Welcome to the Islamic Finance Resources blog, a grassroots initiative started by industry professionals and supported by practitioners from around the globe.

We constantly update this site and its overall content, and encourage you to use the various navigation tools available and welcome your feedback and comments.
A few of the resources that you can find in this site:
- Funds@Work: Network Analysis Among Sharia Scholars v 4.0
- ISRA: Islamic Finance Knowledge Repository
- IFSB-IRTI-IDB Islamic Finance and Global Stability Report
- Sukuk Reports: I, II, III, and IV
Much more available under 'Industry Reports' and 'Academic Papers' (right hand side menus)

Islamic Finance in the News

Islamic Markets on Twitter



27.6.11

Islamic Economics: Notes on Definition and Methodology

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."
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24.6.11

Job Opportunities in Islamic Banking & Finance

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.
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21.6.11

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

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."
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18.6.11

Residual Income Models and the Valuation of Conventional and Islamic Banks

Residual Income Models and the Valuation of Conventional and Islamic Banks
Doctoral thesis, University of Surrey
Schoon, Natalie (2005)
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15.6.11

The Stability of Islamic Banks During the Subprime Crisis

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."
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13.6.11

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

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."
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11.6.11

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

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.
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9.6.11

The Importance of Shari’Ah Supervision in Islamic Financial Institutions

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."
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7.6.11

Islamic Finance: Business as Usual

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."
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5.6.11

Do Islamic Banks Employ Less Earnings Management?

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."
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3.6.11

Enhancing Transparency and Risk Reporting in Islamic Banks

Enhancing Transparency and Risk Reporting in Islamic Banks
Doctoral thesis, University of Surrey
Noraini Mohd, Ariffin (2005)
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31.5.11

Islamic Bond Issuance - What Sovereign Debt Managers Need to Know

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)
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25.5.11

Banking Behavior of Islamic Bank Customers: Perspectives and Implications

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."
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21.5.11

Question time: Revival, reach of Islamic finance

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 
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18.5.11

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

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."
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15.5.11

E&Y: World Takaful Report 2011

Ernst & Young’s World Takaful Report 2011
The fourth edition of Ernst & Young’s World Takaful Report 2011: Transforming Operating Performance, was unveiled recently.
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13.5.11

Financial Guarantee as Innovation Tool in Islamic Project Finance

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."
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11.5.11

Islamic Economics, What Went Wrong?

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?"

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9.5.11

Risk & Return of Islamic Stock Market Indexes

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."
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7.5.11

Islamic Finance: an Ethical Alternative to Conventional Finance?

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.
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4.5.11

True and Fair View - An Islamic Perspective

True and Fair View - An Islamic Perspective 
Doctoral thesis, University of Surrey
Bucheery, Raja Ali M (2001)
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1.5.11

Grooming Gen Y for Islamic Finance - Tweeting Islamic Finance

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.

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29.4.11

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

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."
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27.4.11

Islamic Banking in Indonesia: Lessons Learned

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."
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25.4.11

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

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."
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23.4.11

Taking Takaful to the next level - The Malaysian Experience

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.
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21.4.11

AIMS - Job Opportunities in Islamic Banking & Finance

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. 

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20.4.11

Risk and Stability in Islamic Banking

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."
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18.4.11

A Universal Platform for Shari'a Compliant Equity Screening

A Universal Platform for Shari'a Compliant Equity Screening
Oxford Islamic Finance & Dar Al Istithmar
White Paper
July 2009
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13.4.11

Muslim BRIC has arrived

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
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11.4.11

Thought Leadership: the Neglected Essence of Islamic Finance

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.
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22.3.11

Opalesque Islamic Finance Intelligence - Sixteenth Issue

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
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19.3.11

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

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.
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14.3.11

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

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."
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11.3.11

Islamic Securitisation: Part I - Accommodating the Disingenuous Narrative

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."
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8.3.11

The Relationship between Jakarta Islamic Index and Other Selected Markets

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."
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5.3.11

Islamic Hedging: Gambling or Risk Management?

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."
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2.3.11

Central banking and monetary management in islamic financial environment

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."
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27.2.11

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

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."
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