Islamic finance and the global financial crisis: an empirical study

Islamic finance can no longer be dismissed as a passing fad or as an epiphenomenon of Islamic revivalism. Islamic financial institutions now operate in over 70 countries. Their assets have increased more than fortyfold since 1982 to exceed $200 billion. In 1996 and 1997, they have grown at respective annual rates of 24 and 26 per cent.1 By certain (probably overly optimistic) estimates, up to half of the savings of the Islamic world may in the near future end up being managed by Islamic financial institutions. The first Islamic banks were created in the 1970s, at the time when the aggiornamento of Islamic doctrine on banking matters was taking shape. At the time, Islamic banks were typically commercial banks operating on an interest-free basis. Today, as a consequence of broad changes in the political–economic environment, a new generation of Islamic financial institutions, more diverse and innovative, is emerging as the doctrine is undergoing a new aggiornamento. Perhaps the most important development has been the growing integration of Islamic finance into the global economy. There is now a Dow Jones Islamic Market Index, which tracks 600 companies (from inside and outside the Muslim world) whose products and services do not violate Islamic law. Foreign institutions such as Citibank have established Islamic banking subsidiaries, and many conventional banks – in the Muslim world but also in the United States and Europe – are now offering ‘Islamic products’ that are sometimes aimed at non-Muslims.

Download Full-text

Risk Management Disclosure In Malaysian Islamic Financial Institutions: Pre- And Post-Financial Crisis

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v29i2.7647 ◽

2013 ◽

Vol 29 (2) ◽

pp. 419 ◽

Cited By ~ 9

Author(s):

Rosnadzirah Ismail ◽

Rashidah Abdul Rahman ◽

Normah Ahmad

Keyword(s):

Risk Management ◽

Financial Crisis ◽

Financial Institutions ◽

Islamic Law ◽

Global Financial Crisis ◽

Emerging Market ◽

Risk Disclosure ◽

Font Size ◽

Islamic Financial Institutions ◽

The Global Financial Crisis

The East Asian financial crisis in 1997 and later the global financial crisis in 2007 and 2008 had a big impact on the corporate world as many companies and financial institutions collapsed during that period. Poor governance systems and lack of transparency in reporting including lack of risk reporting and disclosure were blamed as the roots of the problem. Conventional financial institutions have widely practiced risk management within their organization, but it is still under-developed in Islamic financial institutions due to new emerging market and unique business structures which are based on Shariah or Islamic law. Therefore, this study examined the risk management disclosure by all 17 Islamic financial institutions in Malaysia from 2006 to 2009, covering the period before, during, and after the global financial crisis. A disclosure checklist consists of mandatory and voluntary items developed to measure the level of risk disclosure. The descriptive result shows the risk management disclosure among the Islamic Financial Institutions was satisfactory. Analysis for a four year period revealed that the risk disclosure has greatly improved before and after crisis indicating that Islamic Financial Institutions have taken the necessary steps to improve their disclosure.

Download Full-text

Ocena antykryzysowej polityki gospodarczej Stanów Zjednoczonych i wybranych państw członkowskich Unii Europejskiej w latach 2005–2014

10.31338/1641-2478pe.2.16.2 ◽

2016 ◽

pp. 26-46

Author(s):

Marcin Jan Flotyński

Keyword(s):

United States ◽

European Union ◽

Financial Markets ◽

Global Economy ◽

Global Financial Crisis ◽

The United States ◽

The European Union ◽

High Volatility ◽

The Global Financial Crisis ◽

Domestic Products

The global financial crisis in 2007–2009 began a period of high volatility on the financial markets. Specifically, it caused an increased amplitude of fluctuations of the level of gross domestic products, the level of investment and consumption and exchange rates in particular countries. To address the adverse market circumstances, governments and central banks took actions in order to bolster the weakening global economy. The aim of this article is to present the anti-crisis actions in the United States and selected member states of the European Union, including Poland, and an assessment of their efficiency. The analysis conducted indicates that generally the actions taken in the United States in response to the crisis were faster and more adequate to the existing circumstances than in the European Union.

