Does corruption affect Islamic banking? Empirical evidence from the OIC countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zuhairan Yunmi Yunan
Keyword(s):  
Empirical Evidence ◽  
Current Literature ◽  
Design Methodology ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Performance Measurements ◽  
Dynamic Panel ◽  
Content Type ◽  
Islamic Countries ◽  
The Impact

Purpose This paper aims to examine whether the level of corruption affects profitability and soundness of Islamic banking. Design/methodology/approach This paper uses a dynamic panel of 61 Islamic banks from 12 Organization of Islamic Cooperation (OIC) countries covering the period between 2016 and 2018. Findings This paper finds that the empirical evidence examined shows that corruption does affect the profitability and soundness of Islamic banks. Originality/value The value of this paper is to emphasize further understanding of corruption behaviour on Islamic banking in Islamic countries. This paper contributes to filling the gaps in the current literature on corruption and Islamic banking. Existing literature has only focussed on either profitability or soundness of Islamic banking, whereas this paper analyses the impact of corruption levels for both performance measurements simultaneously.

scholarly journals Do Islamic banks gain from corruption and money laundering (ML)?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kinza Aish ◽  
M. Kabir Hassan ◽  
Qamar Uz Zaman ◽  
Sadaf Ehsan ◽  
Khurram Abbas ◽  
...  
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Random Effect ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Profitability ◽  
Content Type ◽  
Real Model ◽  
Effect Regression ◽  
The Impact

Purpose This paper aims to examine the impact of corruption and money laundering (ML) on the profitability and stability of Islamic banks. Design/methodology/approach This study used the data of 53 conventional and 19 Islamic banks of Pakistan and Malaysia to have comparative insights. The empirical methods include the fixed effect and random effect regression and generalized methods of moment for robust results. Findings The results indicate that Islamic banks gain from corruption and ML. Corruption and ML affect bank profitability and stability positively in a less corrupt environment, i.e. Malaysia; however, corruption hurts Islamic banks’ performance, and ML favours Islamic banking profitability and stability in a more corrupt environment, i.e. Pakistan. Originality/value The present study pioneers the debate on corruption and ML related to Islamic banking profitability and stability. This study provides important insights to regulators and Shariah advisors to build a real model of Islamic banking.

Just how loyal are Islamic banking customers?

2018 ◽  
Vol 36 (3) ◽  
pp. 410-422 ◽  
Author(s):  
John J. Ireland
Keyword(s):  
Conjoint Analysis ◽  
Design Methodology ◽  
Price Sensitivity ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Market Simulation ◽  
Conventional Banks ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to determine the rate difference required to persuade Islamic banking customers to switch to conventional banks. Design/methodology/approach A choice-based conjoint analysis survey was administered to 300 UAE Islamic banking customers. Customer utilities for Islamic and conventional banks, products and prices were developed to test hypotheses while a market simulation estimated the impact of rate changes on choice shares. Findings Overall, Muslim customers of Islamic banks strongly preferred Islamic banks and products. However, 43 percent were willing to switch to conventional banks to obtain better rates. Indeed, the share choosing conventional banks rose from 25 percent when rates were the same to 68 percent when conventional products offered 2 percent better rates. Research limitations/implications This research requires replication and extension in appropriate contexts such as Malaysia and Indonesia. Moreover, the existence of price sensitivity tiers implies underlying benefit segments that should be studied. Practical implications As so many Islamic banking customers would switch to conventional banks for better rates, it seems that conventional banks compete with Islamic banks for most clients. Islamic banks should price accordingly. Originality/value This is the first study to quantify the loyalty of Islamic banking customers in terms of price and, consequently, the first to demonstrate the existence of price sensitivity tiers. It is also the first in this field to apply conjoint analysis and market modeling.

scholarly journals A comprehensive appraisal of Sharīʿah governance practices in Malaysian Islamic banks

2020 ◽  
Vol 12 (3) ◽  
pp. 381-400
Author(s):  
Babak Naysary ◽  
Marhanum Che Mohd Salleh ◽  
Nurdianawati Irwani Abdullah
Keyword(s):  
Questionnaire Survey ◽  
Design Methodology ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Senior Managers ◽  
Policy Document ◽  
Content Type ◽  
Team Members ◽  
Governance Practices ◽  
The Impact

