An analysis of the normative parameters of reward and risk in Islamic finance

2020 ◽  
Vol 12 (3) ◽  
pp. 303-323
Author(s):  
Mohamed Benaicha
Keyword(s):  
Design Methodology ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Content Type ◽  
Academic Literature ◽  
Finance Industry ◽  
Risk Principle ◽  
Descriptive Approach ◽  
Practical Implications

Purpose This study aims to define the parameters of the reward-risk principle in Islamic finance as established in the literature and discuss propositions that are presented on how such a principle is to be applied to Islamic banking products. Design/methodology/approach A descriptive approach is used to explore the normative parameters and criticisms of the application of reward-risk in Islamic finance. Findings The study finds that the principle of reward-risk is embodied in the multi-component concept of ʿiwaḍ (counter value) which must be evident in market transactions that involve commercial exchanges. The components include risk, costs, effort, value-adding and capital, all of which apply uniquely to different contractual forms of financing. Research limitations/implications The study uses academic literature and industry documents along with modest contact with prominent practitioners who provided general feedback on prevalent Islamic finance industry practices. Practical implications This study exposits the variety of approaches in applying the reward-risk principle and sheds light on the primary elements of the principle which will facilitate its greater consideration by the Islamic finance industry. Originality/value This study is a meaningful attempt at conveniently summing up and applying the parameters that are considered when discussing the scope of the reward-risk principle in Islamic finance.

scholarly journals The internal challenges facing Islamic finance industry

2016 ◽  
Vol 9 (2) ◽  
pp. 222-235 ◽  
Author(s):  
Abdulazeem Abozaid
Keyword(s):  
Product Development ◽  
Design Methodology ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Banking And Finance ◽  
Finance Industry ◽  
Development Methodology ◽  
Shariah Governance

Purpose The paper aims to highlight the challenges facing Islamic finance industry and outline the prospectus of what constitutes a sound Islamic banking product in terms of both its Shariah control and product development methodology. Design/methodology/approach The paper analytically addresses the internal challenges facing Islamic finance industry by highlighting, first, the deficiencies in the existing Shariah supervisory work and, then, the deficiencies in the product development methodology followed in Islamic banks. Findings Islamic banking and finance is facing some internal challenges which require immediate action. Although facing the external challenges may be beyond the capacity of the industry players, Islamic banks have no excuse to overlook or turn a blind eye to their internal challenges which can be overcome by enacting Shariah governance for both products and Shariah control and reforming the methodology of product development. Originality/value This paper highlights an issue that has not received the needed attention, and it proposes the necessary solutions to the problems it identifies.

Limited purpose banking (LPB) and Islamic finance

Humanomics ◽  
2014 ◽  
Vol 30 (2) ◽  
pp. 122-135 ◽  
Author(s):  
Edib Smolo ◽  
Abbas Mirakhor
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Financial System ◽  
Islamic Finance ◽  
Extensive Literature ◽  
Content Type ◽  
Finance Industry ◽  
Islamic Financial Institutions ◽  
Alternative Solutions ◽  
Practical Implications

Purpose – This paper primarily aims to review and analyze a new model for Islamic finance based on Laurence J. Kotlikoff's idea of limited purpose banking (LPB). In addition, this paper aims to highlight, explain and discuss various aspects of LPB and how it suits the original aspirations of pioneer writers in Islamic finance. Design/methodology/approach – Based on an extensive literature review, this paper aims to highlight, explain and discuss the reform of the Islamic finance industry based on Kotlikoff's model of LPB. Findings – Based on a modified LPB model, Islamic financial institutions could be established to provide specific services with clear aims and objectives. These LPB Islamic financial institutions would operate in a similar way to LPB. Research limitations/implications – As there is no perfect plan, the proposal of this paper is far from being perfect and is open to discussions and improvements. The paper will, hopefully, spark off quite a discussion on the topic; may result in a better understanding of the model; and provide some alternative solutions to the current structurally ill financial system. Practical implications – The paper provides some practical ideas for a better implementation of Shari'ah principles in financial intermediation of the Islamic financial system. Originality/value – Kotlikoff's LPB proposal for reforming the financial system is new and has been directed to the conventional financial system. This paper represents the first attempt to apply his proposal to the Islamic finance industry.

