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- PublicationAl-'adl wa al-ihsan fi al-bay' wa al-qard al-hasanMohamed Fairooz Abdul Khir (ISRA, 2012)
An abstract is written in Arabic.
- PublicationAlternative crypto solutions for impact investing: advancing social impact tokensZiyaad Mahomed (ISRA Research Management Centre, 2021)
Global agendas are aggressively gearing towards climate change strategies and funding the United Nations (UN) Sustainable Development Goals (SDGs). The total investment gap for successfully achieving the 169 targets in developing countries is estimated at USD2.5 trillion per year (UNCTAD 2020). Unfortunately, limited data and challenges in data consensus have significantly inhibited monitoring bodies' ability to accurately determine how much and where it is needed. Furthermore, developing countries have been slow in developing sustainable fund structures and even slower in attracting impact investment for the SDGs (UNCTAD 2019). Impact investing is defined as "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return" (Global Impact Investing Network 2019). Once embraced as a mainstream funding vehicle, impact or sustainable investing is expected to enable the public and private sectors in reaching their SDGs targets.
- PublicationAn analysis of market structure and competitive dynamics in dual banking systemsKinan Salim (INCEIF, 2017)
Islamic banks have proliferated and emerged as important players in the global banking industry especially in the Muslim-Majority countries. The recent increase in the number and market share of Islamic banks has intensified the competition in this new industry. Despite its importance, the increasing competition in Islamic banking market not only from its own Islamic peers, but also from commercial banks has not been adequately addressed nor its consequences have been investigated. This summary aims to shed the light the market structure and the evolution of the competition under dual banking system.
- PublicationApplication of doctrine of judicial precedent in Shariah courtsKyaw Hla Win; Mahamad Arifin; Sa'id Adekunle Mikail (LexisNexis Malaysia Sdn Bhd, 2013)
The doctrine of judicial precedent plays an empirical role in common law, but it has only persuasive value in European continent countries which are practicing civil law system.It has not been recognised as having binding force in Islamic judicial system. In Islam, each case has to be decided based on its own merit and previous decisions can only be considered as guidance for the future cases. This position is still being maintained by some countries such as Malaysia and Saudi Arabia. In Pakistan and Nigeria the doctrine of judicial precedent is applied in deciding cases. Due to this contradiction among Islamic judicial system in various countries, a question arises relating to the feasibility of the application of the doctrine of judicial precedent in Shariah courts. Accordingly, in this paper, the factual nature of the judicial precedents in Islamic judicial systems have been examined comparatively in some details with reference to some selected countries such as Malaysia, Nigeria and Pakistan. This paper points out that the doctrine of stare decisis and judicial precedent can be applied in Shariah courts as guiding precedents but not as binding since there is no express prohibition in Shariah to take judicial guidance from previous decisions.
- PublicationThe application of Rule 78 in vehicle financing by Islamic banks in MalaysiaOmaima Eltahir Babikir Mohamed (INCEIF, 2017)
Al-Ijarah Thumma al-Bay' (AITAB) is an innovative product designed for vehicle financing. Since its inception, AITAB has been a popular product due to the heightened demand by customers. Although AITAB is popular, it is not without condemn especially on the issue of using Rule 78, which is similar to conventional Hire-Purchase practise. This paper, attempts to address the issue of using Rule 78 which affects the customers in the case of default. A case study is used to compare the use of Rule 78 and simple profit rate methods on repaying the principal amount and the profit rate by the customer. The discussion is based upon the case on vehicle financing for three years and the impact on the defaulter on the thirteenth month of financing. The result shows the customer pays higher amount in the case of default using the Rule 78 in financing compared to simple profit rate method.
- PublicationBank competition and stability in dual-banking systemsMoutaz Abojeib (CIAWM, 2016)
Numerous attempts have been made to discover the effect of competition on banking stability, before and after the recent global financial crisis. Despite the rich theoretical and empirical literature on the topic, two contradictory views are observed; the competition-fragility view and the competition stability view. On one hand, the former view argues that higher competition leads to more pressure on profits and hence induces banks' management to take higher risk strategies. On the other, the supporters of the competition-stability hypothesis argue that banks in more competitive markets tend to charge lower rates, which reduces the entrepreneurs' cost of borrowing and increases the success rate of entrepreneurs' investments. Consequently, banks will face lower credit risk on their loan portfolio in more competitive markets, which should lead to more stability.
