Структура и содержание баланса исламского банка в целях раскрытия сущности исламской банковской системы

Islamic Banking and Finance in South-East Asia: Its Development and Future. By Angelo M. Venardos. Singapore: World Scientific Press, 2006. Pp. 238. Spanning more than seventy-five countries and charting an estimated average annual growth of 15 to 20 per cent, Islamic finance has emerged as a globally recognized and accepted form of financing. Southeast Asian regulators and stakeholders increasingly face challenges and opportunities in integrating the system of Islamic financing into mainstream systems of financing. With interest in Islamic finance rising rapidly worldwide, Singapore-based banker, Angelo M. Venardos's volume, Islamic Banking and Finance in South-East Asia, turns the spotlight on Southeast Asian forays into Islamic financing. In a concise volume, Venardos draws attention to the emerging Islamic financial hubs of Malaysia, Indonesia, Labuan, Singapore, and Brunei. As destinations that demonstrate considerable promise, the growth of Islamic finance in these four centres is outpacing many business segments in the global banking system. Recognizing the promise that Southeast Asia exhibits, Venardos's study covers the origins of Islamic finance, the fundamentals of its practice, and legal issues and challenges in Southeast Asia. Islamic Banking and Finance in South-East Asia is a valuable addition to the existing repertoire on Islamic finance. With much of the existing literature focused on the Gulf and the Middle East, this study is one of the early pioneers in investigating the scope of Islamic finance in Southeast Asia. Venardos's volume will be of interest to an audience keen on exploring the historical developments, techniques, and rules and regulations of Islamic financing in the region. Written in a straightforward style and organized in an easy-to-digest format, the coverage of this book is wide-ranging. Islamic Banking and Finance draws from the disciplines of politics, law, religious studies, economics, and finance to provide an overview of the characteristics and operation of Islamic banking and finance in Southeast Asia. Venardos approaches Islamic finance by setting it in the context of the underpinnings of Islam and the economic system it advocates. He delineates the major tenets of the Islamic belief system, highlights the key values in financial decisionmaking, and chronicles the spread and influence of Islam. He also considers the central questions of how Islamic principles are interpreted and applied across Southeast Asian countries. The role of Islamic beliefs and social values play in ordering financial transactions and structuring financial institutional behaviour are also important themes in this volume. The evolution of Islamic finance, as governed by shari'a law and Islamic jurisprudence, is contextualized in the development of an economic system that advances the goals of a just and fair society. Outlining the contours of Islamic commercial law, Venardos juxtaposes conventional JudaicGreco law and Islamic shari'a law. The close historical connection between Islam and commerce is an idea that is threaded through the thirteen chapters that comprise this book. The moderation of business and financial activities by spirituality is central to the practice of Islamic finance. Going beyond the well-known prohibition of paying or receiving interest (riba), Islamic commercial law also stipulates that property and its ownership are grounded in the Quran, and the Sunna are matters with which God is concerned. The inextricability of profit and loss sharing schemes from the practice of Islamic finance is also explored in depth. Business partnerships divide profits and losses in accordance with the capital share and effort, and such arrangements are not rooted in guaranteed rates of return. In contrast to interest-based financing of conventional systems, Islamic finance relies heavily on equity-based systems of financing, where the efforts and risk carried by business partners are the sole determinants of the profit and loss sharing arrangements. …

In light of India’s growing Muslim population, which is projected to become the largest in the world by 2050, and the subsequent need to address their financial integration, this paper argues for the establishment of a comprehensive legal and regulatory framework for Islamic Banking and Finance (IBF) in India. It examines the two major reasons for the need for IBF in India. First, a significant proportion of Indian Muslims are unable to make investments because their investments are not adequately supported by banks and second, this has deepened their financial exclusion. It also identifies the barriers to the growth of IBF in India, which prevents investments from Muslims abroad as well. It also looks at past efforts to incorporate IBF into the financial system. This paper seeks to make certain suggestions for reform in the legal framework so as to accommodate IBF. It examines the two approaches towards the integration of IBF. The first is that of a dual banking system, where IBF operates under a specialised parallel legislation alongside the conventional banking system. The second approach is a piecemeal approach where additions and amendments are made to existing legislation, which also govern the conventional banking system. This paper argues that a dual banking system would be most workable as India’s financial system is otherwise largely drawn on the conventional banking system based on deposits and interest; a specialised system enables better regulation of Islamic Financial Institutions.