Purpose This study aims to empirically investigate the impact of the Sharīʿah Governance Framework (SGF) on improving Sharīʿah governance practices in Islamic banks in Malaysia and in addressing its related issues. Design/methodology/approach Data collection was carried out using a comprehensive questionnaire survey, which was developed primarily based on SGF-2010 and arguments in the literature. The sample for this study includes key functionaries in Sharīʿah governance including senior managers, Sharīʿah committee (SC) and Sharīʿah team members of Islamic banks in Malaysia. Findings The analysis of scores obtained from the questionnaire survey–including 41 items representing current significant issues in Sharīʿah governance–indicates that SGF-2010 has been successful in achieving its objectives and in addressing related issues. The results of the paired sample t-test show significant improvements in Sharīʿah governance practices in Malaysian Islamic banks in light of the aforementioned guideline by Bank Negara Malaysia. Research limitations/implications Findings of this research suggest that among the five essential pillars of Sharīʿah governance, namely, accountability and responsibility, independence, competence, confidentiality and transparency, most of the improvements and changes brought about by SGF-2010 are attributable to accountability and responsibility. However, there is still room for improvement in other components of the SGF, particularly with regard to transparency and the independence of the SC and Sharīʿah team. Originality/value Given the importance of Sharīʿah governance and considering recent endeavours to improve Sharīʿah-compliant culture among Islamic banks in Malaysia, this research is among the first attempts to empirically and comprehensively delve into this subject and evaluate its main issues by directly contacting key players in the Islamic banking industry and providing first-hand highlights. This research also compares the findings based on SGF-2010 with the requirements of SGF-2017 and Sharīʿah Governance Policy Document (SGPD-2019), which were released after this research was completed, where applicable.

The consumers’ commitment and materialism on Islamic banking: the role of religiosity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Junaidi Junaidi ◽  
Ready Wicaksono ◽  
Hamka Hamka
Keyword(s):  
Structural Equation ◽  
Survey Study ◽  
Equation Modeling ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Positive Effects ◽  
Islamic Bank ◽  
Muslim People ◽  
The Impact

Purpose This paper aims to investigate whether and how religiosity (e.g. extrinsic and intrinsic) influences the mediator variables (consumers’ commitment and materialism) in the Islamic bank consumers context. It also examines how the mediators should be influence consumers’ preferences. Design/methodology/approach In total, 658 Muslim people and Islamic bank consumers were recruited for a survey study and structural equation modeling was used to test the research hypotheses. Findings The empirical results indicate that religiosity (e.g. extrinsic and intrinsic) has significant and positive effects on consumers’ commitment and materialism, whereas intrinsic religiosity has no significant effect on consumers’ commitment which subsequently influences consumers’ preference. Furthermore, mediator variables (e.g. consumers’ commitment and consumers’ materialism) have partial mediators between religiosity and consumers’ preferences. Research limitations/implications The current study was limited to Indonesian Muslim people; there is a future need to study consumers’ attitudes and engagement in religious products and services (e.g. Islamic brands). It is can help practitioners, regulators and researchers to observe the dynamic behavior to elaborate on the impact of religion and Islamic products on consumers’ preference. Practical implications The bank managers and regulators should enhance the information of products and services Islamic banks and the difference principle between conventional banks. Moreover, enlighten the consumers about the principle operation of Islamic banks from the perspective of marketing and religiosity. Originality/value This study contributes to consumers’ behavior literature and, specifically, for the decision-making process through developing and testing a model of religious determinants toward Islamic bank products, as well as offers new insights into the determinants of religion and consumers’ decision process toward Islamic banking.

Sustaining corporate culture in a world of hybrid work

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peter Buell Hirsch
Keyword(s):  
Corporate Culture ◽  
Current Literature ◽  
Design Methodology ◽  
White Collar ◽  
Subjective Assessment ◽  
Social Implications ◽  
Content Type ◽  
The Subject ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to examine the challenges to sustaining corporate culture in a world of hybrid working. Design/methodology/approach This paper is a review of current literature on the impact of remote and hybrid working on white-collar employees. Findings There is little consensus on whether remote/hybrid working will harm or strengthen corporate culture. Research limitations/implications The viewpoint is a subjective assessment of a limited number of articles on the subject Practical implications It is not entirely clear how those responsible for corporate culture can act on the findings. Social implications In a world in which corporations are experiencing a shortage of talent, how they handle corporate culture will be increasingly important. Originality/value While much has been written on the impact of remote working, this viewpoint takes the original view that strong corporate cultures rely more on the attitudes and actions of individual employees that company programs or initiatives.