- PublicationBig data analytics and Islamic bankingMhd Osama Alchaar; Neha Sarah Noushad; Kinan Salim (INCEIF, 2019)
As the Fintech evolution transforms the banking sectors worldwide, the players in the market are hard-pressed to experiment the tremendous opportunities that the application of the likes of Blockchain, Big Data and Artificial Intelligence et cetera would have on the financial world. As the volume of the data continue to expand, the possibilities that this raw data materializes in the form of opportunities lean towards limitless. Organizations such as financial institutions must be vigilant of the prospects that such data can reveal and the extend of leverage that they can exercise to build insights for their consumers, products, and services. Big data analytics have alone become the driving force for digital innovations and transformation of banks.
- PublicationClassical zakat modelling for the blockhain age: inspiration from Umar bin Abdul AzizZiyaad Mahomed (INCEIF, 2018)
As the third pillar of Islam, zakat has a 1,400-year-old history in reducing inequality and redistributing wealth to at least, the deserving Qur'anic recipients (Al Qur'an, 9:60). Understood as an obligatory command, zakat appears no less than 58 times in the primary source of Islamic law, 26 times along with prayer, for instance: "So establish Salat and give Zakat, and hold fast to Allah" (Al-Qur'an 22:78). All Muslims who meet a minimum threshold of zakatable assets (nisab) are required to pay zakat annually. The oft-repeated conundrum however, is if the Zakat institution was so deeply entrenched in the Islamic law, why then do so many continue to suffer from poverty and malnutrition in even Muslim majority nations? According to a report by Pew Research Centre (2011), Muslim-majority countries are amongst the poorest in the world, with a median GDP per capita (after adjusting for purchasing power parity) of just $1,200 in sub-Saharan Africa, compared to more developed countries at $33,700 per capita.
- PublicationThe constitutionality of Shariah Advisory Council of Bank Negara Malaysia (SAC) vis-a-vis JRI Resources Sdn. Bhd. v. Kuwait Finance House (Malaysia) BerhadNoor Suhaida Kasri (ISRA, 2019)
In a recent landmark case, JRI Resources Sdn. Bhd. v Kuwait Finance House (Malaysia) Berhad, the Federal Court, the apex court in the judicial system of Malaysia, decided that the ascertainment of Islamic law by the Shariah Advisory Council of Bank Negara Malaysia (SAC) is binding on the judiciary and is not tantamount to a judicial decision. Of the nine panel judges, four judges dissented, arguing against the legality and constitutionality of the SAC. The dissenting judges argued that the SAC has been vested with judicial power by section 57 of the Central Bank of Malaysia Act 2009; hence, this section is unconstitutional and invalid and needs to be struck down. This brief write-up will shed some light on key issues underlying this historic judgment. Before that, let us take a quick look at the impetus that spurred the establishment of the SAC.
- PublicationThe corporate ethical identity disclosure and its impact on financial performance: evidence from Islamic banks globallyMohamed Anouar Gadhoum (CIAWM, 2018)
The importance of ethics in the corporate world has received much attention in the 21st century, after a series of major financial fiascos. In fact, most of the performance of companies in the market have a new dimension of qualitative analysis besides the usual financial analysis that generate quantitative information to ascertain their performance (Guthrie and Farneti, 2008). Dhaliwal et al. (2011) point out that greater disclosure and transparency alighned with non-financial disclosures (social, ethical and environmental) play a complimentary role to financial transparency, leading to lower analyst forecaset errors. Therefore, a more objective assessment of expected financial performance is achieved.
- PublicationCOVID-19 and Aramco: a brief analysisMuawiya Mahomed; Ziyaad Mahomed (INCEIF, 2020)
The year 2020 is unparalleled in historical oil prices, crashing in April to -US$38 per barrel from a low of US$18 in a matter of hours. The increasing stockpiles and inadequate storage facilities forced oil producers to pay buyers to take barrels that were not storable. Oil producers faced a perfect storm of strategic price cutting stemming from rivalry between oil giants from the Kingdom of Saudi Arabia and Russia, and a global virus that forced lockdowns to contain the pandemic. Aramco, the Kingdom's 'national' oil company and the world's largest oil producer until recently, had to manage the severe oil price shock with policy changes that caused spillover effects on the nation. Historically, oil has been a crucial commodity in almost every industry since the 1900s. The global move towards green, sustainable and renewable resources in addressing climate change was anticipated to spell the end of the 'black gold' era. But oil companies have managed to be ranked as sustainable due to a broader definition that covers the adherence to environmental guidelines, governance and social impact. There have been few substitutes to rival its versatility and cost. Going electric has not proven to be a worthy rival to oil in the short-term. According to the International Energy Agency (IEA), crude oil demand is expected to plateau by 2030, with 35% of vehicles going electric in 2040. It seems black gold has some time before it loses its lustre.