This paper aims to present recommendations that can immune a conventional financial system against the global crisis, particularly the Covid-19 pandemic crisis from the lens of Islamic finance. This paper contends that Islamic finance is a relatively immune financial system comparing to the mainstream financial system by eliminating Riba and considering only asset-backed transactions as fruitful ones. This paper begins with the conceptual investigation of the literature on the principles of Islamic finance. The literature’s origins include primary sources (Quraan and hadith) and secondary sources (books, journals, and online resources). This paper is only conceptual and does not aim to examine the issues or theories empirically. The article will be useful to develop hypotheses for future research, especially in Islamic finance. Islamic concepts will of interest, especially for countries that adopt the conventional financial system. This paper will also be useful in the introduction for both Islamic and conventional finance practitioners alike. This paper provides a conceptual model to substitute the dominant conventional economics. Highlights the necessary steps to reconsider the conventional financial system. Islamic finance can mitigate the impact of COVID-19 on the economies mainly because of the PLS (profit-loss sharing) system and Islamic ethics in financial transactions. The paper shows its originality in substance and makes a unique contribution to the literature on systems and ethics by emphasizing Islamic finance practices approaching an effective alternative to conventional finance. Keywords: Islamic finance, mainstream finance, Covid-19JEL Classifications: G00, Y9

Purpose The purpose of this paper is to comparatively examine the cost and the overlooked revenue efficiency of Islamic and commercial banks in the aftermath of the crisis, operating in nine MENA-based countries during the 2010-2017 financial period, where the established empirical work is relatively limited. The authors also update the research where they use recent data sets and they provide for a targeted, structured literature review pre- and post-crisis in the Gulf region. Design/methodology/approach The authors examine cost and revenue efficiency of 25 major Islamic banks (IBs) and 25 major conventional banks (CBs). They conduct tests on the determinants of such variables. In the first stage of the analysis, they measure efficiency by using the data envelopment analysis (DEA) technique. The analysis performs regressions where these also reveal that the bank efficiency index is influenced by various bank type-specific attributes. It also seems that tighter restrictions on bank activities are negatively associated with bank efficiency. Second stage analysis, which accounts for banking environment and bank-level characteristics, confirms these results. Findings Conventional banks are both more cost and revenue efficient than Islamic banks over the period under examination. The analysis also reveals that the bank efficiency index is influenced by bank-type attributes. Greater presence of fixed capital resources has positive effects on growth in both Islamic and conventional banking. The major constraints impeding Islamic banking growth include labour costs. The authors examine whether and how bank-type orientation affects the cost and revenue efficiency of conventional and Islamic banks. They find that post-crisis Islamic banks underperform their conventional counterparts on both accounts within a mixed banking system. Research limitations/implications This study did not include comparative data before the 2008 financial crisis. There is also a great deal of heterogeneity among Islamic banks in the samples that have been examined here and by other researchers and the constructed efficiency scores should be interpreted cautiously as divergent Islamic banks are pooled in the same samples. Practical implications This study identified factors that may help bank managers to improve their financial outlook by controlling revenue and cost efficiency profitability. These factors could as well help to understand how some indicators affect both cost and revenue efficiency, particularly in Islamic banking. It also seems that tighter restrictions on Islamic bank activities are negatively associated with bank efficiency. Islamic banks that directly compete with their conventional counterparts in the aftermath of the crisis are less efficient on both the cost and revenue frontiers. They are potentially hindered by the differential regulations of supervising authorities in dual banking systems. Social implications The authors provide recommendations regarding regulatory and other issues that are relevant to Islamic banking and further research is suggested. Findings are relevant to a variety of stakeholders (managers, policymakers and regulators). Islamic banking authorities could re-examine the benefits of partially moving to a more standardized/conventional system of banking by lifting some trading restrictions. In addition, developing and maintaining managerial skills is an indispensable instrument for the long-term endurance of any system. A related aspect is thus an effort to determine the holistic efficiency (including managerial) of Islamic banks as a guide for policymakers to improve managerial performance. Originality/value There is relatively limited empirical work that investigates the efficiency between Islamic and conventional banking in the aftermath of the crisis in the Gulf region despite the growing importance of this region on political and economic levels. The authors also examine the revenue efficiency measure often under-researched in the literature and particularly important for comparative studies. Overseas-owned banks have attained much higher infiltration levels in middle-eastern countries over the past decade. It has also been suggested that market penetration differences may also be related to bank efficiency concerns among countries and their financial systems as opposed to types of banks.