Download Full-text

Collecting Fees for Safekeeping of Collateral: Rules and Applications in the Contemporary Islamic Financial Institutions

Journal of Environmental Treatment Techniques ◽

10.47277/jett/9(1)53 ◽

2020 ◽

Vol 9 (1) ◽

pp. 50-53

Keyword(s):

Financial Institutions ◽

Islamic Law ◽

Market Price ◽

Point Of View ◽

Actual Cost ◽

Islamic Banks ◽

Maturity Date ◽

Islamic Financial Institutions

The study aims to examine the Shari’ah legality of whether pledgor or pledgee should take care of collateral (marhun) during the period of the loan. Moreover, the study seeks to provide possible applications for the pledge (rahn) and clarify Shari’ah rules for each application. Malaysian Islamic banks apply pledge products by offering loans (qardh hasan) to the customers and requesting gold assets as collateral against a loan. The banks charge safekeeping fees to keep the gold until the maturity date of the loan. This practice combines loan and sale contracts in a single transaction. Accordingly, the study seeks to evaluate this practice from an Islamic point of view. Islamic law categorizes loans under charity contracts while the sale is categorized under contracts of exchange (mu’awadhat). The nature of the two contracts is different. Therefore, the study examines categories that combine loans and contracts of exchange in one transaction. The results reveal that it is not permissible for the pledgee to charge fees higher than market fees for the keeping of collateral. Charging fees that are higher than the market price is considered riba. According to Shari’ah rules, any kind of benefit derived from a loan is riba and thus it is prohibited. However, charging fees that are comparable to the market price and cover the actual cost for safekeeping of collateral is permissible. According to Islamic Fiqh Academy resolutions and AAOIFI standards, Islamic banks may charge fees for safekeeping of gold collateral considering that fees should be to the market fees and should only cover actual expenses.

Download Full-text

Mushārakah—A Realistic Approach to the Concept in Islamic Finance and its Application to the Agricultural Sector in Pakistan

Arab Law Quarterly ◽

10.1163/15730255-12341270 ◽

2014 ◽

Vol 28 (1) ◽

pp. 1-39

Author(s):

Lutfullah Saqib ◽

Kellie W. Roberts ◽

Mueen A. Zafar ◽

Khurram Khan ◽

Aliya Zafar

Keyword(s):

Financial Institutions ◽

Agricultural Sector ◽

Islamic Law ◽

Lower Class ◽

Islamic Finance ◽

Financial Problems ◽

Human Survival ◽

Realistic Approach ◽

Islamic Financial Institutions

Abstract Food is one of the basic necessities that is imperative for human survival. The majority of farmers related to agriculture belong to the lower class and are hence not in a position to fulfil their agricultural needs. Therefore, they must borrow from various sources, e.g., from individuals, organizations, and/or banks, using interest-based lending, which Muslims are prohibited from doing according to the Sharīʿah. Here the concept of mushārakah (participatory mode of finance) is the best option. The present work discusses the application of such transactions to overcome farmers’ financial problems. In this article, the concept of mushārakah is first elaborated in light of classical/contemporary Islamic law literature referring to its rules and regulations followed by a discussion on how mushārakah can be effectively applied to the agricultural sector. The concepts of muzāraʿah (temporary sharecropping contract), musāqah, diminishing mushārakah (al-mushārakah al-mutanāqisah), and customer agency are critically analyzed in such away to make these fit and viable for farmers and Islamic financial institutions.

