Islamic Investment: Evidence From Dow Jones and FTSE Indices

Islamic Investment: Evidence From Dow Jones and FTSE Indices
Khaled A. Hussein
IRTI - IDB

"Despite the increasing attention to Islamic investment, the empirical studies on Islamic indices and/or funds are scarce. Due to increased monitoring costs, availability of a smaller investment universe, and restricted potential for diversification, it has been argued that unscreened benchmarks should outperform Islamic (ethical) investment. This paper examines the impact of the Shari[ah screening on the performance of FTSE Global Islamic index and Dow Jones Islamic Market Index (DJIMI) using a number of performance measurement techniques. We particularly examine whether returns earned by investors who purchases shares in the FTSE Global Islamic and DJIMI indices are significantly different from their indices counterparts, both in the short-run and long-run. In order to capture the impact of the changes in the economic conditions on the indices performance, we divide the sample period into bull and bear market periods. Our findings provide strong evidence to reject the assumption that shari'ah investing offer inferior investment performance compared to unscreened portfolios."

Islamic Investment: Evidence From Dow Jones and FTSE Indices

An Islamic Pricing Benchmark

An Islamic Pricing Benchmark
Prof. Dato' Dr. Mohd Azmi Omar, Asst. Prof. Dr. Azman Md Noor, Prof. Dr. Ahamed Kameel Mydin Meera & Research Team
ISRA Research Paper (No. 17/2010)

Abstract: "The Islamic finance and banking industry has developed tremendously in recent years. The viability of this industry as an alternative method of investment can no longer be denied. As the current global economic and financial crisis laid bare the systemic problems of conventional finance, the Islamic financial system has been offered as a solution by its proponents. However, Islamic finance has been using conventional finance benchmarks, such as KLIBOR, COFI, LIBOR, etc. to determine its own cost of funds, and hence its return on financial investments. This is so because Islamic finance, if not part of the existing conventional finance, has always served as a financial intermediary for surplus and deficit units. Islamic banking, as the dominant institution in the Islamic finance industry, has gone beyond the function of a financial intermediary, for it also serves as a wakil, custodian, partner, entrepreneur, and guarantor. Nonetheless, Islamic finance has yet to come up with an alternative Islamic Pricing Benchmark (IPB) to determine its cost of capital. The need for having such an IPB for Islamic finance cannot be overemphasized; that would make it more comprehensive and independent from the conventional benchmarks that rely on interest rates, the very thing that Islamic finance abhors. Therefore, this project aims to develop an Islamic pricing benchmark model for the Islamic banking industry, more specifically for Malaysia, given its prominence in the Islamic finance industry. The project has reviewed the Shari'ah perspective on an Islamic pricing benchmark and has also examined the conventional pricing benchmark being used by banks. The paper further discusses the theoretical formulation of an Islamic benchmark. Thereafter, using sectoral industry and macroeconomic data, it tests the viability of the benchmark using simulation."

An Islamic Pricing Benchmark

Islamic Finance: An Ethical Alternative to Conventional Finance?

Islamic Finance: An Ethical Alternative to Conventional Finance?
Aziz Tayyebi
The Association of Chartered Certified Accountants
August 2008

"Whether the Islamic finance industry continues to escape the full force of current economic turmoil remains to be seen. What is clear is that the rapid growth in this area of finance and its ethical foundations make Islamic finance an increasingly serious alternative to conventional finance."

Islamic Finance: An Ethical Alternative to Conventional Finance?

Corporate finance in an interest free economy: An alternate approach to practiced Islamic Corporate Finance

Corporate finance in an interest free economy: An alternate approach to practiced Islamic Corporate Finance
Shaikh, Salman
2009

"This paper suggests an alternate approach to corporate finance in an interest free economy by looking beyond practiced Islamic finance and suggesting alternatives for corporate finance in sourcing funds i.e. i) Ijara with embedded options, ii) limited liability partnership, iii) equity modes like Musharakah and Mudarabah iv) income bonds and v) convertible income bonds. It also suggests alternatives for corporate finance in using funds i.e. i) Islamic income funds, ii) Islamic REITs, iii) Treasury Bonds, iv) income bonds v) convertible income bonds, vi) foreign currency reserves, vii) making strategic expansion, and viii) equity investments in other companies. It also suggests methods of valuation by suggesting an alternate means of pricing capital in interest free economy and use of appropriate discount rate i.e. Nominal GDP growth rate in public finance and corporate finance in CAPM, dividend discount model, project valuation, calculating NPV, valuing income bonds and stocks. It also discusses how the problems of scarcity of capital will be solved and alternatives for insurance in an interest free economy."