PurposeConventional insurance creates a gap in the financial system across the world that manifests from the global financial and economic crisis. There is an increasing demand for insurance schemes that will bridge the gap of financial and economic crisis globally. More recently, there is an advocacy in Saudi Arabia for achieving Vision 2030 by various facets of human endeavours such as strengthening financial markets and boasting economic development. The purpose of this paper is to deeply explore policy and reinforcement of the legal framework of Islamic insurance as essential bedrocks in Islamic finance that are Shari’ah compliant to achieve Saudi Vision 2030 for overall sustainability of all spheres of human endeavours in the country.Design/methodology/approachContent analysis and systematic literature review are used as methodological approaches in this paper. There are various sources of accessing secondary data used in this study such as online peer review, journals and library-based sources. Through the exploration of various secondary data, five major themes were identified in this study, namely, policy, legal framework, Islamic insurance, Islamic finance and Saudi Vision 2030. Analysis of various themes were done systematically in this paper. The methodology provides theoretical and practical foundations for reinforcing policy and legal framework for Islamic insurance, specifically in Islamic finance to achieve Vision 2030 in Saudi Arabia. It is the policy and legal framework that can provide necessary dynamics for strengthening Islamic insurance in particular and Islamic finance in general towards attaining sustainable Vision 2030 in the country.FindingsThe paper demonstrated that policy period is explicitly associated with Islamic insurance, whereby Takaful insurance is regarded as policyholder rather than shareholder-oriented. Similarly, it is established that there is need to specifically mention the policy period and the nature of contract in Islamic insurance should not be limited to only mutual cooperation among the participants in connection with the losses but it should capture element of sharing income generated from investment between insurer and policyholders using predetermined ratio for such as provided with theoretical legal framework (Shari’ah) in connection with Islamic insurance model as an integral part of Islamic finance.Research limitations/implicationsIt will depart completely from conventional insurance where borrowing of funds and investment are put at fixed interest (Riba), uncertainty (Gharar) and speculative ideas (Maisir). Avoidance of different elements ascribed with conventional insurance would enable Saudi Arabia to strengthen financial system and boast economic development with an emphasis on an effective policy and efficient legal framework towards attaining Vision 2030 in the country.Practical implicationsThe methodology provides theoretical and practical foundations for reinforcing policy and legal framework for Islamic insurance, specifically in Islamic finance to achieve Vision 2030 in Saudi Arabia.Social implicationsConventional insurance creates a gap in financial system across the world that manifests from the global financial and economic crisis. There is an increasing demand for insurance scheme that will bridge the gap of financial and economic crisis globally. More recently, there is an advocacy in Saudi Arabia for achieving Vision 2030 by various facets of human endeavours such as strengthening financial market and boasting economic development.Originality/valueWith this emphasis, it will depart completely from conventional insurance where borrowing of funds and investment are put at fixed interest (Riba), uncertainty (Gharar) and speculative ideas (Maisir). Avoidance of different elements ascribed with conventional insurance would enable Saudi Arabia to strengthen financial system and boast economic development with an emphasis on an effective policy and efficient legal framework towards attaining Vision 2030 in the country.

