The remarkable worldwide development of the Islamic finance industry and Islamic capital market has resulted in industry players demanding that Islamic banks be rated. Ratings will help them to assess whether a firm is utilizing the funds entrusted to it with due care, by providing indications of good performance so that informed decisions can be made. Since Islamic finance is recognized as being fundamentally different from conventional finance, a rating methodology is needed; one that can capture the unique dimensions of Islamic banks, in particular Shariah (Islamic law) risk. Therefore, this study will examine to what extent credit rating agencies, in particular standard and poor’s, Fitch and Moody’s differ in evaluating the creditworthiness of conventional and Islamic banks. Owing to Islamic banks’ operations needing to comply with Shariah law, this study will further investigate the way to assess Shariah compliance from the perspective of Shariah scholars and practitioners. The research on ratings not only helps boost investor confidence in the Islamic finance industry, but also leads to a better understanding of the concept. This is despite the different methods adopted by the agencies concerned.
{"title":"Islamic Banks’ Risks: It’s Rating Methodology and Shariah Assessment Solutions","authors":"Rafisah Mat Radzi, K. T. Lonik","doi":"10.15640/JIBF.V4N2A7","DOIUrl":"https://doi.org/10.15640/JIBF.V4N2A7","url":null,"abstract":"The remarkable worldwide development of the Islamic finance industry and Islamic capital market has resulted in industry players demanding that Islamic banks be rated. Ratings will help them to assess whether a firm is utilizing the funds entrusted to it with due care, by providing indications of good performance so that informed decisions can be made. Since Islamic finance is recognized as being fundamentally different from conventional finance, a rating methodology is needed; one that can capture the unique dimensions of Islamic banks, in particular Shariah (Islamic law) risk. Therefore, this study will examine to what extent credit rating agencies, in particular standard and poor’s, Fitch and Moody’s differ in evaluating the creditworthiness of conventional and Islamic banks. Owing to Islamic banks’ operations needing to comply with Shariah law, this study will further investigate the way to assess Shariah compliance from the perspective of Shariah scholars and practitioners. The research on ratings not only helps boost investor confidence in the Islamic finance industry, but also leads to a better understanding of the concept. This is despite the different methods adopted by the agencies concerned.","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"4 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166764","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The bad trails left by the financial crisis led many researchers to propose an adequate remedy to ensure financial stability. It is integrated in this framework paper from which we will be testing the resistance of the Islamic bank before, during, and after the period of the subprime crisis (2003-2012). To find out if Islamic finance is a real driver of financial stability, by making a comparison between the two industries, we will use the Data envelopment analysis method (DEA) by integrating a new input "Interest expense". The results do not confirm totally on one of the previous works, nor reject them, since they support the work who says that Islamic banks have kept their stability during the crisis. But those results did not agree that conventional banks are affected by the subprime crisis.
{"title":"Islamic Banks, Conventional banks and Subprime Crisis: Empirical Evidence by Using DEA Approach","authors":"Amine Nafla, Amine Hammas","doi":"10.15640/jibf.v4n1a2","DOIUrl":"https://doi.org/10.15640/jibf.v4n1a2","url":null,"abstract":"The bad trails left by the financial crisis led many researchers to propose an adequate remedy to ensure financial stability. It is integrated in this framework paper from which we will be testing the resistance of the Islamic bank before, during, and after the period of the subprime crisis (2003-2012). To find out if Islamic finance is a real driver of financial stability, by making a comparison between the two industries, we will use the Data envelopment analysis method (DEA) by integrating a new input \"Interest expense\". The results do not confirm totally on one of the previous works, nor reject them, since they support the work who says that Islamic banks have kept their stability during the crisis. But those results did not agree that conventional banks are affected by the subprime crisis.","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"104 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166535","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Mudharib or the entrepreneur can take the opportunity to report a lower profit or loss due to business risk. This reason allows him to be freed from the legal responsibility. Consequently, shahibul mal or the financier has to absorb the loss. This paper attempts to find a solution to overcome this moral hazard. This paper employs the components of the Business Judgment Rule (BJR) that analysed to compare them with the related stipulations in the Islamic law. The finding concludes that in light of the fiduciary relationship, mudharib must fulfill the fiduciary duties being equal to the concepts of tabayyun and amanah in Islam. Based on freedom of contract, the parties can agree to insert the clauses to specify such legal duties in the contract. His legal responsibility can be determined, if mudharib has made an effort to mitigate the business risk, and taking no financial benefit behind the loss. This can serve as a solution to use mudharabah contact more frequently.