Corporate finance in an interest free economy: An alternate approach to practiced Islamic Corporate Finance

Elimination of Interest from the Economy - A Response to Issues and Challenges

Elimination of Interest from the Economy
A Response to Issues and Challenges
By Prof. Khurshid Ahmad
Chairman, Institute of Policy Studies

"Definition of Riba: The judgement is based upon some assumptions or concepts at the conceptual level. Riba have been defined in clear terms. While doing this, the Court has taken into account the controversy that has been taking place about riba in different circles, giving due consideration that all viewpoints being presented were not insincere, many think honestly about the differences. Yet, the court has rightly come to the conclusion that riba covers all forms of interest, usury, bank interest, public utilities and government schemes if they are based on a pre-determined fixed return related to time. It is also very clear that there could be other forms of exploitation and Islam is as much against those forms of exploitation as the exploitation in the form of riba. This should not in any way make the riba concept flexible, yet extension to new situation is not ruled out."

Elimination of Interest from the Economy - A Response to Issues and Challenges

Role of Islamic Banks in Economic Development

Role of Islamic Banks in Economic Development
Shahid Saleem
University of Punjab, Pakistan - CIMA UK

Abstract: The purpose of this working paper is to give the real meaning of DEVELOPMENT from Islamic perspective. Most of Muslim countries are LDCs and using the religious and social ideology of Islam is very useful to establish institutions and to bring moral and ethical change for development in these countries. Islam appears to be the only dynamic religion and tells us about prevention of interest, similar to Christian and Jewish theologies. But at the same time gives a comprehensive setoff trade and financing modes, not easily and completely described in any other religion or social order. Even TFP, a modern concept for collective efficiency has been advised in Islam, shunning to self interest and individualism of materialistic economics. Some scholars of WEST consider use of Islamic banking more suitable for economic development, while others consider Islam as obstacle & threat to development of Muslim countries. We hope that the paper will be useful in this regard to provide another valuable theoretical dimension to this field of study.

Role of Islamic Banks in Economic Development

Profitability Determinants of Islamic Banks: A Cointegration Approach

Profitability Determinants of Islamic Banks: A Cointegration Approach
by Professor Sudin Haron and Dr Wan Nursofiza Wan Azmi
KLBS - Working Paper Series 004
December 2004

Profitability Determinants of Islamic Banks: A Cointegration Approach

Demystifying Islamic Finance – Correcting Misconceptions, Advancing Value Propositions

Demystifying Islamic Finance – Correcting Misconceptions, Advancing Value Propositions
Zaid Ibrahim & Co.
May 2010

Demystifying Islamic Finance identifies 15 most frequent misconceptions and 10 main value propositions of Islamic finance. It highlights, among other things, that Islamic finance is not a mere replica of conventional finance. It also negates the notion that Islamic finance is superior and immune from unethical practices. The publication emphasises that Islamic finance is practical for stakeholders who wish to add depth to their financial system; enhance diverse product offerings and widen their customer base. In consequence to this, it shares the belief that the Islamic Finance opportunity will amplify avenues for investment and capital raising.

To download the complete publication click here (PDF document).
Many thanks to Madzlan Hussain from Zaid Ibrahim & Co. for sharing this with us.

Demystifying Islamic Finance – Correcting Misconceptions, Advancing Value Propositions

5th Islamic Markets Programme

5th Islamic Markets Programme (IMP) 
"Gearing Up to Meet Future Challenges"
4 - 9 July 2010, Securities Commission Malaysia, Kuala Lumpur

The program (which can be found here) aims to provide participants with the ability to evaluate issues regarding the need for clarity, certainty and sound legal and regulatory foundations surrounding capital market products based on Shariah fundamentals.


A wide variety of issues are covered and participants will gain an understanding of the ethical foundations of Islamic finance; how it differs from conventional finance and how its differences make it a more stable system; and will also be able to articulate what needs to be done to provide Islamic finance with a sustaining regulatory and legal framework and why the Malaysian approach has been resilient.

For further details, email sidc@sidc.com.my.
To register, please fill up the registration form (pdf).
Download the programme brochure (pdf).