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.

Empirical evaluation of structure-conduct-performance paradigm as applied to the Iranian Islamic banking system

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahdi Ghaemi Asl ◽  
Muhammad Mahdi Rashidi ◽  
Alireza Ghorbani
Keyword(s):  
Market Structure ◽  
Market Share ◽  
Balance Sheet ◽  
Empirical Evaluation ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Simple Regression Model ◽  
The Impact

Purpose This paper aims to investigate the impact of market structure and market share on the performance of the Islamic banks operating in the Iranian banking system based on the structure-conduct-performance (SCP) paradigm. Design/methodology/approach The Iranian Islamic banking system’s market structure is evaluated by using the econometrics method to test the validity of the traditional SCP paradigm. For this purpose, the authors estimate a simple regression model that is consisted of several independent variables, such as the market share, bank size, real gross domestic product, liquidity and Herfindahl-Hirschman index as a proxy variable for concentration and one dependent variable, namely, the profit as a proxy for performance. The panel data includes a data sample of 22 Islamic banks operating from 2006 to 2019. Data are extracted from the balance sheet of Islamic banks and the time-series database of the Central Bank of Iran and World Bank. Findings The study’s findings indicate that both concentration and market share have a positive impact on the performance of banks in the Iranian Islamic banking system. This result is contradicted with both traditional SCP and efficient structure hypotheses; however, it confirms the existence of oligopoly or cartel in the Iranian Islamic banking system that few banks try to gain the highest share of profit and maintain their market share by colluding with each other. This result is in contradiction with other research studies about the market structure in the Iranian banking system that claimed that banks in Iran operate under monopolistic competition. In addition, it shows that the privatization of some banks in Iran does not improve and help competition in the Iranian banking system. Originality/value This paper is a pioneer empirical study analyzing the market structure, concentration and collusion based on the SCP paradigm in Iranian Islamic banking. The results of the study support the existence of collusive behavior among the Islamic bank in Iran that is not aligned with Sharia. This study clearly shows the difference between ideal Islamic banking and Islamic banking in practice in Islamic countries. This clearly indicates that only prohibiting some operations like receiving interest, gambling and bearing excessive risk is not enough. In fact, the Islamic banking system should be based on the Sharia rule in all aspects and much more modification and study have to be done to achieve an appropriate Islamic banking system. These possible modifications to overcome the issues of cartel-like market structure and collusive behavior in the Iranian Islamic banking system include making the Iranian banking system more transparent, letting foreign banks enter the Iranian banking system and minimizing the government intervention in the Iranian banking system.

House financing: contracts used by Islamic banks for finished properties in Malaysia

2020 ◽  
Vol 11 (1) ◽  
pp. 168-178 ◽  
Author(s):  
Aishath Muneeza ◽  
Muhammad Fahmi Fauzi ◽  
Muhammad Faisal Bin Mat Nor ◽  
Mohamed Abideen ◽  
Muhammed Maher Ajroudi
Keyword(s):  
Research Finding ◽  
Design Methodology ◽  
Banking Industry ◽  
New Products ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Modus Operandi ◽  
Content Type ◽  
Secondary Sources ◽  
Insight Into