Download Full-text

The Regulation of Islamic Finance in the United Kingdom

Ecclesiastical Law Journal ◽

10.1017/s0956618x10000827 ◽

2010 ◽

Vol 13 (1) ◽

pp. 69-77 ◽

Cited By ~ 1

Author(s):

Jonathan Ercanbrack

Keyword(s):

United Kingdom ◽

Financial Institutions ◽

Islamic Finance ◽

Islamic Banks ◽

Financial Industry ◽

Religious Dimension ◽

The United Kingdom ◽

Islamic Financial Institutions

This article examines the unique risks associated with Islamic financial institutions and the secular state's reticence to directly regulate their religious dimension. It argues that the state's method of regulating the Islamic financial industry ignores special reputational risks associated with the religious and cultural distinctiveness of Islamic banks.

Download Full-text

Special issue on Islamic financial institutions and the global financial crisis 2008/2009

International Journal of Islamic and Middle Eastern Finance and Management ◽

10.1108/imefm.2010.35203aaa.003 ◽

2010 ◽

Vol 3 (1) ◽

Keyword(s):

Financial Crisis ◽

Financial Institutions ◽

Global Financial Crisis ◽

Special Issue ◽

Islamic Financial Institutions ◽

The Global Financial Crisis

Download Full-text

Legal Aspect of Islamic Finance

Arab Law Quarterly ◽

10.1163/15730255-12341302 ◽

2015 ◽

Vol 29 (3) ◽

pp. 285-295

Author(s):

Reyadh Mohamed Seyadi

Keyword(s):

Financial Institutions ◽

Islamic Law ◽

Legal Aspect ◽

Islamic Finance ◽

Islamic Banks ◽

Islamic Institutions

Nowadays, a number of Islamic banks look forward to compete with contemporary conventional financial institutions. However, conventional transactions, which are not recognized by the Sharīʿah (Islamic law), are totally rejected when relying on ribā (usury). Therefore, although in principle it would not necessarily be inappropriate to compete with conventional institutions, Islamic institutions should carefully uphold the spirit and purposes of the Sharīʿah. Transactions should not simply be designed to meet all Islamic requirements while at the same time deviate from the substance and spirit of the Sharīʿah.

Download Full-text

Nervous Giant: China and the Financial Crisis

Pitt Political Review ◽

10.5195/ppr.2011.12 ◽

2011 ◽

Vol 8 (1) ◽

pp. 8-11

Author(s):

Patrick Farrell

Keyword(s):

United States ◽

Financial Crisis ◽

Global Economy ◽

Global Financial Crisis ◽

The United States ◽

Policy Decisions ◽

Trade Relationship ◽

Current Financial Crisis ◽

The Stability ◽

The Global Financial Crisis

While the current financial crisis is widely acknowledged to be global, surprisingly little attention has been paid to its effect on one of the largest players in the global economy. China has weathered the crisis extremely well, though its growth has slowed slightly. I will analyze this by looking at China’s purchases of debt, the Chinese holdings of debt in the United States and its growing holdings in Europe, and the policy decisions directing this. This shows an intriguing change in the policy decisions that led to China becoming such a large holder of American debt. China amassed its large holdings of debt from the United States by merit of the strong trade relationship between the two countries, as well as the stability of the U.S. dollar. However, China’s interest in buying up Italian debt and forming stronger bonds with other Eurozone and European countries seems to speak to a different motive. Rather than allowing its reserves of foreign capital to grow over time, as it did with its U.S. debt, China is making a more aggressive move in this case. Thanks to its relative stability during the crisis, I believe this shows us that China is seeking to both ensure the continued security of its economic growth and increase its economic influence, thus using the instability of the global financial crisis to kill two birds with one stone.