5th Islamic Markets Programme

Derivatives and Islamic Finance

Derivatives and Islamic Finance
By Muhammad Ayub
Senior Joint Director, Islamic Banking Department
State Bank of Pakistan, Karachi

Derivatives and Islamic Finance

4th International Islamic Capital Market Forum

4th International Islamic Capital Market Forum (IICMF)
"Sukuk: Transferring the Best Practices"
1 July 2010, Kuala Lumpur

The 4th International Islamic Capital Market Forum (IICMF) will be hosted by the Securities Commission Malaysia on 1 July 2010 in Kuala Lumpur. The full program can be found here and it covers a wide range of topics:  starting with a comprehensive overview of the sukuk framework (from the regulatory, governance and and legal perspectives) to very specific issues in sukuk (industry outlook, Fiqh implications, best practices, as well as overall portfolio allocation).

For further details, email sidc@sidc.com.my.
To register, please fill up the registration form (pdf).
Download the programme brochure (pdf).

4th International Islamic Capital Market Forum

Ernst & Young's Islamic Funds & Investment Report 2010

Ernst & Young's Islamic Funds & Investment Report 2010
After quite a few press releases the 'actual' report is now available. Click here to download a copy of the report (one-time registration required on their site).

Ernst & Young's Islamic Funds & Investment Report 2010

IFSB - Published Standards

This post is long overdue, the various published standards that have been issued by the IFSB are a must-read for anyone involved in or looking to enter into Islamic banking and finance.  Even more so when they are freely available from the IFSB website.  We list the direct links below and have created a boxlet (bottom-right of the page) with the same information for ease of navigation:

• IFSB-1: Guiding Principles of Risk Management for Institutions (other than Insurance Institutions) offering only Islamic Financial Services (IIFS)
• IFSB-2: Capital Adequacy Standard for Institutions (other than Insurance Institutions) offering only Islamic Financial Services (IIFS)
• IFSB-3: Guiding Principles on Corporate Governance for Institutions Offering Only Islamic Financial Services (Excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds
• IFSB-4: Disclosures to Promote Transparency and Market Discipline for Institutions offering Islamic Financial Services (excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds)
• IFSB-5: Guidance on Key Elements in the Supervisory Review Process of Institutions offering Islamic Financial Services (excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds)
• IFSB-6: Guiding Principles on Governance for Islamic Collective Investment Schemes
• IFSB-7: Capital Adequacy Requirements for Sukuk, Securitisations and Real Estate investment
• IFSB-8: Guiding Principles on Governance For Takaful (Islamic Insurance) Undertakings
• IFSB-9: Guiding Principles on Conduct Of Business For Institutions Offering Islamic Financial Services
• IFSB-10: Guiding Principles On Shariah Governance Systems For Institutions Offering Islamic Financial Services

IFSB - Published Standards

Opalesque Islamic Finance Intelligence - Ninth Issue

Welcome to the ninth issue of Opalesque Islamic Finance Intelligence (download the PDF version), it's a busy edition! We touch on equity screening in our editorial section, while the Featured Resource covers multimedia and interactive sources. The Featured Structure section has Nikan analyzing how successive parallel Murabahas can be used to construct a Profit Rate Swap.

Lex Islamicus hears from Hakimah Yaacob and Edib Smolo, both from the International Shari’ah Research Academy (ISRA), as they dissect the approach taken by Enlgish courts towards Islamic finance contracts. Furthermore, the Kulliyyah Korner hears from Ezry Fahmy, Jhordy Kashoogie and Asim Anwar Kamal who co-authored a study on the relationship between Shariah compliant structures and the Maqasid al-Shari'ah.

As part of our ongoing survey (The Islamic Window) Joy Abdullah delves into the perception of Islamic finance, particularly from outside of the industry. This is complemented in the Industry Snapshot by Deloitte's David Vicary who provides his views on the importance of education and financial literacy. Our Opinion Column shares the views of Nihad Awad from CAIR, on a topic that might not appear to be related to Islamic finance at the outset, although we argue the industry has an opportunity to contribute here in a positive way.

As always, we are keen to hear your comments & suggestions and 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: Equity Screening and the Golden Calf
Featured Resource: Islamic Finance Multimedia
Featured Structure: Shariah Compliant Profit Rate Swap
Lex Islamicus: It is not a murabaha contract; it is just an English law of contracts
Kulliyyah Korner: Debt versus Equity Financing in the Light of Maqasid al-Shari'ah
The Islamic Window: Industry Perception
Industry Snapshot: What Makes Sense?
Opinion Column: A Muslim Response to 'Draw Muhammad Day'

Opalesque Islamic Finance Intelligence - Ninth Issue

Ernst & Young’s World Takaful Report 2010

Ernst & Young’s World Takaful Report 2010
The third edition of Ernst & Young’s World Takaful Report 2010: Managing performance in a recovery, was unveiled recently. The report reveals that the Takaful industry is expected to surpass US$8.8 billion in contributions in 2010.