Purpose The purpose of this paper is to find out the existing practices of the Islamic banks in providing financing to the customers who have a requirement to purchase a finished property and to examine the existing products used by the Islamic banks in this regard by providing an insight into the modus operandi of these products. In doing this, attempt is made to find out the most famous product offered by the Islamic banks in this regard and to find out whether in reality, Malaysian Islamic banking industry has moved away from Bai Bithaman Ajil (BBA) or not. Design/methodology/approach This is a qualitative research, largely library-based, and it will consist of secondary sources such as books, journals, articles and other sources related to the Islamic house financing in Malaysia for finished properties. Recent information of the practises of the banks in this regard is obtained from the official websites of the banks. Findings It is found from this study that majority of Islamic Banks in Malaysia prefer to use the Commodity Murabahah facility for finished property. This finding contradicts with the observations made by some scholars who state that in Malaysia, BBA was initially used, and nowadays, the use of Musharakah Mutanaqisah is more common. The reason why Commodity Murbahah has gained popularity is because of the fact that via the Bursa Suq Al Sila platform, it is easy, swift, reliable, profitable, cheaper, convenient and has zero risk to do this type of transaction at the comfort of the office. It is recommended in this paper to use Musharakah Mutanaqisah, as this contract is an innovative contract that is classified as an equity contract under shariah where risk is shared between the parties. There is need to conduct further research to implement Musharakah Mutanaqisah in Malaysia, specifically to reduce the risk that Islamic Banks will bear by practicing this contract. Originality/value The findings of this paper might create confusion among readers, as some may perceive that the finding of the paper is not new as BBA has been dominating Islamic house financing industry from the inception of Islamic banking in the country, and BBA and Murabahah are similar in nature, and as such, commodity Murabahah is also a Murabahah transaction. The reality that needs to be understood is that the way BBA was or is practised in Malaysia in relation to Islamic house financing is that in the name of BBA, the transaction actually followed the Bai’ ‘inah contract, which is a controversial contract among the shariah scholars. Likewise, commodity Murabahah is also a different contract than Murabahah, as it actually refers to tawarruq. As such, this research finding is important to the Islamic banking industry to understand that Malaysia has moved away from the Bai’ ‘inah contract practised in the name of BBA in Islamic house financing, and there are new products introduced by the Islamic banks in Malaysia to replace this practice which were criticised by Shariah scholars.

The impact of religiosity on luxury brand consumption: the case of Saudi consumers

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tagreed Saleh Abalkhail
Keyword(s):  
Saudi Arabia ◽  
Design Methodology ◽  
Positive Relationship ◽  
Muslim Women ◽  
Capital City ◽  
Luxury Consumption ◽  
Content Type ◽  
Luxury Brand ◽  
Islamic Countries ◽  
The Impact

Purpose The purpose of this study was to examine the impact of religiosity on luxury brand consumption among Muslim women. Design/methodology/approach A total of 322 women were surveyed. Data was collected in the capital city of Saudi Arabia and assessed using SEM. Findings The findings revealed that religion impacts consumers’ attitudes towards luxury brand consumption. A positive relationship was found between attitude towards luxury and luxury consumption. Also, attitude towards luxury mediated the relation between religiosity and luxury consumption. Originality/value The study’s findings serve to remind the retailers in Islamic countries to keep in mind the importance of religion in consumers’ preferences and selections.

Islamic bank rent

2014 ◽  
Vol 7 (2) ◽  
pp. 170-181 ◽  
Author(s):  
Yasushi Suzuki ◽  
S.M. Sohrab Uddin
Keyword(s):  
Empirical Evidence ◽  
Banking Sector ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Islamic Bank ◽  
Franchise Value ◽  
Conventional Banks ◽  
First Time ◽  
Rent Theory

Purpose – This paper aims to draw on the bank rent approach to evaluate the existing pattern of financing of Islamic banks and to propose a fairly new conceptualization of Islamic bank rent. Design/methodology/approach – The bank rent theory is adopted to generate the theoretical underpinnings of the issue. After that, empirical evidence from the banking sector of Bangladesh is used to support the arguments. Findings – Repeated transactions under murabaha are observed in the Islamic banking sector of Bangladesh. The asset-based financing gives the Bangladeshi Islamic banks relatively higher Islamic bank rent opportunity for protecting their “franchise value” as Shari’ah-compliant lenders, while responding to the periodic volatility in transaction costs of profit-and-loss sharing. Research limitations/implications – The bank rent approach suggests that the murabaha syndrome can be ironically justifiable. On the other hand, the current profit-and-loss sharing risk provides an idea of the difficulty in assuming the participatory financing with higher credit risk in practice. Islamic scholars and the regulatory authority need to design an appropriate financial architecture which can create different levels of rent opportunities for Islamic banks to avail the benefit from the variety of Islamic financing as declared by Islamic Shari’ah. Originality/value – This paper introduces a fairly new concept of “Islamic bank rent” to make sense of the murabaha syndrome. This approach also contributes to clarifying the unique risk and cost to be compensated with the spreads that Islamic banks are expected to earn. To draw empirical evidence, as far as it could be ascertained, the data of both Islamic banks and conventional banks with Islamic banking windows/branches are used for the first time.

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