Hassan / Mollah Islamic Finance

Ethical Underpinnings, Products, and Institutions
1. Auflage 2018
ISBN: 978-3-319-91295-0
Verlag: Springer International Publishing
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 332 Seiten, eBook

Reihe: Progress in Mathematics

Islamic finance often faces numerous challenges in a dynamic marketplace. This book aims to discuss contemporary issues and challenges in Islamic finance to inform discussions surrounding the governance system, the Islamic legal system, prudential regulations, Islamic home financing, and Islamic microfinance. Furthermore, corporate social responsibility (CSR), Islamic accounting, risk management, Basel Accord, and Shari'ah governance systems are discussed in the book. Despite the relevance of these issues in Islamic finance, only a few reference sources exist. This book will provide a guide for academics, students, and banking professionals to acquaint them with the theory and practice of Islamic finance, filling a needed gap.

Zielgruppe

Research

Autoren/Hrsg.

Hassan, Abul

Mollah, Sabur

Inhaltsverzeichnis

1;Preface;5
2;Acknowledgements;15
3;Contents;17
4;List of Figures;20
5;List of Tables;22
6;Part I Islamic Financial Markets, Its Ethical Foundation, Portfolio Performance, Customer Loyality and Products;24
7;Chapter 1 The Ethical Underpinnings of Islamic Economics and Finance;25
7.1;1.1 Background;26
7.2;1.2 Ethics of Economics;27
7.3;1.3 What Is Islamic Economics and Finance?;28
7.4;1.4 Features of Islamic Economics;29
7.5;1.5 Ethical Features of Islamic Finance;31
7.6;1.6 Ethical Dimension in Islamic Economics;31
7.7;1.7 Objective (Maqasid) of Islamic Economics;33
7.7.1;Philosophical-Based Objective;34
7.7.2;Operational-Based Objective;34
7.8;1.8 Examples;35
7.9;1.9 Why Islamic Economics and Finance?;35
7.10;1.10 Conclusion;37
7.11;References;39
8;Chapter 2 Islamic Finance: A Global Alternative;41
8.1;2.1 Theoretical Development;41
8.2;2.2 Foundations of Islamic Financial System;43
8.3;2.3 Distinguish Between Conventional and Islamic Financial System;44
8.4;2.4 Financing Principles in Islamic Financial System;46
8.5;2.5 Social Goal;47
8.6;2.6 Emerging as Alternative Financial Option;48
8.7;2.7 Universal Acceptability;51
8.8;2.8 Conclusion;52
9;Chapter 3 Justice, Balance, Trust and Benevolence: The Relationship of the Islamic Bank to Its Shareholders;53
9.1;3.1 Islamic Ethics Criteria;53
9.2;3.2 Taking Responsibility;54
9.3;3.3 A True Joint Venture;55
9.4;3.4 A Way of Life;56
10;Chapter 4 Following the Rules: How Do Islamic and Ethical Investing Impact Portfolio Performance?;57
10.1;4.1 Islamic Screening Criteria;58
10.2;4.2 Socially Responsible Investment Screening Criteria;58
10.3;4.3 Something in Common;59
10.4;4.4 Ethical Factors in Investment;59
10.4.1;The Effects of Ethical Behaviour on Company Share Price;60
10.4.2;Company Policies;60
10.4.3;Reputation;61
10.4.4;Consumers;61
10.4.5;Regulation;61
10.4.6;Employee Motivational Training;62
10.5;4.5 Effects of Islamic Ethical Investment on a Portfolio;62
10.5.1;Diversification;62
10.5.2;Sector and Stock Effects;63
10.5.3;Tracking Error;64
10.5.4;Concentration;64
10.5.5;Management of Funds;65
10.5.6;Many Possibilities;65