Click here to download a copy of the report presentation.
Click here to download a copy of the report (one-time registration required on their site).

Ernst & Young’s World Takaful Report 2010

The Concept and Operations of Swap as a Hedging Mechanism for Islamic Financial Institutions

The Concept and Operations of Swap as a Hedging Mechanism for Islamic Financial Institutions

Assoc. Prof. Dr. Asyraf Wajdi Dusuki & Shabnam Mokhtar
ISRA Research Paper (No. 14/2010)

"This paper has been prepared to discuss the concept and operations of the swap instrument as a hedging mechanism in the Islamic financial system. The main objective of this paper is to give a clearer picture of the swap mechanism as offered by the international Islamic financial institutions and how its operations are structured in accordance with Shariah principles and contracts. In preparing this paper, ISRA has held a series of internal discussions as well as with outside parties, including Shariah experts and operating officers from international banks directly involved in the structuring of Shariah-compliant swap products. Documents related to the products and related academic materials were also referred to, giving a wider and thorough perspective on the issue."

The Concept and Operations of Swap as a Hedging Mechanism for Islamic Financial Institutions

Shariah, Economics and the Progress of Islamic Finance: The Role of Shariah Experts

Shariah, Economics and the Progress of Islamic Finance: The Role of Shariah Experts
Dr. Mohammad Nejatullah Siddiqi
Seventh Harvard Forum on Islamic Finance
April 2006

"Discussing the role of Shariah experts in the development of Islamic economics and Islamic finance calls for a look at the nature of economics and the focus of Shariah. The chief concerns of economics over the ages have been efficiency and equity. Shariah in its broader sense that gives primacy to objectives over rules and regulations shares these concerns. However the same may not apply to shariah meaning fiqh : i.e., laws codified at a particular time and place. The historical context in which we approach our subject today sends mixed signals. The schools of traditional Shariah learning had long tilted towards teaching codified fiqh with few insights into the objectives, the maqasid al-shariah. But the new assignments given to Shariah scholars trained in these schools increasingly called for paying attention to objectives while interpreting the rules. How far have they been able to meet this challenge, is one of the questions whose answer I will try to explore. I begin by first narrating what happened in the name of Islamic economics during the last century then trying to understand where we find ourselves today and how we arrived where we are in the business of Islamic finance."

Shariah, Economics and the Progress of Islamic Finance: The Role of Shariah Experts

Concept Paper on Shariah Governance Framework for Islamic Financial Institutions

Concept Paper on Shariah Governance Framework for Islamic Financial Institutions
Bank Negara Malaysia, May 2010

This concept paper was released recently and its proposed framework is divided into six sections:

Section I - General Requirements of Shariah Governance Framework
General requirements of the Shariah governance structure that describes the essential key functional or key organs

Section II - Oversight, Accountability & Responsibility
Outlines the level of accountability and responsibility of the board of directors, Shariah committee and management of the IFI.

Section III - Independence
Aims at safeguarding the independence of the Shariah committee in ensuring sound Shariah decision, and emphasis on the role of the board of directors in recognizing the independence of the Shariah committee.

Section IV - Competency
Highlights requirements and expected competencies to ensure key functions are capable of implementing Shariah governance.

Section V - Confidentiality & Consistency
Minimum set of rules that emphasis on the importance of observing and preserving confidentiality and improving consistency by the Shariah committee.

Section VI - Shariah Compliance & Research Functions
Prescribe the functions of the internal Shariah review, Shariah audit, Shariah risk management process and the Shariah research functions.

Concept Paper on Shariah Governance Framework for Islamic Financial Institutions

The Rise and Fall of Gulf Finance House

The Rise and Fall of Gulf Finance House
By Mohammed Khnifer, Aatef Baig, and Frank Winkler
Reading University, May 2010

This paper dissects the balance sheet and business model of Gulf Finance House (see GFH dividend/stock price chart), 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. This is perhaps the first case study wholly dedicated to GFH, and it goes on to suggest that there is a connection between the Murabaha model and their Islamic Private Equity model.

Many thanks to Mohammed Khnifer for sharing their paper.