{"title":"The Mudharib’s Legal Responsibility for the Business Risk in Mudharabah","authors":"Hendy Herijanto","doi":"10.15640/JIBF.V4N1A3","DOIUrl":"https://doi.org/10.15640/JIBF.V4N1A3","url":null,"abstract":"Mudharib or the entrepreneur can take the opportunity to report a lower profit or loss due to business risk. This reason allows him to be freed from the legal responsibility. Consequently, shahibul mal or the financier has to absorb the loss. This paper attempts to find a solution to overcome this moral hazard. This paper employs the components of the Business Judgment Rule (BJR) that analysed to compare them with the related stipulations in the Islamic law. The finding concludes that in light of the fiduciary relationship, mudharib must fulfill the fiduciary duties being equal to the concepts of tabayyun and amanah in Islam. Based on freedom of contract, the parties can agree to insert the clauses to specify such legal duties in the contract. His legal responsibility can be determined, if mudharib has made an effort to mitigate the business risk, and taking no financial benefit behind the loss. This can serve as a solution to use mudharabah contact more frequently.","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"4 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
N. Zain, Izyan Farhana Binti Zulkarnain, Rusni Hassan
Shari’ah Governance Framework for Islamic Financial Institutions 2010 or SGFI was introduced as an effort to establish and enhance the corporate governance structure which is in line with the requirements of Shari’ah. Opposite from the conventional corporate governance, the Shari’ah corporate governance has distinguished features where the priority is to fulfil the Shari’ah-compliant characteristics. By referring into the application of Shari’ah governance structure as operated within Malaysian Islamic banking and finance institutions, uniquely, there are traces of Shura concept where it is significant in achieving the objectives of Shari’ah corporate governance. This article explores the essence of Shari’ah corporate governance structure of Islamic banking and finance, the traces of concept of Shura and the relevancy of Shura in achieving the Shari’ah corporate governance in Malaysia.
{"title":"Shari’ah Corporate Governance Structure of Malaysian Islamic Banking and Finance: The Traces of Shura","authors":"N. Zain, Izyan Farhana Binti Zulkarnain, Rusni Hassan","doi":"10.15640/JIBF.V3N1A3","DOIUrl":"https://doi.org/10.15640/JIBF.V3N1A3","url":null,"abstract":"Shari’ah Governance Framework for Islamic Financial Institutions 2010 or SGFI was introduced as an effort \u0000to establish and enhance the corporate governance structure which is in line with the requirements of \u0000Shari’ah. Opposite from the conventional corporate governance, the Shari’ah corporate governance has \u0000distinguished features where the priority is to fulfil the Shari’ah-compliant characteristics. By referring into the application of Shari’ah governance structure as operated within Malaysian Islamic banking and finance \u0000institutions, uniquely, there are traces of Shura concept where it is significant in achieving the objectives of \u0000Shari’ah corporate governance. This article explores the essence of Shari’ah corporate governance structure of \u0000Islamic banking and finance, the traces of concept of Shura and the relevancy of Shura in achieving the \u0000Shari’ah corporate governance in Malaysia.","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166468","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Proposal for the Dubai World Islamic Finance Arbitration Tribunal (DWIFAC) and Jurisprudence Office (DWIFACJO) as the Dispute Resolution Mechanism and Center for the Islamic Finance Industry","authors":"C. Paldi","doi":"10.15640/JIBF.V2N2A2","DOIUrl":"https://doi.org/10.15640/JIBF.V2N2A2","url":null,"abstract":"","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166384","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper examines the regulatory accommodation process of Shari’a-compliant financial institutions within the Italian legal framework.The paper is divided into four sections. The first two sections adopt a business-based approach drawinga comparison between the Islamic and the Italian banking models in terms of institutional and functional requirements. The third section suggests that Shari’a rules and, as a result, Shari’a-compliant financial operations, represent a cultural phenomenon, where “cultural” means that Islamic finance is a set of ways of thinking and behaving which every Muslim endorses step by steps thanks to the educational process.In the conclusions it is argued that the Italian legal system poses no formal hurdles to the accommodation of Islamic financial entities.
