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2016 | Buch

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Islamic Finance

Principles, Performance and Prospects

herausgegeben von: Tina Harrison, Essam Ibrahim

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Inhaltsverzeichnis

Frontmatter

Introduction

Abstract

The global market for Islamic financial services has shown strong growth in recent years and has demonstrated remarkable resilience following the global financial crisis in 2007. Although Islamic financial assets currently make up only a fraction of the world’s financial assets at 1 percent, many Islamic banks have experienced double-digit growth rates in recent years, surpassing their conventional peers (ATKearney, 2012). Indeed, global Islamic financial assets have tripled since the start of the economic slowdown in 2007 (TheCityUK, 2015) and are forecast to reach $4 trillion by 2020 (Karim, 2012).

Tina Harrison, Essam Ibrahim

1. Toward a Comprehensive Theoretical Framework for Shariah Governance in Islamic Financial Institutions

Abstract

The industry of Islamic banking is one of the fastest growing industries in the world with the annual growth rate of 17.6 per cent and total global assets of US$1.7 trillion in 2013 (Ernst and Young Report, 2014). Despite this remarkable growth, the issue of corporate governance in Islamic financial institutions (IFIs) has not received due attention in the academic as well as the professional fields of Islamic finance (Alnasser and Muhammed, 2012). It is worth noting that there are inherent differences between Islamic and conventional banking systems due to the fact that the functions of Islamic banks must be compliant with Islamic rules and principles (Shariah) which comes from the Holy Quran and Sunnah according to which the payment of interest, speculation and financing of specific illicit transactions such as pork and alcohol is prohibited (Bhatti and Bhatti, 2009). Islamic banks operate also based on the profit and loss sharing principle which stipulates that banks as well as the investors share the risks associated with business ventures (Beck et al, 2013). Nevertheless, the scope of Islamic corporate governance (ICG) extends beyond the conventional corporate governance (CCG) which operates largely in the interests of management and shareholders to include the spiritual aspects as well as the worldly needs of people. In other words while the western systems of corporate governance are based on self-interest, the ultimate goal in ICG is Maqasid al Shariah (objectives of Islamic law) (Bhatti and Bhatti, 2009).

Siti Normala Sheikh Obid, Babak Naysary

2. Do Customers Patronize Islamic Banks for Shari’a Compliance?

Abstract

Islamic finance has become a vital part of the global financial system with its tremendous growth in assets (Khan and Bhatti, 2008) and resilience to the recent financial meltdown due to its conservative investment approach (Yeates, 2008). However, it is considered as a stone-age industry because of its lack of competitiveness with the conventional banking institutions (El Baltaji, 2010). Thus, one can argue that Islamic banks rely on Shari’a compliance as their core competence and thereby ignore the provision of top-notch products and services to their customers. Some researchers even lament the current form of Islamic banking and blame Islamic Financial Institutions (IFIs) for charging a Shari’a arbitrage premium for their inefficient and costly banking products (El-Gamal, 2005; El-Gamal, 2006). A more recent study has even suggested that Islamic-minded customers are even inclined to sacrifice some of the conventional banking needs for the sake of having access to Shari’a-compliant services (Lee and Ullah, 2011). The matter of fact, however, is that Islamic bank customers have to meet their banking needs in addition to Shari’a compliance. Customers, thus, would happily patronize Islamic banks that are competitive with conventional banking institutions.

Shakir Ullah, Kun-ho Lee

3. Bank Image in the UAE: Comparing Islamic and Conventional Banks

Abstract

This study explores how UAE customers view Islamic banks and conventional banks. We investigate whether this image affects customer preference about the type of bank they want to patronize. In the highly competitive UAE market, banking institutions are intensely concerned with customers’ post-purchase behavior. They recognize that merely satisfying customers is not sufficient to retain their loyalty because even satisfied customers may switch to competitors. According to Ekrem et al,¹ in the past decade, firm image has been recognized as a strategic tool to strengthen a firm’s competitive position and improve its profitability. But image alone may not be an adequate source of competitive advantage, as customers also want specific products and services. Thus, customers’ image of UAE banks and their services are related to customer preferences.

Hussein A. Hassan Al-Tamimi, Adel Shehadah Lafi, Md Hamid Uddin

4. Bankers’ Perception towards Bai Salam Method for Agriculture Financing in Pakistan

Abstract

Regular access to formal credit is considered vital to reduce poverty in any agrarian society. Easy access to credit not only helps to improve the overall productivity of the farmers, but also improves social indicators in the long run. Despite all economic benefits, agriculture financing is generally considered risky and has low returns owing to unpredictable weather conditions and high default ratios. The same impression may also be true in Pakistan, where commercial banks, despite raising 28 per cent of total deposits, only disbursed 3.5 per cent of the total loans in the rural areas by the end of 2002.¹ The figures highlight the need to ensure regular transfer of funds to rural areas to reduce poverty levels, and to generate economic activities for the farmers.