The Rise and Fall of Gulf Finance House

Islamic Finance and Economics as Reflected in Research and Publications

Islamic Finance and Economics as Reflected in Research and Publications
S. Nazim Ali, Ph.D.
Harvard Law School

"The development of the Islamic Finance (IF) industry is closely linked to the research pursued in its field. As soon as new theories are generated by researchers, the industry picks them up and implements them. And as soon as the industry encounters new problems, they turn to the researchers to find a way to overcome them. A closer look at the relationship between research and the industry makes several trends apparent. This paper aims to discuss and analyze those trends so as to offer a general understanding of this burgeoning field."

Islamic Finance and Economics as Reflected in Research and Publications

Deloitte's New Islamic Finance Portal

The Deloitte Islamic finance portal has been recently launched as a resource for all participants in the Islamic Finance industry and will feature regular insights from practitioners and their Sharia'a Scholar. They will discuss a variety of topics including the key opportunities and challenges facing the Islamic Finance industry.

In addition, a multimedia glossary section is available to those new to the industry seeking to learn more. Topics covered in these webcasts include Musharaka, Mudarabah, Murabaha, Ijarah, Salam, Istisna' and Sukuk.  This is complemented with an interview with their own Sharia'a Scholar, Mufti Hassaan Kaleem, who provides a candid discussion on his background and his views of the Islamic finance industry. Furthermore, there are periodical blogposts from their Global Leader in Islamic Finance (Daud Vicary Abdullah) in the View from the front segment of the site.

Deloitte's New Islamic Finance Portal

Deloitte Webcast: Interview with Sheikh Muhammad Taqi Usmani

For their new Islamic financ portal, Deloitte has as an inaugural feature an exclusive interview with Sheikh Muhammad Taqi Usmani (Chairman of the AAOIFI Sharia'a board), in which he revisits some of the important Sharia'a issues which are currently being discussed in the industry.  Amongst the topics covered in the webcast, Sheikh Taqi Usmani provides clarity on the recent rulings from the OIC Fiqh Academy on the use of Tawarruq, and gives his view on the application of Islamic Finance in the post financial crisis era.

Deloitte Webcast: Interview with Sheikh Muhammad Taqi Usmani

An Introduction to Takaful – An Alternative to Insurance

An Introduction to Takaful – An Alternative to Insurance
By Muhammad Ayub
Senior Joint Director, Islamic Banking Department
State Bank of Pakistan, Karachi

An Introduction to Takaful – An Alternative to Insurance

Islamic Banking: Interest-Free or Interest-Based?

Islamic Banking: Interest-Free or Interest-Based?
Beng Soon Chong, Nanyang Technological University (NTU)
Ming-Hua Liu, University of Macau
Pacific-Basin Finance Journal

October 2007

Abstract: A unique feature of Islamic banking, in theory, is its profit-and-loss sharing (PLS) paradigm. In practice, however, we find that Islamic banking is not very different from conventional banking. Our study on Malaysia shows that only a negligible portion of Islamic bank financing is strictly PLS-based and that Islamic deposits are not interest-free, but are closely pegged to conventional deposits. Our findings suggest that the rapid growth in Islamic banking is largely driven by the Islamic resurgence worldwide rather than by the advantages of the PLS paradigm and that Islamic banks should be similarly regulated as their western counterparts.

Islamic Banking: Interest-Free or Interest-Based?

A Roadmap for Making Islamic Finance Sources More Accessible

A Roadmap for Making Islamic Finance Sources More Accessible
The Role of Secondary Services in the Dissemination of Research
S. Nazim Ali
Director, Islamic Finance Project
Harvard Law School

Abstract: "Secondary services, particularly electronic databases, have revolutionized research by bringing together more resources for one’s disposal. This virtual network has exponentially increased the availability of information, thus making relevancy one of the most important questions in data collection. The Internet may be useful for finding introductory information because the turn-over time is short and the resources are practically unlimited. However, the internet is inherently flawed as a research tool for serious researchers because there is no barrier to entry, hence regardless of credentials or veracity anyone can post anything as a “fact.” The issue of quality assurance then becomes important. Quality assurance can stem from professional authority (who is writing the article), institutional authority (where is the research being undertaken), or a publisher’s authority (by whom is it being published). Therefore, though the Internet is a good source of industry news, market
news, and consumer perceptions, established outlets (both print media and electronic) should be preferred."