Bank Margin Determination: A Comparison Between Islamic and Conventional Banks in Indonesia

PurposeThe purpose of this paper is to examine the relationship between Islamic bank margin (BM) and its determinants. It also compares the BM behavior of Islamic and conventional banks in the Indonesian dual banking system.Design/methodology/approachThe paper employs a time series approach under the dealership framework of Ho and Saunders. The autoregressive distributed lag model is used to inspect cointegration between BM and its determinants for the period of January 1996 to February 2006 of five sample banks (two Islamic banks and three conventional banks).FindingsThe result confirms that there exists a long‐running relationship between the Islamic BM and its determinants. In particular, as interest rate volatility increases, Islamic BM responds negatively while that of conventional banks responds positively. The findings differ from most of the other studies as they found a positive relationship between BM and interest rate volatility. This paper also shows that the margin behavior changes as the basis of bank operations changes from conventional to Islamic principles.Research limitations/implicationsThe paper uses a relatively small sample of three (out of 150) conventional banks as a comparison to two sample Islamic banks. However, as they come from the same peer with the Islamic banks, it is believed that the finding is valid. Islamic banks in Indonesia are not remote from the interest rate volatility in their presence under a dual banking system. It is the displaced commercial risk that threatens Islamic banking profitability in a changing market interest rate situation.Practical implicationsUnder a dual banking system, the stability of interest rates and the financial system is of great importance for the policy maker in developing the Islamic banking industry in Indonesia. As long as the BM is still a major source of income to the Islamic banks, it is necessary for Islamic banks to have prudent risk management to mitigate the negative effect of displaced commercial risk and maintain its profitability. Implementation of profit equalization reserves concept is a possible measure for Islamic banks to shield their operation.Originality/valueThis paper is believed to be the first study on Islamic BM behavior in Indonesia. It is expected to provide useful information for policy makers and Islamic bank management to develop a sound and profitable Islamic banking industry in Indonesia.

PurposeThe purpose of this paper is to empirically examine the perception of Islamic bank employees in Malaysia and selected Gulf Cooperation Council (GCC) countries, namely, Bahrain, Oman and the UAE, on various issues related to Islamic business ethics and the practices of the Islamic banks at which they work.Design/methodology/approachThe required data to determine Islamic bank employees’ ethical perceptions is sourced from 144 completed survey questionnaires and interviews with 12 Islamic bank senior executives. Islamic model of normative business ethics is used to measure the relationship between attitudes and behaviours of employees and the ethical practices of Islamic banks.FindingsResults show that the Islamic bank personnel working in Malaysia and the GCC perceived that their banks conform to Islamic ethical norms in business. These banks were seen to be concerned with their impact on society, and ethics prevailed over profit-maximisation. The findings also suggest that despite being less regulated compared to Malaysia, Islamic bank personnel in GCC had a better impression of the ethical standard practised in their institutions compared to the feedback given by their Malaysian counterparts. Additionally, this research also proves that, in general, there is a positive correlation between attitudes and behaviours of employees and the ethical practices of Islamic banks.Research limitations/implicationsThe main limitation of the study is that the respondents were not selected randomly but rather through a convenient sampling of personal contacts. Despite the inherent limitation of the sampling method because of the constraints of time and resources, the large number of respondents from 12 different banks are representative of the Islamic bank employees in Malaysia and the GCC.Practical implicationsThe findings may serve as a useful input for Islamic financial institutions in improving their practices to conform with Islamic ethical norms.Originality/valueThe topic of Islamic business ethics and the practices of Islamic banks have not been fully understood by its stakeholders. This paper aims to give insights on how far Islamic bank business practices in Muslim majority societies fit with the prescribed business framework in Islam and its contributing value for both the organization and employees.

