Framework for the Islamic Capital Market

2010-12-04T15:35:00.000Z

Creating an Effective and Efficient Regulatory Framework for the Islamic Capital Market

by Dr Wan Nursofiza Wan Azmi

KLBS - Working Paper Series 010

2007

Islamic Microfinance: A New Approach to Help Small Enterprises

2010-12-02T03:18:00.000Z

Islamic Microfinance: A New Approach to Help Small Enterprises
ABAC Malaysia
August 2008

"It is estimated that about 35% of the world’s 1.2 billion Muslims are poor, thus creating a large market for microfinance. However, there are very few Islamic MFIs and Islamic banks involved in microfinance. Many MFIs are operating under the conventional system, while Islamic banks tend to favor larger firms."

An Approach to Islamic Economics

2010-11-30T06:56:00.000Z

An Approach to Islamic Economics
Dr. Mohammad Nejatullah Siddiqi
October 2007

"The subject matter of economic analysis, behavior of economic agents, is susceptible to human volition. There are no iron laws. One can do things in a manner then change to another way of doing. In one’s choice of how to behave/do things, one is influenced by a number of factors. Self- interest seems to be the most influential of these. But tradition, what the others are doing, what is the easiest course of doing, impact on others, public interest, what is morally preferable, what is spiritually higher, etc. are also involved.

Some abstraction is necessary for scientific analysis to proceed. Traditions change only in the long run and can be abstracted away in a short-term analysis. Demonstration effect and peer pressure also belong to that category, though to a lesser extent. Taking the easiest course (by maintaining the status quo, for example) leads to different paths in different cases and cannot be handled scientifically. It is better left to be taken into account at the policy level, if and when needed. The remaining four factors are of a different nature. They should not be abstracted away without careful consideration of the implications of doing so."

Sukuk Focus - RAM

2010-11-28T03:18:00.011Z

Sukuk Focus
Malaysian Islamic Capital Market: An intelligent positioning in an evolving industry

RAM Holdings
November 2010

In this issue:

Metamorphosis of the Malaysian Islamic Capital Market
Wakalah-Based Sukuk via Commodity Murabahah - the Latest Innovation
Market Statistics

Please note a free registration is required to access the document.

Regulatory challenges posed by Islamic capital market products and services

2010-11-26T07:48:00.000Z

Regulatory challenges posed by Islamic capital market products and services
Professor Rodney Wilson
University of Durham, UK
IOSCO task force on Islamic capital market

"This paper explores some of the issues that arise in the regulation of Islamic capital market products and services. As many of the products are distributed to retail clients by Islamic banks and through the Islamic windows of conventional banks, it is also pertinent to deal with the regulation of these institutions, not least because of the distinctive liability and asset structures of Islamic banks. Liquidity and capital adequacy are considered, as well as questions of product information disclosure and transparency. Islamic banks and the Islamic windows of conventional banks offer brokerage facilities for securities trading. How should such facilities be regulated, and are there any unique issues that arise because of the need for shariah compliance? Islamic banks also use Islamic sukuk securities for liquidity management. How does the status of such assets compare with their conventional equivalents? This is likely to become a major issue confronting regulators in the years ahead given the rapid growth of these securities".

Incoherence of Contract-Based Islamic Financial Jurisprudence in the Age of Financial Engineering

2010-11-24T07:31:00.005Z

Incoherence of Contract-Based Islamic Financial Jurisprudence in the Age of Financial Engineering
Mahmoud A. El-Gamal
Rice University
Duke Islamic Studies Center

May 2007

Abstract: "Islamic financial jurisprudence has always had the stated aim of enhancing human welfare, and therefore prohibitions must be seen through the lens of welfare-enhancing regulation of financial practices. In today’s age of financial engineering, utilizing many of the legal and financial advances of the past two decades, it is quite easy to synthesize the contracts that classical and contemporary jurists forbade from the ones that they have permitted. This financial engineering approach was always possible to some extent, but recent advances have reduced transaction costs substantially. In premodern societies, when transaction costs of ruses to circumvent prohibitions were substantial, prohibitions could serve their intended regulatory purpose, albeit imperfectly. In today’s age of low-cost financial engineering, the regulatory substance of prohibitions, contract conditions, and other contract-based juristic rulings has been diluted to the point of rendering the contract-based jurisprudence incoherent".

Islamic Finance and Structured Commodity Finance Techniques

2010-11-21T05:48:00.000Z

Islamic Finance and Structured Commodity Finance Techniques: Where The Twain Can Meet

UNCTAD secretariat
May 2006

"This study discusses Islamic trade and project financing techniques, and draws parallels with conventional finance. It is hoped that the discussion will inspire conventional bankers to incorporate Islamic financing structures into their credit packages, and Islamic bankers to adopt some of the innovations of structured finance to expand their lending and investment possibilities."