A Roadmap for Making Islamic Finance Sources More Accessible

Multimedia & Interactive

We have made some additions to the blog - there is a new "Multimedia & Interactive" boxlet on the top right hand side to easily navigate to this content (alternatively all these posts can be found using the Multimedia label).

You will also notice we separated our document archive (right hand side menus), we now have two different sets: "Industry Reports & Articles" and "Academic Papers & Case Studies". We are finding it increasingly necessary to develop a more precise catalogue, and in that sense we look forward to contribute to the Islamic Finance Library as it develops.

Last but not least we have added 'addtoany' functionality, this will enable you to share any specific post with your friends/peers regardless of what network you use (Linkedin, Facebook, etc, etc).

Multimedia & Interactive

Opalesque Islamic Finance Intelligence - Eighth Issue

The eighth issue of Opalesque Islamic Finance Intelligence is here (download the pdf version), the underlying thread uniting all the content for this month is looking at Islamic finance from a fresh and open perspective. This month's editorial outlines how Islamic finance is being developed/introduced in new markets - and whether the industry's long term future is being mortgaged for some short term gains. This is complemented in the Featured Resource (with a list of studies that look at Islamic finance from a global or macroeconomic point of view) as well as the Industry Snapshot (with an analysis of the recent report by the IFSB, IRTI and the IDB).

The Featured Structure section welcomes Mohammed Khnifer as he takes a novel approach as to the permissibility of organized tawarruq. Lex Islamicus takes on Islamic commercial contracts as Khalil explores the issues of good faith and fair dealing. The Kulliyyah Korner hears from Ahmed Mohamed Badr-Eldin and profiles his research on adapting conventional ratios to measure the performance of Islamic banks.

Furthermore, the Opinion Column hears from Edib Smolo, from the International Shari’ah Research Academy (ISRA), and his take on the future prospects of the industry. As part of our ongoing industry survey (The Islamic Window), Joy Abdullah provides an overview of the initial findings and some of the most striking signals from consumers.

Welcoming your comments & suggestions and a reminder that you can check the ever-growing archive of Opalesque Islamic Finance Briefing and Opalesque Islamic Finance Intelligence, all available free. In addition, we continue to expand the reach of our industry survey (see reference link) and appreciate it if you can help us disseminate it further.

Download the complete issue of Opalesque Islamic Finance Intelligence here.

Alternatively you can read each section separately:
Editor’s Note: Disclosure, Due Diligence & Death Spirals
Featured Resource: The Macro Perspective
Featured Structure: Maslaha and the Permissibility of Organized Tawarruq
Lex Islamicus: In Good Faith
Kulliyyah Korner: Measuring the Performance of Islamic Banks by Adapting Conventional Ratios
Opinion Column: Islamic Finance Practices at the Crossroads
The Islamic Window: Preliminary Findings
Industry Snapshot: IFSB-IRTI-IDB Islamic Finance and Global Stability Report

Opalesque Islamic Finance Intelligence - Eighth Issue

The Coming of Age of Islamic Structured Products

The Coming of Age of Islamic Structured Products
Association of Islamic Banking Institutions Malaysia
December 2008

"Islamic finance is coming of age. Today, for the first time, Islamic structurers in Malaysia and the Middle East are starting to create new financial products and infrastructure from scratch; developments that do not simply wrap their conventional counterparts in a Shariah structure but which are Islamic from start to finish."

The Coming of Age of Islamic Structured Products

Islamic Financing Arrangements Used in Islamic Banking

Islamic Financing Arrangements Used in Islamic Banking
Ehsan Zar Rokh
University of Tehran
April 2007

Abstract: Islamic finance is an old concept but a very young discipline in the academic sense. It lacks the required extent and level of theories and models needed for expansion and implementation of the framework provided by Islam. In these circumstances, unawareness and confusion exist as to the form of the Islamic financial system and instruments.

The main difference between the present economic system and the Islamic economic system is that the later is based on keeping in view certain social objectives for the benefit of human beings and society. Islam, through its various principles, guides human life and ensures free enterprise and trade. That is the reason why the conventional banker does not have to be concerned with the moral implications of the business venture for which money is lent.

