1,701 research outputs found

    The rise of islamic finance: 2-step murabaha / Ahmet Suayb Gundogdu.

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    The Islamic finance industry should refrain from replicating conventional tools by complicated scams which hold Arabic names. There is enough room for product development within the sphere of Islamic Shari’ah. Today, the Islamic finance industry is still heavily recourse to commodity Murabaha for liquidity management regardless of prohibition of the practice by Islamic Fiqh Academia. This mainly results from the lack of a proper liquidity management alternative for Islamic banks. Although Sukuk can serve the purpose to some extent, not only commodity Murabaha but also Sukuk is not expected to underpin the Islamic finance industry for the future. In this paper, 2-Step Murabaha is proposed as a strong alternative to the popular but questionable Islamic resource mobilization/liquidity management tools. It is suggested that the Islamic finance industry healthily rise on 2-Step Murabaha. The literature review part of the paper dwells on Islamic finance in the context of resource mobilization/liquidity management. The disbursement procedures in full detail are explained for the 2-Step Murabaha transaction in a case of a Gambian importer and an Egyptian exporter of yarn. Then, the structure is evaluated to suggest the 2-Step Murabaha to be embedded in stock exchanges in order to facilitate international trade while serving the Islamic finance industry for liquidity management

    Risk regulation in Islamic banking: Does Saudi Arabia need to adopt the risk regulation practices of Basel?

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    Proponents of Islamic finance often argue that the success of Islamic banks in the UK and Malaysia during the 2007-8 Financial Crisis is proof of the proposition that all Islamic banks (IBs) are immune from sub-prime-mortgage type shocks. The implementation of Basel practices in Saudi Arabia will be very difficult and is likely through various challenges. However, it is arguable that such practices may bring about change in a substantial way in the UAE market. Thus, this thesis will discuss features of IBs in the UK and Malaysia, and discuss the areas in which the Saudi market is mired in less risk than conventional markets in the UK and Malaysia. Using a qualitative methodology, this research sought to answer the primary research question, that is, “Does Saudi Arabia Need to Adopt the Risk Regulation Practices of Basel?” To be able to accurately answer this main question, it is necessary to determine whether the standardisation of accounting practices and regulatory principles can enhance Islamic finance organisations. It is likewise necessary to determine whether the Basel framework can be internalized by Islamic financial institutions to solve issues such as the inadequate coordination of financial markets in Saudi Arabia. The research sought to consider whether legal secularisation could be reconciled with Islamic models of finance in order to standardise banking processes across jurisdictions. It is vital to discuss this research problem as it is evident that Islamic banks are, by design, “safer” than conventional banks, which take fewer risks than conventional banking systems. Its ability to withstand the 2007-8 Financial Crisis can serve as example to other banking systems to follow to prevent the debilitating effects such a crisis can provide to the global financial system and the worldwide economy as a whole. This paper also discusses inherent risks in dealing with Saudi banks caused by structural weaknesses in the Saudi economy, further caused by a lack of transparency. Research from the content analysis and literature review demonstrated that certain components of Malaysian banking and banking in the UK, including Basel Frameworks (I, II, and III) can be adopted by the Islamic financial model in order to improve the overall banking structure in Saudi Arabia. Whilst Islamic accounting standards do not need to be as rigorous as some Basel Frameworks discussed in the study, implications for positive social change in Saudi Arabia include adopting policies which specialise in clearing defining risk management and policies which focus on improving corporate governance and bolstering transparency in Saudi markets. The central argument of this research therefore, is that the incorporation of pertinent Basel components, as well as those from the Malaysia and UK banking system, into the KSA banking system, will bring about improvements to the latter’s overall banking structure

    Criminality and cryptocurrencies:Enforcement and policy responses - Part II

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    Criminality and cryptocurrencies:Enforcement and policy responses - Part I

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    Malaysia’s Policy Responses to the Panic of 1997: An Islamic Perspective

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    This thesis explores the rationale behind the decisions of the Malaysian policymakers in response to the Panic of 1997, as Malaysia is the only country that had rejected the Washington Consensus while the rest of the crisis-affected countries pursued the orthodox policies. The thesis is to investigate whether the reasons behind the policy responses were due to adhering to the underlying principles of Shariah or mere political pragmatism. Identified by the World Bank as a newly industrialising economy (NIE), Malaysia symbolises a developing country with an impressive growth rate in the last thirty years prior to the Panic of 1997. The transformation to a rapid economic growth in the 1980s and 1990s resulted from a change of policies regarding social and economic development. It was a widespread perception that the reason for Malaysia’s rejection of IMF’s involvement was primarily due to prevent any intervention in its existing social affirmative action policy known as the New Economic Policy (NEP). Concurrently, Prime Minister Mahathir’s strong advocation towards the Islamisation policy had also made a significant impact in the development of Malaysia’s policy framework. The Washington Consensus via the IMF delegitimised the prevailing economic system in Southeast Asia by blaming the structural deficiencies in the financial and corporate sectors of the countries as the root cause of the Panic of 1997. The IMF believed that the Washington Consensus presents a model for institutional transformation. However, Malaysia had adopted the unorthodox capital control policy as a policy response, while the rest of the crisis-affected countries had accepted the Washington Consensus. The thesis adopts a historical institutional analysis in explaining the significance of the Islamisation policy and the importance of upholding the NEP and the likely impact of its reversal or revocation

    The alignment of the Saudi legal system with the international rules of electronic commerce