- PublicationThe COVID-19 pandemic: the impact on emerging and development economiesShamsher Mohamad Ramadili Mohd (INCEIF, 2021)
Humans are social creatures that live based on interaction with one another, including economic activities and pandemics that brings unpredictable negative social and economic impact. The COVID-19 pandemic has now reshaped globalization and transformed the industrial society into an Information and digital society. This third-wave (Toffler, 1984) is mark by the widespread use of internet-based information technology, digital service industries with artificial intelligence as the driving of economic and social development. Meanwhile, COVID-19 has also shown a big gap between large companies with substantial market capitalizations such as Microsoft, Apple, [Alphabet] and Facebook in the developed economies that survive the pandemic. Similarly, in emerging and developing countries, their small-medium enterprises that forms the back-bone of their economy are also surviving this pandemic better than other businesses.
- PublicationCOVID-19 pandemic: the role of Islamic financeShamsher Mohamad Ramadili Mohd; Zulkarnain Muhamad Sori (INCEIF, 2020)
COVID-19 pandemic is a virus-related natural disaster. The COVID-19 pandemic was detected in 2019 in Wuhan in China and then spread to Hong Kong and then other countries, as it has considerably broader reach in terms of numbers of both countries and people affected than other virus-related disasters (Hassan et al. 2020). The possible reason for this global contagion is the increased integration of the global social and economic supply chain linkages so entrenched in the globalized ecosystem since 1980s. These previous virus-related pandemics including Severe Acute Respiratory Syndrome (SARS) (2002-03), Swine Flu (2009-10), Middle East Respiratory Syndrome (MERS) (2012-13), Ebola (2014-15), and Zika (2016) had a relatively high mortality but low infection rates compared to COVID-19 that is highly contagious but relatively less fatal but generating greater economic losses due to its prolonged persistence (Verikios et al., 2011). The prolonged nature of this pandemic has halted the global economy and caused substantial socio-economic adversities in all economies, albeit more in emerging and developing economies that have greater vulnerabilities of poor population, lack of financial resources and infrastructure to provide reasonable health services in normal times, let alone during pandemics. COVID-19 have beaten them all by affecting the economy and financial systems of almost 211 countries, with more than 50 million diagnosed and 1.2 million deaths at the point of writing this article (November 2020). This pandemic has contributed to mass economic destruction due to total and partial lockdowns of the economy, economic disruption through reduction of output or even closure of factories and increase in unemployment. Since the pandemic is global, the export-oriented economies suffer greatly as importing countries reduce their imports due to decrease in demand for goods and services.
- PublicationCOVID-19 saga and economic impactMohamed Ariff Abdul Kareem (INCEIF, 2020)
The COVID-19 outbreak hit the fan in December 2019 in Wuhan, China. There is much controversy over the genesis of this new pandemic which is haunting the humanity the world over. Contradictory, if not competing, conspiracy theories have emerged, with China and the US blaming each other. Some have described COVID-19 as a Black Swan which took the world completely unawares, while others contend it was not unforeseen, as people like Bill Gates have been talking about an impending pandemic of Biblical proportions, for nearly five years.
- PublicationCrypto mania: the Shariah verdictShamsher Mohamad Ramadili Mohd; Ziyaad Mahomed (CIAWM, 2018)
The 17th century was witness to the Dutch Golden Age, the leading global economic power at the time. It was also the period of what was soon after referred to as 'Tulip Mania' for what is considered the first recorded speculative bubble that collapsed in 1637. Many analysts find a stark similarity between tulip mania and the dramatic rise of the cryptocurrency value in 2017. Tulip bulbs became fashionable status symbols, and although having weak fundamentals, reached exorbitant prices. Bitcoin's dramatic 1,500% increase in 2017 alone, attracted a significantly large group of speculative investors to benefit from what many see as an unhinged gamble on what has gained popularity, not only as decentralized ledger tokens but also with potential links to laundering activity.