11;Chapter 5 A New Perspective: Islamic Business Ethics and Islamic Finance Customer Loyalty;66
11.1;5.1 Islamic Ethics Ensures Harmony in Banking Business;66
11.2;5.2 Customer Support Advisory—An Important Factor;67
11.3;5.3 Shari’ah—Basis of Customers’ Satisfaction;67
11.4;5.4 CSA Role Vis-à-vis Service Expectation;68
11.5;5.5 Sales Behaviour Model Based on Islamic Business Ethics;69
11.5.1;Customer Satisfaction with the Core Service (H1);70
11.5.2;High-Level Customer Satisfaction (H2) Leads to Trust (H3) and Loyalty (H4);70
11.5.3;Customer Trust (H3) to Islamic Banks;71
11.5.4;Customer Loyalty (H4) to Islamic Bank;72
11.6;5.6 Conclusions;72
12;Chapter 6 Unprecedented Opportunity: The Global Credit Crisis and Islamic Banking;74
12.1;6.1 Introduction;74
12.2;6.2 Delicateness of Capitalism;77
12.2.1;The Money Illusion and Debt;77
12.2.2;Real Economy and Financial Economy—Twin Economy Dilemma;80
12.2.2.1;The Boom and Bust Virus;81
12.3;6.3 The Credit Crunch;84
12.3.1;Subprime Market;85
12.3.2;Securitization;86
12.3.3;Collapse of Subprime Market;87
12.3.4;Self-Interest;89
12.3.5;Impact on Global Economy;91
12.3.6;Economic Recession;92
12.4;6.4 Islamic Economics as Solution to Financial Crisis;92
12.4.1;Riba Is Unlawful But Trade Is Lawful;93
12.4.2;No Twin Economy in Islamic System;95
12.4.3;Proper Distribution of Wealth;96
12.4.4;Circulation of Wealth;97
12.4.5;Limited Taxation;97
12.4.6;Islamic Monetary Policy Curbs Inflation;98
12.4.7;Promotion of Businesses and Creation of Jobs;99
12.4.8;Islam Encourages Spending;100
12.4.9;Challenges Before Islamic Banking;100
12.5;6.5 Conclusion;104
12.6;References;106
13;Chapter 7 Shari’ah Compliant Equity;108
13.1;7.1 Investment in Islamic Equity;108
13.1.1;Equity Shares;110
13.1.2;Equity Funds;111
13.2;7.2 The Company’s Business and Its Structure;112
13.2.1;Enterprise’s Business;112
13.2.2;Structure of the Company Business;113
13.2.2.1;Obligation of the Enterprise;113
13.2.2.2;Earnings from Unlawful (Haram) Activities;114
13.2.2.3;Cash and Receivables or Payables of the Company;114
13.3;7.3 Conclusion;115
14;Chapter 8 Sukuk—Shari’ah-Based Asset Securitization;117
14.1;8.1 Securitization and Sukuk;117
14.2;8.2 Types of Sukuk;119
14.2.1;Trust Certificates;119
14.3;8.3 Mudarabah Sukuk;119
14.4;8.4 Musharakah Sukuk;120
14.5;8.5 Murabahah Sukuk;122
14.6;8.6 Ijarah Sukuk;123
14.6.1;Asset-Backed Ijarah Sukuk;124
14.7;8.7 Global Sukuk Market Performance;124
14.8;8.8 AAOIFI’s Concern on Shari’ah Compliance of Sukuk;127
14.9;8.9 Conclusion;129
15;Chapter 9 Islamic Mutual Funds: A Vehicle for Mobilization of Small Savings;130
15.1;9.1 Islamic Mutual Fund Is Managed Pool of Capital;131
15.2;9.2 Types of Islamic Mutual Funds;131
15.3;9.3 Pricing of Islamic Mutual Funds;131
15.4;9.4 Islamic Investment;132
15.5;9.5 Islamic Investment Criteria;132
15.6;9.6 Trading and Investing Practices;134
15.7;9.7 Growing Importance of Islamic Mutual Funds;134
15.8;9.8 Islamic Mutual Funds Worldwide;135
15.8.1;An Important Issue to Address;135
16;Chapter 10 Joining Forces: Islamic Finance and Private Equity;136
16.1;10.1 Venture Capital vs. Private Equity;137
16.2;10.2 Private Equity and the Muslim World;138
16.3;10.3 Structuring Private Equity;139
16.4;10.4 Deal and Screening Process;141