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    This thesis deals with fundamental questions of compatibility andadaptation in the regulation of electronic commerce as it impacts on the normsand precepts of Islamic law. It finds that in the Kingdom of Saudi Arabia, theresponse of the religious and civil authorities to the realignment of its laws ofcontract, in order to encompass the innovations and changes implicit in theelectronic environment, have been inhibited by misgivings about the nature ofthe electronic environment itself and by fears that some of the protectiveaspects of traditional contract formation will be lost.Based upon a detailed comparison of the various stages and components ofthe electronic and traditional contract, the thesis finds that the principlesunderlying Islamic law are not violated or substantively threatened by the newforms. It is shown that laws and treaties, created at an international level ofscrutiny and discussion, are now broadly in place and accepted by most of the‘developed’ world, with necessary allowance being made for future innovationand change.The Kingdom of Saudi Arabia, it is recommended, can only make progressin this field by a policy of greater engagement, both in respect of the nature ofthe electronic contract itself, and also with the arbiters of compromise in bodiessuch as the United Nations and the World Trade Organisation. It finds this progress to be essential to the health and well-being of Saudi society as awhole, and it suggests that any misgivings currently felt by the nation’slegislators are based more on misapprehension than on objective realities

    Trust and Money or Value Transfers: A study of the implications of global value conflict generated by UN Security Council Resolution 1373

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    Trust is a fundamental aspect of any given functional society. However, since late September 2001, the UN approach to global financial governance appears to have been driven by distrust of other less formalized money or value transfer (MVT) systems. At the core of this ‘Global Regulatory Effort’ (GRE) is UN Security Council Resolution (UNSCR) 1373, which mandated that states legislate to regulate all informal MVT systems. In particular, the MVT system known as ‘hawala’ was implicated by US authorities in the funding of the acts of terrorism committed on September 11 in 2001. Although the focus of this multilateral effort was predominantly on the Islamic hawala system, the regime targeted any MVT system not linked to an established commercial banking operation. In this way UNSCR 1373 put a line in the sand between trustworthy and untrustworthy financial service providers. The necessity of this unprecedented step was ostensibly in order to prevent any future global acts of terrorism and maintain international peace and security. However, the regime’s approach implicitly legitimized formal Westernstyle financial systems while delegitimising all others. This study contends that a significant implication of this securitized approach to global financial governance was the creation of a Global Trust Conflict (GTC). The Global Financial Crisis of 2007/2008 and the adoption of Bitcoin as legal tender by El Salvador emphasize the significance of this Conflict. Moreover, the emergence of blockchain technology, Decentralized Finance (DeFi), and Distributed Ledger Technology (DLT) represents a new and challenging front in which the implications of the Conflict may be significant. Particularly in terms of the prevailing nature of trust provision services throughout the global economy. As a result, new possibilities for the shape of global order have arisen as state and private interests compete to influence the future of remittances. This research argues that the UNSCR 1373 mandate is anti-competition and served to institutionalize distrust of non-bank MVT systems. This includes traditionally informal remittances and emergent decentralized value transfer systems built on blockchain technology. This thesis concludes that a Global Trust Conflict exists, which constitutes the most significant barrier to regulatory efficacy and compliance aimed at MVT systems

    THE PERFORMANCE OF MALAYSIAN ISLAMIC BANKING INDUSTRY AND THE IMPACT OF FOREIGN ISLAMIC BANKS

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    Malaysia’s determination to become a hub for Islamic banking in Southeast Asia has led the Central Bank of Malaysia to grant licenses to foreign Islamic banks to operate in the country. Due to the intense competition among Islamic banks, the introduction of more innovative products is projected to tap investment opportunities not only for Malaysia but also for the rapidly growing Southeast Asian region. This research assesses the significance of Malaysian Islamic banking since the introduction of the first Islamic bank two decades ago, and evaluates the competition among the Islamic banks in the country. The research evaluates the impact of foreign Islamic banks in Malaysia by measuring their contribution to the growth of the Malaysian Islamic banking industry. In relation to this, the study is designed to address three primary areas. First, to measure the performance of the Islamic banks in Malaysia by using financial ratios, data envelopment analysis (DEA), and the Malmquist Productivity Index. Second, to compare and evaluate the nature of competition and market structure of the Islamic banks in the country by employing the bank concentration ratio (CRk), Herfindahl-Hirschman Index (HHI), and the Panzar-Rosse (PR) model. Lastly, to validate the relationship between competition among Islamic banks in Malaysia and their financial performance. The selected financial ratios indicated that domestic Islamic banks performed better during the 2005 to 2012 period in terms of profitability, but the foreign Islamic banks excelled in terms of liquidity, risk, and solvency ratios. DEA results showed that the domestic Islamic banks are considered more efficient with the majority of domestic Islamic banks outperforming the foreign Islamic banks. Banks like Maybank Islamic, CIMB Islamic, and Alliance Islamic are considered among the top performers for technical efficiency and scale efficiency. The study also found that based on the Malmquist Productivity Index, the least efficient banks based on DEA have improved in technical efficiency, technology, and total factor productivity (TFP). The study also found that between 2008 and 2012, the Malaysian Islamic banking industry operated in monopolistic competition conditions with a moderately concentrated market structure. The introduction of foreign Islamic banks caused the market structure to become more competitive and less concentrated by comparing the results that include foreign Islamic banks against results generated with a subsample of domestic Islamic banks only. BNM’s financial reform and liberalisation of financial system proved to induce competition making the financial system more resilient, competitive, and dynamic. The Islamic banks have recorded consistent increased annual performance with the under-performing Islamic banks catching up to the top performers
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