İslami finans alanında dünyada lider ülkelerden olan Malezya’da İslami bankaların varlıkları yanı sıra sukuk ve diğer İslami fonlar İslami finansal sistemde önemli bir pay almaktadır. Ülkede, İslami finansal sistemin gelişimini sürekli kılmak adına Şeriat kuralları dikkate alınarak yeni İslami finansal enstrümanların geliştirilmesi konusunda önemli inovasyon çalışmaları yapılmaktadır. Ülkede İslami bankacılık uygulamalarının başlatıldığı 1983 yılından günümüze sektörde önemli ilerlemeler kaydedilmiştir. Günümüzde 65 milyar $’ı aşan sermayesi ile İslami bankacılık sektöründe Malezya, model bir ülke konumundadır. İslami bankacılık sisteminin ortaya çıkışında mudilerden gelen faizsiz hizmet alma talebi önemli bir motivasyon olmuştur. Bankacılıkta dual/ikili sistemin uygulandığı ülkede, yerli ve yabancı İslami bankaların yanı sıra konvansiyonel bankalar da faaliyette bulunmaktadır. Malezya’da Şeriat kurallarınca uygun görülen Mudaraba, Muşaraka, Murabaha, Selem, Vadîa gibi çok çeşitli İslami kontrat modelleri uygulanmaktadır. Öte yandan, 2002 yılında Şeriat hükümlerine uygun olarak Sukuk ihracına başlanmıştır. Malezya günümüzde sukuk ihracı konusunda dünyanın önde gelen ülkeleri arasında yer almaktadır. Ancak Malezya’da, İslami finans konusunda diğer ülkelere göre rekabetçi üstünlüğe karşın, uygulamada bazı güçlükler yaşanmaktadır. Bu çalışmanın amacı, Malezya’da İslami bankacılık ve İslami finans uygulamalarını incelemektir. Malezya’da İslami bankacılık ve İslami finans uygulamaları hakkında ayrıntılı bilgiler verildikten sonra bu ülkede İslami finansın geliştirilmesine yönelik öne çıkan politika önerileri üzerinde durulacaktır. Çalışma, Malezya’da finansal sistemin yapısı yanında İslami bankacılığın yapısı ve işleyişi, İslami finansal enstrümanlar, sukuk ve tekâfül uygulamaları ile İslami finans sistemin gelişmesine yönelik politika önerileri başlıklarından oluşmaktadır.

This qualitative research analyses requirements on the development of Shariah contract based core banking system under Islamic finance legal framework in Malaysia. It is recorded not less than 500 initiatives to develop Islamic core banking system have been implemented globally. However, its development and previous studies related to it were focussed on operational requirements and system design. The attention on Shariah contract requirements which is the parameter in Islamic core banking system and its capability on achieving objectives of Shariah is still lacking. Apart from banking institutions’ reluctancy to try Islamic core banking system which its functionalities are yet to be proven, the studies on the development of core banking system under Malaysia’s Islamic finance legal framework is still limited that lead to Shariah compliance aspect being seen as irrelevant if it involves technology in nowadays digital banking era. Therefore, the objectives of this research are to identify suitable methodology for its development in Malaysia, to examine existing practices on its development, to analyses its capability in achieving objective of Shariah in Islamic banking, and to evaluate the prospect of its integration with Shariah contract requirements, blockchain technology and smart contract. The discussion in this article is fully based on library research and analysed via thematic content analysis. This article found that the previous studies have yet to examine methodology of its development under Islamic Financial Services Act 2013, current practices on its development, its capability as means to achieve objective of Shariah in Islamic banking, and its capability from Shariah compliance aspect aside from sustaining or enhancing its basic capability as one of the Islamic banking technologies in Malaysia.