16.5;10.5 Currently Islamic Private Equity;144
16.5.1;Fast Growth Ahead;146
16.6;10.6 Development of Private Equity;147
17;Chapter 11 Financial Futures, Stock Options and Warrants in the Islamic Capital Market;150
17.1;11.1 Introduction;150
17.2;11.2 Strategies for the Sophisticated Conventional Investors: Stock Options, Warrants and Futures;152
17.2.1;Options;153
17.2.1.1;Stock Options;153
17.2.1.2;Making Money with Stock Options;154
17.2.1.3;Pricing;155
17.2.2;Warrants;157
17.2.2.1;Futures Contracts;157
17.3;11.3 Shari’ah Bans Maysir, Gharar and Dayn Bi-Dyan;158
17.4;11.4 Obstacles to Practice Stock Index Futures, Stock Options and Warrants in the Islamic Market;160
17.4.1;Stock Index Futures;160
17.4.2;Stock Options;162
17.4.3;Warrants;164
17.5;11.5 Conclusion;165
17.6;References;166
18;Chapter 12 Small Solutions: Poverty Alleviation Through Islamic Microfinance;167
18.1;12.1 Introduction;168
18.1.1;Brief Introduction of Islamic Microfinance Programme: RDS;169
18.1.2;Shari’ah Compliance Financial Plan of RDS and Growth;170
18.2;12.2 Literature Review;172
18.3;12.3 Islamic Microfinance Model Study;176
18.3.1;Income;177
18.3.2;Assets;177
18.3.3;Health;177
18.3.4;Schooling of Children;178
18.3.5;Family Harmony;178
18.4;12.4 Methodology of the Study;178
18.4.1;Sampling;179
18.4.2;Data Collection;180
18.4.3;Regression Equation and Statistical Test;181
18.5;12.5 Empirical Results;182
18.6;12.6 Financial and Social Development (Harmony) Among Beneficiaries;191
18.7;12.7 Diversification of the Scheme: Experts’ Opinion;193
18.8;12.8 Conclusion and Policy Recommendations;194
18.9;12.9 Food for Thought;196
18.10;12.10 Role of Zakah and Awqaf;197
18.11;12.11 Fitting the Pieces Together;198
18.12;References;198
19;Chapter 13 Home Sweet Home: Islamic Housing Financing;201
19.1;13.1 Shari’ah-Compliant Mortgage Models;201
19.2;13.2 Ijarah Mortgage;202
19.3;13.3 Murabahah Mortgage;202
19.4;13.4 Musharakah Mutanaqisah;203
19.5;13.5 Tiered Financing Product;203
19.6;13.6 Market Players in Islamic Mortgage;204
19.7;13.7 Shari’ah Mortgage Payment and Fees;205
19.8;13.8 Sector Growth;206
19.9;13.9 Regulation Help;206
19.10;13.10 Does Being Ethical Pay?;209
19.11;13.11 Leading Europe;210
20;Chapter 14 Operational Mechanism of Takaful and Re-Takaful;211
20.1;14.1 Concept of Takaful;212
20.2;14.2 Takaful Operations;214
20.3;14.3 General Takaful;214
20.4;14.4 Family Takaful;214
20.5;14.5 Models of Takaful;215
20.5.1;Operation of Mudarabah Model;215
20.5.2;Wakalah Model;217
20.5.3;Hybrid Wakalah–Mudarabah Model;217
20.5.4;Hybrid of Wakalah–Waqf Model;218
20.5.5;Re-Takaful (Islamic Reinsurance);220
20.6;14.6 Methods;221
21;Part II Regulation, Risk Management, CSR of Islamic Financial Services, Accounting, Governance, and Their International Islamic Infrastructure Institutions;224
22;Chapter 15 Courting Change: Development of Islamic Legal System Could Bring Growth;225
22.1;15.1 Shari’ah Laws in Islamic Banking;225
22.2;15.2 Creating New Contracts;226
22.3;15.3 Adoption of Shari’ah Laws for Islamic Finance;227
22.4;15.4 Dispute Resolution;228
22.5;15.5 Shari’ah Courts for Dispute Settlement;229
22.6;15.6 Standardization of Islamic Products;229
22.7;15.7 Value-Added Roles of Shari’ah Scholars;231