Riba and interest in Islamic finance: semantic and terminological ıssue

2018 ◽  
Vol 11 (1) ◽  
pp. 131-138 ◽  
Author(s):  
Ugi Suharto
Keyword(s):  
Design Methodology ◽  
Conceptual Analysis ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Conceptual Level ◽  
Content Type ◽  
Banking And Finance ◽  
Islamic Jurisprudence ◽  
Practical Implications ◽  
Correct Expression

Purpose The aim of this paper is to argue analytically that interest and riba are not exactly the same and not an interchangeable terminology. There are similarities and differences between the two at the conceptual level. Design/methodology/approach To support the argument, the paper shows that it is possible to prove cases where the riba is involved but the interest is not. Hence, there is a situation of the presence of riba without interest. Furthermore, it is also possible to prove cases where the interest is involved but the riba is not. Hence, there is a situation of the presence of interest without riba. The notion and concept of interest in finance are analysed critically in comparison with riba in Islamic jurisprudence (fiqh Islami). So a comparative conceptual analysis is the main methodology of the paper. Findings The paper finally suggests that the correct expression should be that Islamic banking and finance is “a ribawi free of banking and finance” instead of “interest free of banking and finance” as it is popularised. Research limitations/implications The paper is conceptual in nature. No empirical analysis is pursued. Practical implications Islamic finance should not claim it self as interest-free finance, rather riba-free finance. Social implications It is more truthful to the society to say that Islamic finance is riba-free finance. Originality/value The paper is expected to contribute in the conceptual level of Islamic banking and finance’s understanding by clearing up the basic confusion and misconception about riba and interest. This would consequently minimise or even eliminate the taken-for-granted tendency of denoting the semantic of riba and interest as an interchangeable term, especially when writing in English and addressing the finance’s students and scholars. The semantic clarification between interest and riba hopefully becomes the main contribution of this paper.

scholarly journals Measuring resource efficiency and resource effectiveness in manufacturing

2018 ◽  
Vol 67 (9) ◽  
pp. 1854-1881 ◽  
Author(s):  
Mangesh Gharfalkar ◽  
Zulfiqur Ali ◽  
Graham Hillier
Keyword(s):  
Design Methodology ◽  
Inverse Correlation ◽  
Resource Efficiency ◽  
Waste Generation ◽  
Content Type ◽  
Academic Literature ◽  
Shared Data ◽  
Resource Intensity ◽  
Three Stages ◽  
Practical Implications

Purpose The purpose of this paper is twofold: first, to identify and analyse existing resource efficiency (RE) and resource effectiveness measures and indicators (REMIs); and second, to identify gaps and develop a new indicator of “operational resource effectiveness” (OREft) suitable for manufacturing units. Design/methodology/approach Research methodology consists of three stages: gap identification, development and testing. Through review of academic literature, 40 REMIs are identified and analysed. A survey of manufacturers is carried out to validate the hypothesis and seek inputs on the development of the new indicator. The proposed indicator is tested by comparing OREft index of two manufacturing units with each other, with resource intensity per unit (RIPU), waste intensity per unit (WIPU) and with four other REMIs. Findings Analysis of 40 REMIs clearly points towards the absence of a hypothesised REMI. In total, 78 per cent of manufacturers surveyed in north England substantiate the hypothesis. Inverse correlation established between the proposed OREft indicator, RIPU, WIPU and other comparisons is likely to validate the output generated by the proposed indicator. Research limitations/implications Testing of this indicator is limited to two dissimilar manufacturing units that shared data. Practical implications The proposed indicator is useful for comparing the operational resource effectiveness of individual factories over a period as well as with other factories. RIPU and WIPU captured in this indicator also represent operational RE that can be used to initiate improvement action. Originality/value Inclusion of both, the resource consumption and the waste generation along with discount/multiplying factors that capture the circularity aspects is likely to be the distinguishing feature of this indicator.