{"title":"Regulatory and legislative landscape for Islamic financial institutions: the case of Italy","authors":"G. Gimigliano","doi":"10.15640/JIBF.V2N2A4","DOIUrl":"https://doi.org/10.15640/JIBF.V2N2A4","url":null,"abstract":"The paper examines the regulatory accommodation process of Shari’a-compliant financial institutions within the Italian legal framework.The paper is divided into four sections. The first two sections adopt a business-based approach drawinga comparison between the Islamic and the Italian banking models in terms of institutional and functional requirements. The third section suggests that Shari’a rules and, as a result, Shari’a-compliant financial operations, represent a cultural phenomenon, where “cultural” means that Islamic finance is a set of ways of thinking and behaving which every Muslim endorses step by steps thanks to the educational process.In the conclusions it is argued that the Italian legal system poses no formal hurdles to the accommodation of Islamic financial entities.","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"2 1","pages":"43-66"},"PeriodicalIF":0.0,"publicationDate":"2014-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166453","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article analysis the issue of riba and capitalist banking interest in the light of the ethics of Islamic economics. It provides that many of the Muslim countries are Under Developing and dependent upon interest-based foreign aid for their survival. In this context, it seems impossible to establish an economy on the basis of zero rate-interest. In the light of the historical and contextual development of riba and capitalist interest it reveals that both have a different background. The former was a way of exploitation of the poor segment of society while the later was legalized to help poor segment of the society, to control the fluctuation of monetary value, to ensure capital growth and above all has become an unavoidable element of contemporary economic transactions. Hence, this article suggests that the contemporary mode of capitalist interest should be declared permissible by way of well recognized interpretive principles of necessity which means that necessity makes a prohibited thing permissible (al-darurat tubihu al-mahzurat) and public interest.
{"title":"Socio-Ethical Dimensions of Islamic Economy and Issue of Modern Interestand RIBA: An Analysis in the Light of the Economy of the Muslim World","authors":"Naseem Razi","doi":"10.15640/JIBF.V2N2A3","DOIUrl":"https://doi.org/10.15640/JIBF.V2N2A3","url":null,"abstract":"This article analysis the issue of riba and capitalist banking interest in the light of the ethics of Islamic economics. It provides that many of the Muslim countries are Under Developing and dependent upon interest-based foreign aid for their survival. In this context, it seems impossible to establish an economy on the basis of zero rate-interest. In the light of the historical and contextual development of riba and capitalist interest it reveals that both have a different background. The former was a way of exploitation of the poor segment of society while the later was legalized to help poor segment of the society, to control the fluctuation of monetary value, to ensure capital growth and above all has become an unavoidable element of contemporary economic transactions. Hence, this article suggests that the contemporary mode of capitalist interest should be declared permissible by way of well recognized interpretive principles of necessity which means that necessity makes a prohibited thing permissible (al-darurat tubihu al-mahzurat) and public interest.","PeriodicalId":31275,"journal":{"name":"Journal of Islamic Banking and Finance","volume":"2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67166408","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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