Islamic Financing Arrangements Used in Islamic Banking

Tools For Controlling Monetary Variables in the Islamic Banking System

Tools For Controlling Monetary Variables in the Islamic Banking System
Prof. Dr. Abdul Ghafar Ismail
ISRA Research Paper (No. 13/2010)

Tools For Controlling Monetary Variables in the Islamic Banking System

State Bank of Pakistan - Rules and Regulations for Islamic Banking

Rules and Regulations for Islamic Banking

Instructions and Guidelines for Shariah Compliance

Guidelines for Islamic Microfinance Business by Financial Institutions

Risk Management Guidelines for Islamic Banking Institutions

Guidelines on Islamic Financing for Agriculture

Guidelines For Opening Of Stand Alone Branches for Islamic Banking

Fit & Proper Criteria for Appointment of Shariah Advisors

State Bank of Pakistan - Rules and Regulations for Islamic Banking

What Does Islam Say About Corporate Social Responsibility (CSR)?

What Does Islam Say About Corporate Social Responsibility (CSR)?
Asyraf Wajdi Dusuki
Assistant Professor, Department of Economics
Kulliyyah of Economics and Management Sciences, IIUM

May 2008

"The escalating social and economic problems brought about by globalization have raised new questions as well as expectations about governance, ethical and social responsibilities. Consequently Corporate Social Responsibility (CSR) has emerged and developed rapidly as a field of study. Many Western theoreticians attempt to provide theoretical, moral and ethical groundings for CSR initiatives. Nevertheless such endeavors have received wide criticisms for problems relating to justification, conceptual clarity and possible inconsistency. The endeavors also fail to give adequate ethical guidance to business executives who must decide which courses to pursue and how much commitment to give. The main objective of this paper is to study the concept of CSR, which has gained popularity and wide acceptance amongst Western business community today from an Islamic perspective. This paper provides discussion on the Islamic alternative views on the various theories underpinning the construct of CSR. This view, which prevailed within the ambit of Shari’ah, is very influential in dominating the thinking and behaviour of approximately 1.6 billion Muslims across the globe."

What Does Islam Say About Corporate Social Responsibility (CSR)?

Towards Developing a Successful Islamic Financial System

Towards Developing a Successful Islamic Financial System

by Professor Sudin Haron
KLBS - Working Paper Series 003
2004

Towards Developing a Successful Islamic Financial System

Network Analysis Among Sharia Scholar version 4.0 - Funds@Work AG

Here is the latest report covering the Sharia Scholar Landscape from Funds@Work, which can be accessed directly from their site here.

Their initial study was one of the earliest posts in our blog (more than a year ago), for comparison purposes their earlier report is here.

It is much more comprehensive than previous sharia scholar reports previously created and above all introduces new perspectives such as the tertiary institutions that leading scholars attended. This will allow in the future to screen for less prominent scholars that have a similar educational background as more prominent ones for example.

In addition, Funds@Work plans to integrate this data into an Islamic instrument database, such as a database of 1000 Sukuk. This will allow academics and practitioners alike to find among others scholars most appropriate for cooperation by analyzing their expertise (e.g. sector/country exposure), experience, position (e.g. chairman) educational background (e.g. degrees, majors or ongoing professorships), company involvement, and identifying events they should attend, at which scholars speak.

It will also assist users in assessing business and partnership potentials by searching institutions, e.g. by country or sector, and reviewing their scholar board compositions as well as their involvement in the Sukuk industry.

It will also be of help in identifying sukuk investment or structuring opportunities by viewing Sukuk that have been approved by the scholars that users specify, or by obtaining the list of scholars that have approved each Sukuk or that are linked to companies which were involved in the sukuk issuance. They aim to broaden the universe to also incorporate other Islamic products such as e.g. mutual funds.

It will complement the many good initiatives that have been recently launched. The whole industry will profit from greater transparency and new insights.

Network Analysis Among Sharia Scholar version 4.0 - Funds@Work AG

Embracing Islamic investment in Australia using the Malaysian model

Embracing Islamic investment in Australia using the Malaysian model: challenges and opportunities
Mahmood Nathie
Griffith Islamic Research Unit
March 2008

"This paper sets out the principles and application of Islamic law relating to IEF’s. It argues that a model incorporating IEF values may be possible for adoption in Australia supported by institutional involvement – some of whom are already actively in engaged in managing IEF’s overseas through associated financial institutions. It presents evidence of the demand for such investment alternatives, especially from individuals with investments tied up in superannuation funds. It argues that Australia should not ignore the capital market trends in the Asian economies where IEF’s are becoming increasingly popular".

Embracing Islamic investment in Australia using the Malaysian model

IFSB-IRTI-IDB Islamic Finance and Global Stability Report

Islamic Finance: Global Financial Stability
IFSB-IRTI-IDB
April 2010

"The Report examines the intrinsic strength of the Islamic finance model, the state of the Islamic financial services industry and challenges and strategies for strengthening financial stability in the Islamic financial services industry."