Ahmad Kaleem, Saima Ahmad

5. Bank-Level Stability Factors and Consumer Confidence — A Comparative Study of Islamic and Conventional Banks’ Product Mix

Abstract

The stability of the banking sector is the foundation of steadiness of the entire financial system as banks play a central role in the money creation process; in the payment system, in the financing of investment and in economic growth. Furthermore, to preserve monetary and financial stability central banks and supervisory authorities have a special interest in assessing banking system stability. Bank stability is normally reflected by features, such as bank runs or illiquidity and subsequent risks relating to illiquidity in the banking sector, which affect their customers and is reflected in their confidence levels.

Kassim Hussein

6. A Comparative Performance of Conventional and Islamic Unit Trusts: Market Timing and Persistence Evidence

Abstract

Mutual funds have been a convenient way for investors to gain the benefit of a diversified portfolio. Mutual fund managers collect funds from a large number of small investors and create a portfolio of assets, and each investor owns a small part of this portfolio in proportion to his investments. The difference between mutual funds and unit trusts lies in their legal structure, but the end result for investors is similar (Investment Company Institute (ICI), 2009). The very obvious potential risk for unit trusts is the volatility of market activities, which will affect the value of a security, bonds or any other security (Lau, 2007). Islamic mutual funds are different from conventional mutual funds as they invest only in Shariah-compliant assets such as stocks and sukuks (Fikriyah et al, 2007; Elfakhani et al, 2005). Conventional unit trust funds managers do not solely invest in equity markets compared with Islamic unit trusts; rather the fund may also comprise all types of risk-free investment (Low and Ghazali, 2007).

Nafis Alam, Kin Boon Tang, Mohammad Shadique Rajjaque

7. Shariah-Compliant Equities: Empirical Evaluation of Performance in the European Market during Credit Crunch

Abstract

The teachings and guidelines in Islam encompass all aspects of human life. It governs all the daily activities of an individual. The Islamic Law or Shariah, as it has been derived from the Quran,¹ Fiqh² and Sunnah,³ governs all aspects of life and activities thereon of Muslims. It includes everything related to social, spiritual, ethical, economic or any other aspect of life.

Nafis Alam, Mohammad Shadique Rajjaque

8. Awareness of Islamic Banking Products among Muslims: The Case of Australia

Abstract

The concept of interest-free financing was practiced by Arabs prior to the advent of Islam, and was later adopted by Muslims as an acceptable form of trade financing. While the system had been used on a small scale for centuries, its commercial application began in the 1970s.¹ Since then Islamic financing has experienced worldwide acceptance, and by early 2003 there were at least 176 Islamic banks around the world, with deposits in excess of $147bn.²

Hussain Gulzar Rammal, Ralf Zurbruegg

9. Challenges and Opportunities for Islamic Retail Banking in the European Context: Lessons to Be Learnt from a British-German Comparison

Abstract

This article explores the key determinants of Islamic retail banking (IRB) in the European context in order to identify major challenges and opportunities for the European IRB market. This investigation is of relevance, as Islamic banking, that is the Shari’ah (Islamic law) compliant way of banking, is on the rise. During the past three decades the industry expanded with double-digit growth rates and there are now more than 300 Islamic financial institutions operating in over 50 countries worldwide.¹ As Islamic banking was initially developed in recognition of the need of ordinary Muslims for borrowing and lending, the most prevailing activity of Islamic banking in the predominantly Muslim societies of the Gulf and the Far East is retail banking.^2,3 Yet, in most of Europe IRB services offered to the general public are still rare.⁴ This appears to be a missed business opportunity as Europe’s Muslim community of about 50 million⁵ clearly outnumbers the total population of the Arab states in the Persian Gulf region of about 36.2 million.⁶

Stefan Volk, Markus Pudelko

10. Developing the Islamic Financial Services Sector in Italy: An Institutional Theory Perspective

Abstract

The Islamic Financial Services (IFS) sector has experienced wider consumer acceptance and rapid growth since its commercial launch in the 1970s. This growth has primarily been in countries in Asia such as Iran, Malaysia, Pakistan and the Middle East region. Although non-Muslim majority countries like Hong Kong and Singapore have taken positive strides in developing the sector, European countries have lagged behind their Asian counterparts (Daily Times, 2013). Europe is host to a large Muslim population, but the lack of developed Islamic financial institutions means that the potential of IFS product offerings is yet to be fully realized in the region (Volk and Pudelko, 2010).

Barbara Petracci, Hussain G. Rammal

Backmatter

Titel: Islamic Finance
herausgegeben von: Tina Harrison
Essam Ibrahim
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-30918-7
Print ISBN: 978-3-319-30917-0
DOI: https://doi.org/10.1007/978-3-319-30918-7