Are Islamic banks different? The application of the Radical Affinity Index

2019 ◽  
Vol 12 (1) ◽  
pp. 2-29 ◽  
Author(s):  
Leire San-Jose ◽  
Jon Cuesta
Keyword(s):  
Great Britain ◽  
Design Methodology ◽  
Islamic Banking ◽  
Ethical Dimension ◽  
Islamic Banks ◽  
Ethical Perspective ◽  
Content Type ◽  
Social Commitment ◽  
Practical Implications ◽  
Ethical View

Purpose The purpose of this paper is to extend the literature on Islamic banking by examining their ethical dimension using transparency, placement of assets, guarantees and participation from Radical Affinity Index. Design/methodology/approach To this end, a sample of 20 Islamic banks from 13 countries (Bahrain, Saudi Arabia, Malaysia, Pakistan, Kuwait, Tanzania, Great Britain, Oman, Iraq, Egypt, Bangladesh and Qatar) was used. Findings The results are robust to ethical effects. The evidence suggests that among Islamic banks, at least some of them could improve their ethical requirements of the Sharia; they obtained lower scores than ethical banks in terms of RAI variables (transparency, placement of assets, guarantees and participation). Research limitations/implications It is used a random sample rather than population with the limitations that entails. The variables in the index are based on ethical perspective; then, the index is applied in Islamic banking but with the ethical view limitation. Practical implications The Islamic banks have the option to increase their transparency including further information regarding the beneficiaries of the benevolent funds; moreover, it would offer a clearer view about their ethical and social commitment towards society. Originality/value Additionally, this paper broadens the scope of the literature by analysing the determinants of Islamic banking around ethical dimensions of financial entities.

Value- based Islamic banking and reporting in Bahrain

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Akhtar Ali Saeed Mohammed ◽  
Fadillah Mansor
Keyword(s):  
Annual Reports ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Reporting Standard ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Islamic Economic ◽  
Practical Implications ◽  
Specific Contribution

Purpose This paper aims to analyse whether the practices of Islamic banks in Bahrain are in line with value-based Islamic banking (VBIB) and reporting disclosure in the annual reports towards achieving their fundamental objectives of human-centred economic development and social justice. Design/methodology/approach Based on Islamic finance, Islamic economic principles and perception of Maqasid al-Shari’ah, this paper examines and assesses the current practices of Islamic financial institutions (IFIs) in Bahrain through content analysis of financial and annual reports of Islamic banks in Bahrain and interviews of Islamic banking experts. Findings The findings reveal that value-based banking (VBB) has not been translated fully into practice by the Islamic banks in Bahrain. Research limitations/implications The data analysis was restricted to Islamic banks in Bahrain. Practical implications This paper identifies the need for reporting standard development to improve the VBB practice in Bahrain in the future. Looking at the objectives of the IFIs, this paper introduces the concept of VBB in Bahrain, which includes ethical banking, responsible banking and social responsibility. The study adds value not only to the current Islamic finance literature but also helps many stakeholders, including prospective academics, who may conduct comparative studies in different jurisdictions throughout the world. Originality/value The specific contribution of this paper is the identification of the VBB practices and related disclosure in the Islamic banking industry in Bahrain. The study is useful to harmonise and standardise the practices of VBIB by the contemporary Islamic banks in Bahrain.

scholarly journals How open is OpenGLAM? Identifying barriers to commercial and non-commercial reuse of digitised art images

2019 ◽  
Vol 76 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Foteini Valeonti ◽  
Melissa Terras ◽  
Andrew Hudson-Smith
Keyword(s):  
Design Methodology ◽  
Art Museums ◽  
End Users ◽  
Institutional Perspective ◽  
Content Type ◽  
Image Tracking ◽  
Academic Literature ◽  
Risks And Benefits ◽  
Quality Image ◽  
Practical Implications