22.8;15.8 Global Harmonization;232
23;Chapter 16 Gaining Strength: Prudential Regulations in Islamic Banking;233
23.1;16.1 Rationale Behind Prudential Regulation;233
23.1.1;Public Good View;234
23.1.2;Protection of Public Resources View;234
23.1.3;Integrity of Fiduciary Contracts View;235
23.2;16.2 Supervision in Islamic Banking;235
23.3;16.3 Looking to the Future;237
24;Chapter 17 Risk Management in Islamic Financial Institutions;239
24.1;17.1 Risks in Islamic Financial Institutions;239
24.2;17.2 Market Risk;240
24.2.1;Unsystematic Risk;241
24.2.2;Systematic Risk;241
24.3;17.3 Credit Risk;242
24.4;17.4 Liquidity Risk;243
24.5;17.5 Operational Risk;244
24.6;17.6 Legal Risk;245
24.7;17.7 Reputation Risk;245
24.8;17.8 Risk Related to Human Resources;245
24.9;17.9 Room for Adaptation;246
24.10;References;246
25;Chapter 18 The Basel Accords in Relation to Islamic Finance;247
25.1;18.1 Introduction;248
25.2;18.2 Base Accord Application in Islamic Banks;250
25.3;18.3 Capital Adequacy Framework Under Basel Accord;251
25.3.1;New Basel II;252
25.3.2;Basel III: Higher Capital Requirements and Liquidity Rules;253
25.3.2.1;New Capital Requirements;253
25.3.2.2;New Capital Buffer;254
25.3.2.3;Leverage Ratio;255
25.3.2.4;Systemically Important Banks;255
25.3.2.5;Liquidity Rules;255
25.4;18.4 Basel Methodology to Islamic Banking and Finance;257
25.4.1;AAOIFI Capital Adequacy Framework;257
25.4.2;The IFSB Capital Adequacy Framework;259
25.4.2.1;The IFSB Proposal;259
25.4.2.2;Higher Capital Requirements and Liquidity Under Basel III and IFSB’s Revised Proposal (Capital Conservation Buffer);260
25.4.2.3;Leverage Ratio;263
25.5;18.5 Risk Specification of Islamic Banks/IFIs;264
25.5.1;Risk Specification in IFSB Guidelines;265
25.5.2;Liquidity Risk in Basel III Framework;267
25.5.2.1;Stock of High-Quality Liquid Assets;267
25.5.2.2;Total Net Cash Flow;268
25.6;18.6 Case Study: Capital Adequacy Analysis of Al-Rajhi Bank Under Basel Framework;271
25.6.1;Capital and Buffer;271
25.6.2;Leverage Ratio;273
25.6.3;Liquidity Coverage Ratio;273
25.6.4;RWA of Al-Rajhi Bank and Minimum Capital Requirement & Buffers Risk-Weighted Assets;274
25.7;18.7 Conclusions;278
25.8;References;279
26;Chapter 19 CSR Disclosure for Islamic Financial Institutions;281
26.1;19.1 Stakeholder Engagement;282
26.2;19.2 Disclosure and Accountability;282
26.3;19.3 The Need for Standards;283
26.4;19.4 Proposed Model;284
26.4.1;Ethical Behaviour, Stakeholder Engagement, Customer Relations and Good Governance;284
26.4.2;Interest-Free, Lawful Products and Services;285
26.4.2.1;Opinion of Shari’ah Supervisory Board;286
26.4.3;Development and Social Goals;286
26.4.3.1;Zakah (Religious Tax);286
26.4.3.2;Qardh-Hassan (Benevolent Loan);287
26.4.4;Charity and Other Activities;287
26.4.5;Commitment to Community Development;287
26.4.6;Research, Training and Development;288
26.4.7;Employees;288
26.4.8;Environment;289
26.5;19.5 Joining Global Standards;289
27;Chapter 20 Just and Balanced: The Importance of Accounting in Islamic Finance;290
27.1;20.1 Shari’ah Laws in the Operation of IFIs;290
27.2;20.2 Value-Based Accountability;291
27.3;20.3 Islamic Finance Works Differently;292
27.4;20.4 Principles of Islamic Accounting;293