The article argues that the impact of globalization transformations on the socio-economic development of countries requires reforming financial systems and promoting financial inclusion. The search for alternatives to the traditional financial system, one of which is Islamic finance, is explained. The process of formation and development of Islamic finance is analyzed, and the role of the first Islamic financial institutions in these processes is determined. The specifics of the functioning of the Nasser Social Bank (Egypt), which still directs its projects to support the social and economic development of the population, are revealed. Research and educational institutions dealing with Islamic finance are systematized. The interest of Western banks and financial institutions in Islamic finance is substantiated. Islamic finance forms regional clusters, with the leading centers being the countries of the Gulf Cooperation Council (GCC); Malaysia (the leading center of Islamic finance in Southeast Asia); Indonesia (successfully integrating the principles of sustainable development into the field of Islamic finance); North Africa (using Islamic finance instruments to stimulate economic development and attract investment); the United Kingdom (the financial hub of Islamic finance in the West). The results of the rating of Islamic financial institutions in the world according to Global Finance are analyzed. The activities of the Kuwait Finance House Group recognized as the best Islamic financial institution are examined, and its main strategic initiatives in 2023, as well as social projects, are identified. A hypothesis about the impact of Islamic finance on the economies of countries is put forward; the sample consisted of 12 countries characterized by the development of Islamic finance. The size of Islamic banks’ assets, the volume of Sukuk and Takaful markets, and the share of Islamic finance in the banking system were chosen as the main independent variables; the GDP and GDP per capita were chosen as the dependent variables. Based on the division of countries into two groups according to the share of Islamic finance in the banking system, the authors find that the group with a share of Islamic finance of more than 20% has a significantly higher GDP per capita, which indicates a higher well-being of citizens in these countries. The Sukuk and Takaful markets also show higher values in the group with a higher share of Islamic finance, indicating increased activity in Islamic financial markets in these countries. Using the methods of correlation analysis, the dependencies between the studied indicators in this group of countries are established. The results indicate the untapped potential of Islamic finance to improve the well-being of citizens. The need to direct the resources of Islamic finance to the development of infrastructure and social projects is emphasized. The importance of introducing innovative instruments of Islamic finance, which will promote financial inclusion and attract investment in socially important projects, is substantiated. The key strategic directions for the further development of Islamic finance that will have an economic and social effect are suggested.

The literature on corporate governance at corporations and conventional banks is extensive; however, it does not assign proper weight to Islamic finance institutions despite their growing importance in the global financial system. Important questions that are still unexplored to date include: What are the attributes of the corporate governance mechanisms at Islamic finance institutions? and How do their corporate governance attributes affect their performance and risk taking behavior? To answer these questions, we use an exhaustive sample of Islamic and non-Islamic banks in the Gulf Cooperation Council (GCC) region, in the years 2007 to 2009, i.e., around the global financial crisis of 2008 which represents a natural stress test. We assess the impact of the corporate governance characteristics ownership structure / concentration, board of directors' size, composition, and independence and the effectiveness of the legal system and investor protection of the country on a wide array of bank performance indicators, including profitability, efficiency, asset quality, and risk. We perform univariate and multivariate tests which control for many potentially confounding effects. Our results show that, during the 2008 global financial crisis, the return on assets and operating income-to-total assets were significantly higher at Islamic banks compared to non-Islamic banks in the GCC region by more than 1 and 2.5 percent, respectively. Islamic banks also exhibited a more prudent risk-management behavior and higher solvency than non-Islamic banks. Moreover, consistent with the notion of the importance of corporate governance, asset-productivity at Islamic banks is significantly increasing in family- and foreign-ownership and the effectiveness of the legal system and investor protection, and it is decreasing in board size and insiders. Furthermore, risk-taking behavior at Islamic banks is decreasing in government- and family-ownership and the investor-protection level in the home country. This study has important practical implications. Investors may consider including Islamic banks in their portfolios given their resilience to the financial crisis. Non-Islamic financial institutions may consider adopting some of the features of Islamic banking into their operating models. Policy makers can use our results for better policy formulation and regulation of their financial system.

Islamic banking & Finance and conventional banking are described as having the "same purpose but the essence and operations of Islamic banking are in accordance with Shariah law and have same "basic objectives" as other business and financial entities, i.e. "maximization of shareholder wealth". The speedy development of an Islamic banking system may improve financial insertion by providing an alternative to faith sensitive Muslims who are willingly excluded themselves from the system of conventional finance due to the nature of interest based. In Pakistan, the Islamic banking system eroding the growth of conventional banking so it’s worthy to explore the effect of religious belief the occurrence of a financial exclusion. The target population is from FATA and PATA maintain accounts at Islamic banks and conventional banks and a sample size of one hundred and fifty customers were picked up. The methodology focuses on the KAP Model (knowledge, attitude, practices), which indicates if attitude influences the association among “knowledge and practice” of an “Islamic banking”. Looking into KAP Analysis survey, through study result we find out that knowledge about Islamic banking and practices of Islamic banking are closely related. People having information about Islamic Banking and Products are more inclined towards Islamic Banking and people who don’t have much information are less interested in Islamic banking and Islamic products. KAP survey suggested that customers of conventional and Islamic banks are driven by the same motivating factors that have impact on their attitude. However, there have some likable factors that could be valued by “Islamic bank account holders only such as “variety of products & services, reliability, confidence in bank’s management, reputation and most important compliance with the Shariah rules in finance & investment.”. Low-cost services are some factors result in non-Muslims prefer Islamic Banking over the conventional banking.