Download Full-text

Penerapan Maqashid Al-Shari‘ah Pada Lembaga Keuangan Islam

JES (Jurnal Ekonomi Syariah) ◽

10.30736/jesa.v3i1.39 ◽

2018 ◽

Vol 3 (1) ◽

Author(s):

Achmad Fageh

Keyword(s):

Islamic Law ◽

Global Financial Crisis ◽

Essential Elements ◽

Islamic Finance ◽

Minimal Impact ◽

Moral Framework ◽

Islamic Financial Institutions ◽

Principles Of Justice ◽

Conventional Systems ◽

Financial Issues

Islamic finance made its first appearance in the 1970s. Since its inception, Islamic finance has made phenomenal progress and progressed beyond its traditional market into a global phenomenon. The recent global financial crisis has also brought Islamic finance into navel attention. Regardless of the minimal impact accused on Islamic finance, the crisis offers an opportunity for introspection and evaluation. It is inevitable to determine whether it can be a viable alternative to conventional systems in global financial markets. Therefore, Islamic financial institutions must ensure that all transactions are in accordance with sharia, not only in the form and technical law, but more importantly, in their economic substance, which should be based on the objectives outlined by the sharia, also known as maqa>s}id al-shari>’ah. This article aims at examining the concept of maqa>s}id al-shari>’ah of Islamic jurisprudence in order to appreciate its contribution toward more comprehensive, rational and realistic answers to contemporary financial issues and thereby to increase the awareness of the maqasid approach in structuring and developing Islamic finance products. For this purpose, the author examine the literal and conceptual meaning of maqa>s}id al-shari>’ah and scrutinise its position in Islamic law. They also highlight the essential elements of maqasid al-shari'ah and explain how this approach may contribute to better solutions for various Islamic finance issues and challenge. Islamic finance as an institution based on the ethical and moral framework of Islamic law assumes a distinctive role in society. Furthermore, the maqashid al-shari’ah framework also implies that. The characteristics of Islamic finance institutions are shaped by higher Islamic legal objectives that emphasize overall social and economic goodness rather than infectious greed and infectious individualism. Productive benefits are commendable as long as they are in accordance with the principles of justice as determined in the sharia. Keywords: Framework, Maqashid al-Shari‘ah, Islamic Finance

Download Full-text

PENERAPAN MAQASID AL-SHARI‘AH PADA LEMBAGA KEUANGAN ISLAM

JES (Jurnal Ekonomi Syariah) ◽

10.30736/jes.v2i2.42 ◽

2018 ◽

Vol 2 (2) ◽

pp. 226-242

Author(s):

Achmad Fageh

Keyword(s):

Islamic Law ◽

Global Financial Crisis ◽

Essential Elements ◽

Islamic Finance ◽

Minimal Impact ◽

Moral Framework ◽

Islamic Financial Institutions ◽

Principles Of Justice ◽

Conventional Systems ◽

Financial Issues

Islamic finance made its first appearance in the 1970s. Since its inception, Islamic finance has made phenomenal progress and progressed beyond its traditional market into a global phenomenon. The recent global financial crisis has also brought Islamic finance into navel attention. Regardless of the minimal impact accused on Islamic finance, the crisis offers an opportunity for introspection and evaluation. It is inevitable to determine whether it can be a viable alternative to conventional systems in global financial markets. Therefore, Islamic financial institutions must ensure that all transactions are in accordance with sharia, not only in the form and technical law, but more importantly, in their economic substance, which should be based on the objectives outlined by the sharia, also known as maqa>s}id al-shari>’ah. This article aims at examining the concept of maqa>s}id al-shari>’ah of Islamic jurisprudence in order to appreciate its contribution toward more comprehensive, rational and realistic answers to contemporary financial issues and thereby to increase the awareness of the maqasid approach in structuring and developing Islamic finance products. For this purpose, the author examine the literal and conceptual meaning of maqa>s}id al-shari>’ah and scrutinise its position in Islamic law. They also highlight the essential elements of maqasid al-shari'ah and explain how this approach may contribute to better solutions for various Islamic finance issues and challenge. Islamic finance as an institution based on the ethical and moral framework of Islamic law assumes a distinctive role in society. Furthermore, the maqa>s}id al-shari>’ah framework also implies that. The characteristics of Islamic finance institutions are shaped by higher Islamic legal objectives that emphasize overall social and economic goodness rather than infectious greed and infectious individualism. Productive benefits are commendable as long as they are in accordance with the principles of justice as determined in the sharia.

Download Full-text