Purpose In recent years, OpenGLAM and the broader open license movement have been gaining momentum in the cultural heritage sector. The purpose of this paper is to examine OpenGLAM from the perspective of end users, identifying barriers for commercial and non-commercial reuse of openly licensed art images. Design/methodology/approach Following a review of the literature, the authors scope out how end users can discover institutions participating in OpenGLAM, and use case studies to examine the process they must follow to find, obtain and reuse openly licensed images from three art museums. Findings Academic literature has so far focussed on examining the risks and benefits of participation from an institutional perspective, with little done to assess OpenGLAM from the end users’ standpoint. The authors reveal that end users have to overcome a series of barriers to find, obtain and reuse open images. The three main barriers relate to image quality, image tracking and the difficulty of distinguishing open images from those that are bound by copyright. Research limitations/implications This study focusses solely on the examination of art museums and galleries. Libraries, archives and also other types of OpenGLAM museums (e.g. archaeological) stretch beyond the scope of this paper. Practical implications The authors identify practical barriers of commercial and non-commercial reuse of open images, outlining areas of improvement for participant institutions. Originality/value The authors contribute to the understudied field of research examining OpenGLAM from the end users’ perspective, outlining recommendations for end users, as well as for museums and galleries.

scholarly journals Industry professionalisation of strata title managers: what are the implications for governance?

2015 ◽  
Vol 33 (2) ◽  
pp. 187-204 ◽  
Author(s):  
Erika Altmann
Keyword(s):  
Qualitative Research ◽  
Pilot Study ◽  
Design Methodology ◽  
Social Implications ◽  
Small Scale ◽  
Research Project ◽  
Content Type ◽  
Academic Literature ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to explore the rise of strata manager as a newly emergent profession and note their impact on the governance within medium and high density, strata titled housing such as flats, apartments, town-houses and CIDs. Design/methodology/approach – This research presents finding from a small scale, qualitative research project focused on the interaction between the owner committee of management and strata managers. Findings – The introduction mandatory certification is championed by industry bodies. The strata managers considered they already demonstrated valuable attributes desired by committees of management. These differed to the attributes targeted by the new training regime, and the attributes valued by the committees of management. Research limitations/implications – This is a small scale pilot study. A larger study will need to be undertaken to confirm these results. Practical implications – There is a disjunct between the training and what strata managers consider relevant to undertaking their duties. This has significance for the ongoing governance of these properties and industry professionalisation. The resilience of Australia’s densification policies will depend on how learning will translate into better governance outcomes for owners. Social implications – One in three people within Australia’s eastern states lives or owns property within strata titled complex (apartments, flats and townhouse developments). The increasing number of strata managers and professionalisation within their industry has the ability to impact an increasing number of people. Originality/value – The impact of this new profession, and their requirements in terms of expertise has not been fully considered within existing academic literature.

Effects on agility of IT-business alignment

2019 ◽  
Vol 35 (4) ◽  
pp. 16-17
Keyword(s):  
Design Methodology ◽  
Reading Time ◽  
Reverse Effect ◽  
Content Type ◽  
Finance Industry ◽  
Business Alignment ◽  
Market Responsiveness ◽  
Market Turbulence ◽  
Pertinent Information ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings In the context of the Indian finance industry, strong links between IT and the rest of the firm promotes agility. However, market turbulence positively influences market responsiveness but has the reverse effect on process-related agility. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Revisiting green packaging from a cost perspective

2019 ◽  
Vol 26 (3) ◽  
pp. 1080-1104 ◽  
Author(s):  
Gaganpreet Singh ◽  
Neeraj Pandey
Keyword(s):  
System Dynamics ◽  
Reverse Logistics ◽  
Design Methodology ◽  
Content Type ◽  
Academic Literature ◽  
Green Packaging ◽  
Glass Bottles ◽  
Process Dimension ◽  
Practical Implications

Purpose The purpose of this paper is to explore green packaging from the process dimension. Specifically, it focuses on understanding the behavior of costs associated with installing green packaging infrastructure. Design/methodology/approach The study used system dynamics to design the model. The model was tested on three industries employed in manufacturing glass bottles to generalize the result. Findings The study concludes that cost of remanufacturing which initially is higher because of recollection phases and reverse logistics costs eventually becomes lower than new manufacturing as soon as system achieves stability and continues to follow the same trend over the period of time. Practical implications The study put forwards an explanation to the concerns of manufacturers who were unwilling to install green packaging or remanufacturing infrastructure into their operations because of several cost- and risk-related dilemmas. Originality/value The study extends the academic literature by answering the queries raised by Kassaye and Holloway (2015).

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