Banking framework establishes the central mainstay of any economy. Banks functions as monetary conduits between sectors that have abundance reserves and those that are in deficiency. The historical backdrop of banking in the Gulf Cooperation Council (GCC) traces all the way back to 1918 with the foundation of the primary bank in Bahrain. The territorial financial evolution is attributable to oil abundance and loaning business that spotlights on building, land and client advances. Throughout the long term, the financial framework worldwide has advanced in its contributions to suit the changing customer requests. One of the essential determinants of this change came about because of the strict convictions of individuals bringing about the remarkable development of Islamic Banking System. The prevalence of these banks are in nations with critical Muslim populace like Iran, Pakistan and Sudan but not limited to them. Islamic banks work under Sharia standards of hazard sharing and premium preclusion as appeared differently in relation to customary banks that purchase cash-flow to pool assets and offer cash-flow to produce revenue pay or benefit. This paper applies banks' endogenic elements identified with their monetary record and pay explanation and utilizing an aggregate of 24 financial ratios relating to the banks’ performance and seeks to thoroughly analyze the same among customary and Islamic banks. This examination clarifies the design, activity and the board of traditional banks in the GCC combined with the working of Islamic banks. The paper likewise intends to decide the beneficial and proficient banks among the chosen sample. The study incorporates 20 institutions, similarly dispersed among Islamic and customary banks utilizing information between the time of 2014 - 2017. The example is comprehensively ordered dependent on benefit ratios, proficiency ratios, asset indicator ratios and risk ratios. Further sub categorization is done to show up at an aggregate of 24 ratios. An independent T-test is used to determine a substantial ratio between Islamic and conventional banks.

The Islamic banking industry is an important part of the financial system in any country that has this type of banking. Islamic banking institutions are regulated by several laws and regulations as same as conventional banks. The Islamic banking Act and general banking law, financial laws, and other related laws are the main piece of law for organizing the Islamic banking system. One of the main challenges that facing Islamic banking institutions is the lack of a legal framework to protect Islamic banking and manage these banks. The legal framework of the Islamic banking industry includes special Islamic banking law and other laws that have relation to Islamic banks such as finance law and company law. The two main legal challenges of Islamic banking institutions is lack of legal framework and lack of Sharia court to deal with disputes and issues relating to Islamic banking cases. thus, it is necessary for Islamic banking institutions to have special Islamic banking law and provisions in other law that they regulate Islamic banking institutions. Therefore, enacting Islamic banking law and amending some other laws to include the Islamic banking industry is needed. Furthermore, establishing a Sharia court to settle Islamic banking cases when there are disputes. Alternatively, appointing Shariah experts and professionals in Islamic banking issues in civil court can be an alternative solution for dealing with Islamic banking cases. Purpose of The Paper: The purpose of this study is to find out the legal challenges that face Islamic banks, and then find proper solutions for these challenges. Methodology and Approach: The qualitative method-based is applied for this study as qualitative research is a proper method for conducting this type of research. The study uses various documents and content analysis approach to understand and analyse the nature of legal challenges of Islamic banking institutions. In this paper, both primary and secondary materials are part of the data collection. Thus, Acts, books, academic journals are used for collecting data for the purpose of this research. Findings: It is found that the current legal framework of the Islamic banking industry needs to be reformed to be a proper legal framework. Therefore, related laws and regulations to Islamic banks should be amended to cover Islamic banking institutions. In addition. Islamic banking Act is necessary to be enacted for regulation Islamic banks. Furthermore, establishing a Sharia court or appointing qualified Shariah scholars in civil court is necessary for resolving legal challenges that face Islamic banking institutions. Keywords: Islamic Banking, Legal Issues, Shariah Court, Civil Court DOI: 10.7176/JLPG/107-10 Publication date: March 31 st 2021