To read the press release click here.
To download the complete report click here.

Contents:
A. Appreciating the Islamic Finance Model
I. Key Principles

B. The State of Islamic Financial Services Industry
I. Increasing Significance of Islamic Finance in the Global Financial System
II. Performance of Islamic Banks
III. Performance of Islamic Indices

C. Challenges and Strategies for Strengthening Financial Stability in the Islamic Financial System
I. Strengthening Islamic Financial Infrastructure
II. Accelerating Effective Implementation
III. The Establishment of a Platform for Constructive Dialogue: Islamic Financial Stability Forum

IFSB-IRTI-IDB Islamic Finance and Global Stability Report

Case Study: Banking Behavior of Islamic Bank Customers in Bangladesh

Banking Behavior of Islamic Bank Customers in Bangladesh
Mohammad Saif Noman Khan*, M. Kabir Hassan** & Abdullah Ibneyy Shahid***
IBTRA

* Institute of Business Administration,Uiversity of Dhaka, Bangladesh
** Ph.D.Department of Economics and Finance, University of New Orleans
*** Asian Tiger Capital Partners, Panthapath, Dhaka

Abstract: "This study investigates the banking behavior of Islamic bank customers in Bangladesh. By collecting data from a sample of 100 customers of Islamic banks, researchers conducted a comprehensive profile analysis, a number of chi-square tests, and t tests and found a number of key findings as to the behavior of Islamic bank customers in Bangladesh. First, most of the customers of Islamic banks fall in the age category of 25-35 years. Islamic bank customers are highly educated and have durable relationships with the banks. Second, high customer awareness and usage exist for various deposit mobilization instruments but there is not high awareness and usage of any individual financing facilities of Islamic banks. Third, income category and education have a significant role in customers’ usage of various Islamic bank products/services. Fourth, customers seem to be satisfied with a number of products/services of Islamic banks. Fifth, among the service delivery elements, ‘employees’ deserve an immediate attention for improving customer satisfaction. Finally, ‘religious principles’ is the key bank selection criterion of the Islamic bank customers, while customers’ demography plays some role in determining which selection criteria matter more than others do."

Case Study: Banking Behavior of Islamic Bank Customers in Bangladesh

An Analytical Review of Different Concepts of Riba (Interest) in the Sub-Continent

An Analytical Review of Different Concepts of Riba (Interest) in the Sub-Continent
Aziz, Farooq, Mahmud, Muhammad and Karim, Emadul (2008)
Federal Urdu University of Arts, Science and Technology,
Karachi Campus, Karachi, Pakistan, Khadam Ali Shah
Bukhari Institute of Technology (KASBIT)

Abstract: "The traditional concept of Riba (interest) is an excess amount on loan, which creditor receives from debtor on the repayment of loan. There is almost a consensus on the sprit of this concept that it is traditional thought or school; but along with that some other point of views also exist, which present Riba, in somewhat different ways, will be termed as non-traditional approach in this paper. Both of these schools are agreed on the point that, Riba is just restricted to debt, and the increment on it is Riba; but the main difference among these is that: former approach claims that, each and every addition on loan, regardless of purpose and time duration of loan is Riba; but, the later approach demand’s some room for that on different grounds. Actually both of them do not have any sound base. When the concept of unearned income (the income, which is not the result of human labor), is a recognized fact in Islamic economics in different forms, like: ijara (rent), Mudoraba and Mazara’a (Share Cropping); then definitely no logical reason is left to avoid excess income on loan. Both approaches are just unable to give a concrete concept of Riba."

An Analytical Review of Different Concepts of Riba (Interest) in the Sub-Continent

Economics of Tawarruq

Economics of Tawarruq - How its Mafasid overwhelm the Masalih
Tawarruq: A Methodological issue in Sharī`a-Compliant Finance
February 2007
Mohammad Nejatullah Siddiqi

Abstract: "This paper examines the impact of tawarruq on the economy. It demonstrates through macroeconomic analysis that the harmful consequences of tawarruq are much greater than the benefits generally cited by its advocates. It concludes that a financial instrument whose mafasid (harms) are much greater than masalih (benefits) cannot be characterized as sharī`a - compliant".

Economics of Tawarruq

AAOIFI on Screening Islamic Products

Source: Thomson Reuters

AAOIFI on Screening Islamic Products