- PublicationDo ethics imply better governance? The case of Islamic and socially responsible equitiesChoudhary Wajahat Naeem Azmi (INCEIF, 2017)
There are different ways through which debt exerts pressure on managers to align their interests with those of shareholders. For instance, it does this by reducing free cash flows (Jensen, 1986; Stulz, 1990), by increasing monitoring by debt holders (Ang, Cole, & Lin, 2000) and by increasing takeover threats (Williams, 1987). In this respect, another line of arguments indicates that good corporate governance is associated with lower agency issues (McKnight & Weir, 2009; Rashid, 2016). As per this view advanced by La Porta, Lopezde-Silanes, Shleifer, and Vishny (2000), both debt and governance mitigate agency conflicts and essentially play the same role; therefore, they can be good substitutes for each other.
- PublicationDo MSME patronage factors correspond to UAE Islamic banker perceptions?Shinaj Valangattil Shamsudheen; Shamsher Mohamad Ramadili Mohd; Ziyaad Mahomed (INCEIF, 2020)
According to UAE Ministry of Economy, the SME sector represents more than 94 per cent of the total number of companies operating in the country and provide jobs for more than 86 per cent of the private sector's workforce. There are more than 350,000 companies working at the SMEs platform, and providing over 86 percent of the private sector's total workforce. They contribute to more than 60 percent of the UAE non-oil GDP. According to the Central Bank of UAE's data, credit provided to microenterprises grew 26.3% during the period from December 2017 through March 2019.
- PublicationDo profit-sharing investment account holders provide market discipline in an Islamic banking system?Omar Alaeddin (INCEIF, 2017)
Market discipline is one of the main pillars for stability and resiliency in banking system (Basel II, 2004). The mechanism of market discipline primarily relies on the role of depositors who receive timely information and act accordingly through their respective accounts. Empirical evidence shows the presence of market discipline, whereby non-insured depositors react to risk factors of the bank accordingly by either withdrawing their deposit (quantity mechanism) or demanding higher return (price mechanism). In tandem with conventional banking system, Islamic banking also emphasize on market discipline, signified by the global standard number 4 issued by Islamic Financial Services Board in 2007. However, unlike conventional banking, market discipline in Islamic Banking is conjectured to work via profit-loss sharing system. That is, the role of Profit Sharing Investment Account (PSIA) holders who are exposed to the variability of profit generated from their investment. The intriguing question of whether PSIA would be more effective and efficient in implementing market discipline remains an ongoing debate. Even there is no empirical study attempts to address this issue. Therefore, we perform empirical research to discover it.
- PublicationDo sukuk credit ratings create a value effect?Mahmoud Al Homsi (CIAWM, 2016)
The Islamic finance industry has shown an extraordinary accomplishment in the last decade. A major contributor to this success can be attributed to a significant increase in sukuk issuance: from US$ 1.172 million in 2001 to US$ 138 billion in 2013. Malaysia is the world's largest sukuk market with about US$ 430.579 billion of the total US$ 551.357 billion of domestic sukuk in the financial world, a whopping 78.09% of the total global domestic sukuk market. This significant development has necessitated the need for an effective credit rating mechanism for the Sukuk issuance. Credit rating has become an important instrument to assesses the creditworthiness of an issuer, most often based on the history of the issuer's borrowing and repayment, its underlying assets, its outstanding liabilities and its overall business performance (Arundina, Azmi Omar, & Kartiwi, 2015).
- PublicationDoes diversification improve bank performance in dual-banking systems?Mirzet Seho (CIAWM, 2018)
Conventional intermediation theories argue that imperfections in financial markets are raison d'etre for financial intermediaries such as banks. Islamic banks are no different from their conventional counterparts in this regard as they too perform similar intermediary functions. However, unlike their conventional counterparts, the principles of Islamic banks are different as they are operated on Shariah-based precepts of riba avoidance and risk sharing. In practice, however, Islamic banks are claimed to be likened to conventional banks, which raises concerns about possible convergence of these two banking systems over time.
- PublicationEducation to propel takaful industry in the next decadeSalim Majid Zain (INCEIF, 2017)
Takaful, a subset of the Islamic finance industry, has seen strong growth in the last decade due to the rising demand for Shariah compliant financial products globally. Increasing awareness in the global arena especially the Gulf Cooperation Countries (GCC) and the predominant Islamic countries have helped fuel the growth of Islamic finance across the banking and insurance sectors. This is brought by the push of the respective Islamic countries to promote Islamic finance as an alternative to conventional finance.
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