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Economic Change and Restructuring

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31-05-2023

Financing and returns of Shari’ah-compliant contracts and sustainable investing in the Islamic banking of Oman

Authors: Faris Alshubiri, Mawih Kareem Al Ani

Published in: Economic Change and Restructuring | Issue 4/2023

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Abstract

The present study used quarterly data from 2014 to 2020 to analyse the financing and returns of Shari’ah-compliant contracts in Oman based on murābahah, ijārah muntahia bittamlīk and wakālah Islamic banking tools and their relationship to sustainable investing, which was measured using three pillars of governance: capital adequacy, asset quality, and risk sensitivity. The autoregressive distributed lag (ARDL) model results revealed significant negative short- and long-run relationships between the financing and returns of Shari’ah-compliant contracts and sustainable investing in Islamic banking in Oman, which was measured by asset quality, capital adequacy, and risk sensitivity except there was a significant positive long-run relationship between the financing of Shari’ah-compliant contracts and capital adequacy in the short run. Additionally, insignificant long-run relationships existed between the financing of Shari’ah-compliant contracts and capital adequacy. The study’s main conclusion is that Shari’ah governance practices in Oman may ensure and support asset quality and the capital adequacy ratio. Furthermore, the findings indicated that the capital-to-risk weighted assets ratio protects depositors and promotes financial comprehensive systems’ stability, credibility, and efficiency. The study’s main recommendation is that Oman should increase Islamic banking assets and enhance the legal and regulatory system to promote the development of Islamic banking services that are compliant with the standards of the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions.

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Title: Financing and returns of Shari’ah-compliant contracts and sustainable investing in the Islamic banking of Oman
Authors: Faris Alshubiri
Mawih Kareem Al Ani
Publication date: 31-05-2023
Publisher: Springer US
Published in: Economic Change and Restructuring / Issue 4/2023
Print ISSN: 1573-9414
Electronic ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-023-09522-8

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