27.5;20.5 Challenges for Islamic Accounting;294
27.6;20.6 Ethics for All;297
28;Chapter 21 Bigger Than the Bottom Line: Islamic Principles of Accounting;299
28.1;21.1 Prohibition of Riba;301
28.2;21.2 Ban on Gharar;302
28.3;21.3 Adoption of Acceptable Valuation Techniques;302
28.4;21.4 Valuation of Zakah;303
28.5;21.5 Forbidden Business Activities;303
28.6;21.6 Environmental Awareness;303
28.7;21.7 Trusteeship;303
28.8;21.8 Information and Financial Statements;304
28.8.1;Financial Statements;305
28.9;21.9 Assets and Liabilities;306
28.10;21.10 Shari’ah-Based Accountability in Accounting;306
29;Chapter 22 Rich Architecture: Briefing on Shari’ah-Compliant Corporate Governance;308
29.1;22.1 Providing a Foundation for Good Governance;309
29.2;22.2 Role of the Shari’ah Supervisory Board;310
29.3;22.3 Division of Responsibilities;311
29.4;22.4 Conclusion;312
30;Chapter 23 International Islamic Financial Infrastructure Institution: AAOIFI;313
31;Chapter 24 International Islamic Financial Infrastructure Institution: IFSB;316
31.1;24.1 Constituent Member;317
31.2;24.2 Adoption of Standard;317
31.3;24.3 PSIEIs Data and Publications;319
32;Chapter 25 International Islamic Financial Infrastructure Institution: IIRA;320
32.1;25.1 International Recognition;320
32.2;25.2 Type of Ratings IIRA Offers;321
32.3;25.3 Sovereign Ratings;321
32.3.1;Methodology;322
32.4;25.4 Issuer Ratings;322
32.4.1;Methodology of Issuer Ratings;322
32.5;25.5 Sukuk Ratings;322
32.5.1;Methodology of Sukuk Ratings;322
32.6;25.6 Insurer Financial Strength Ratings;324
32.7;25.7 Publications and Training;324
33;Chapter 26 International Islamic Financial Infrastructure Institution: IILM;325
34;Index;327

Über Autor(innen)

Abul Hassan is a Research Scientist and Associate Professor at the Centre of Islamic Banking and Finance, King Fahad University of Petroleum and Minerals. Hassan earned his MSc in Financial Economics and PhD in Finance from the Durham University Business School. He has taught at Durham University, Staffordshire University, University of Brunei Darussalam, and Gloucestershire University (Markfield Institute). Hassan has published extensively in international peer review journals. Currently, he is conducting research in the area of Islamic banking and finance.

Sabur Mollah is a Professor of Accounting and Finance at the School of Management, Swansea University. He obtained his BCOM (Honours) and MCOM (Finance) from University of Dhaka, PhD in Corporate Finance from Leeds University Business School, and Docent in Business Administration (specialization in Corporate Finance) from Stockholm Business School. Mollah taught previously at Bournemouth University, University of Botswana, University of Dhaka, Hull University Business School, Leeds University Business School, and Stockholm Business School. He has published extensively on issues surrounding market reactions to dividend policy, asset pricing behaviour, market efficiency and volatility, corporate governance in banks, Shari’ah governance, and earnings management. His research has appeared in the Journal of Accounting and Economics, Journal of Corporate Finance, and Journal of Banking and Finance, etc. Mollah has also received several medium-size external grants.