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Über dieses Buch

This book presents empirical research that addresses the latest issues and innovative products in Islamic banking and finance around the world. Chapters from expert contributors cover a wide range of topics, including the various issues in stock markets, an overview of takaful, a roadmap for introducing Islamic finance to uncharted territories and an in-depth analysis of the current challenges.

Case studies and statistics provide up to date information that can be used for future research. This book will be of interest to academics and researchers who wish to learn more about the challenges of Islamic finance and economics.

Inhaltsverzeichnis

Frontmatter

Islamic Finance—Local and Global Status

This article apprises the readers on the current status of Islamic finance across the world. Islamic finance though nascent has grown manifolds in the recent years and has spread across many different jurisdictions. With Pakistan as a Muslim-majority nation, it has been at forefront of the efforts and growth of Islamic finance. The article provides some insights into way forward for the industry.
Irum Saba

Sukuk for the Financing of Non-revenue Water Management: Malaysia as a Case Study

Water is essential for life, and it is increasingly becoming scarce. The World Economic Forum’s Global Risks 2015 report stated that global water crises are the biggest threat facing the planet over the next decade. Despite the fact that water scarcity is going to be a global issue, a staggering 32 billion cubic meters of treated water is lost to urban supply systems around the world. The World Bank reported that more than US$14 billion is lost every year by water utilities worldwide, more than a third of that by water utilities in developing countries. By reducing the water loss, 8 billion cubic meters per year of treated water can provide water to an additional 90 million people who currently lack access to clean potable water. The terminology often used for the water that is lost is non-revenue water (NRW). NRW is basically the difference between the amount of water supplied to the distribution system and the amount of water billed to consumers. Water is lost through leaking pipes or theft. Eliminating NRW altogether is not feasible, though reducing the current level to half is a reasonable target in most developing countries. Although the NRW issue is a global phenomenon, it can only be understood and acted based on its local conditions. For that reason, Malaysia is taken as a case study. The NRW problem is an issue for the water utilities in Malaysia as some states lose nearly 60% of their treated water (MWIG 2015). The water utilities do not spend on NRW management, as the cost of maintenance is higher than the revenue received from consumers due to low tariffs. This research studies the feasibility of using sukuk to finance the NRW problem in Malaysia. The methodology used is a cost-benefit analysis. The results indicate saving water through leakage preventions is a profitable venture with benefits amounting to RM2.13 bil/year and able to service additional 26.8 million people. This study defines the benefits of reducing NRW in terms of value and solving the issue through structuring Green Sukuk to finance NRW work. Due to the universality of the issue, the sukuk structure could be replicated with specificities related to each country. The limitation of the study is that it only looks at part of the NRW, which is the physical losses, and not into apparent losses, which includes theft and meter inaccuracies.
Kulsanofer Syed Thajudeen

Role of Takaful in Raising Higher Education Enrollment in Pakistan

This study analyzes how saving-based Takaful products can help people in Pakistan in planning the future for their children’s education. We recorded feedback from a sample of 400 people belonging to the working class and have children under the age of 12 years. The survey assessed from them how they envision the education of their children. We find that saving-based Takaful products can help in providing children with a better and secure educational future. The views of the respondents clearly state the vitality of an investment plan which can be designed to provide adequate money for key educational milestones in a child’s career. The study helps determine the fact that planning for children’s education through Shariah -based products can help improve the overall enrollment rate in higher education in the country.
Muhammad Imran, Mohsin Khawja

Ṣukūk Default and Issues in Their Resolution: The Case of Villamar Ṣukūk

Several high-profile Sukuk have defaulted in recent years. The phenomenon has created upheaval in the sukuk market and affected its development and investors’ confidence. Smooth resolution of default and bankruptcy is quite important for the financial instruments and their markets. The purpose of this study is to understand the nature and causes of the difficulties encountered in quick settlement of defaulted sukuk. It also aims to identify the Shariah issues faced in the resolution and settlement processes. Specifically, we focus on Villamar Sukuk. It was a Musharakah sukuk launched in 2008, after the issuance of the 2007 AAOIFI revised Shariah standard for sukuk. The Villamar sukuk was unique in that it was a Musharakah sukuk without the buyback promise, thus complying with this aspect of the AAOIFI’s revised sukuk standard. The paper analyzes the following: How a Musharakah sukuk can ever default? What operational and structuring factors cause delay in default resolution of a Musharakah sukuk? The paper derives several lessons from this episode and proposes regulatory and governance measures that can improve resolution of sukuk default and expedite their settlement.
Salman Syed Ali

