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