Towards a Robust Shariah Screening Criterion for Stocks

If it was not for the indices for Shariah compliant equities, the global Islamic capital market (ICM) would not have proliferated with an astounding pace. Those indices have played an extremely crucial role in assisting the investors seeking Shariah compliant stocks to invest their capital. This conjecture is equally true for Pakistan. In this regard, a remarkable initiative recently taken by the country is the launch of All Shares Islamic Index of Pakistan (ASIIP) . The index has been established to develop Pakistan’s ICM and to cater the needs of the investors pursuing Shariah compliant investment in stocks. The selection criterion of ASIIP comprises of mainly two categories: (1) Shariah screening criterion and (2) technical filters. Although a general understanding has been established regarding the Shariah screening criterion and its conceptual basis, there seems to always linger a muddle about how those Shariah rulings are unswervingly related to it. Part of this confusion is attributable to the presence of rather an incongruity between the criterion and its Shariah underpinnings. In view of that, this paper gives an insightful discussion on the criterion from Shariah perspective. It critically analyses the criterion and its underlying Shariah basis by conducting a comprehensive and conscientious research through qualitative method. In doing so, it also juxtaposes the criterion directly to the classical sources of Islamic jurisprudence. On the basis of analysis, it proposes major modifications, on the one hand, to introduce a new ratio or filter within the criterion and, on the other hand, to exclude unnecessary ones from it. It also recommends re-examining the benchmarks for the prevalent ratios. These propositions would not only improve the robustness of the prevailing criterion, but also help abridging the gap between practical aspect of the criterion and its conceptual Shariah basis. Ultimately, it would vitally contribute to critical success factors and future progression of ICM in Pakistan.
Farrukh Habib

Introducing Islamic Finance in Unchartered Economies: The Case of Canada

The primary goal of this paper is to explore the viability of initiating Islamic finance (IF) in an unchartered economy. Canada is taken as a case study for this paper. To achieve our objective, we proceed in two stages. The first stage involves the analysis of market opportunities for IF. More precisely, the first stage involves the cost/benefit analysis which would enable the IF industry to see whether it is feasible for them to initiate. Second, the more challenging stage involves the analysis with regard to the barriers in offering IF products. In other words, we examine whether some of the IF products can be offered in the current regulatory framework. More importantly, we also examined the current banking regulations, which might hinder the offering of IF products, and provide suggestions on the amendments that can be made to ensure the smooth start. Broadly speaking, in this paper, we dispel certain myths surrounding the system such as it is not compatible with the contemporary finance and Muslims exclusivity etc. Based on the demography, established ethical market, existence of Islamic indices and the mutual funds, and its high rank in the Islamicity index, we argue that Canada could be one of the avenues to initiate Islamic financial system. We have also highlighted some of the economic benefits of such system in terms of its impact on economic growth. Additionally, we have also elaborated on how its risk-sharing characteristic and attachment to real economy could be beneficial for Canadian economy in terms of lowering the risk of banking crises and stock market crashes.
Baharom Abdul Hamid, Mohsin Ali, Wajahat Azmi, Zaheer Anwer

Islamic Finance, in the Age of Black Swans and Complexities, for a Multipolar World

The recent financial developments have given rise to a developing consensus that the unipolar economic growth regime dominated by USA, Japan, and few European centers is under great stress. The consensus takes into consideration the present financial complexities, stresses, and strains, and the ensuing uncertainty surrounding the sustainability of the unipolar regime, which has given way to a shift toward a multipolar economic setup. Scholarship has already hinted on not only better trade and investment opportunities, but also on a much more resilient global economic growth that such a shift can bring. However, there are some major obstacles that need to be overcome in order to reap fully the desired benefits of multipolarity. Continuation of debt-based financing regime (the hallmarks of which are risk transfer and risk shifting) will not necessarily allow the benefits of emerging multipolarity to accrue to the world economy. The new system can be more effective with a new regime of financing. Indications are that almost all emerging countries in Asia are actively considering risk sharing via Islamic finance as a possible alternative.
Mughees Shaukat, Abbas Mirakhor

Backmatter

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