Islamic Companies Research Articles

DO GOVERNMENT AND PRIVATE SHARIA COMMERCIAL BANKS PRACTICE SIMILAR FINANCIAL SOCIAL RESPONSIBILITY DISCLOSURE?

Previous studies highlight the relationship between Corporate Governance and Corporate Social Responsibility. Good corporate governance has been found significantly influence the level of a company social responsibility whether in conventional or Islamic companies context. Most of the studies focus of the studies focus on conventional banks or Islamic banks belong to government or private actors. However, limites or even none of the studies has tried to compare the impact of corporate governance on social responsibility between government and private owned sharia banks. Through quantitative method, we studied the differences between government and private owned sharia banks using six sharia banks samples. The sample was purposively selected from Indonesian Bank website. Our data analysis shows that all three variables; independent commissioners, boards of directors, and sharia supervisory boards are significantly impact the companies’ corporate social responsibility practices. Eventhough, the difference between government and private owned sharia banks in social responsibilty practices is not significant, the result shows that the level compliance of government sharia banks towards social responsibiity is higher than private sharia banks. This might prove that government sharia banks might more commit to social welfare than private sharia banks. Future reseach with more samples and variables might be required to make the finding more valid.

DO GOVERNMENT AND PRIVATE SHARIA COMMERCIAL BANKS PRACTICE SIMILAR FINANCIAL SOCIAL RESPONSIBILITY DISCLOSURE?

Previous studies highlight the relationship between Corporate Governance and Corporate Social Responsibility. Good corporate governance has been found significantly influence the level of a company social responsibility whether in conventional or Islamic companies context. Most of the studies focus of the studies focus on conventional banks or Islamic banks belong to government or private actors. However, limites or even none of the studies has tried to compare the impact of corporate governance on social responsibility between government and private owned sharia banks. Through quantitative method, we studied the differences between government and private owned sharia banks using six sharia banks samples. The sample was purposively selected from Indonesian Bank website. Our data analysis shows that all three variables; independent commissioners, boards of directors, and sharia supervisory boards are significantly impact the companies’ corporate social responsibility practices. Eventhough, the difference between government and private owned sharia banks in social responsibilty practices is not significant, the result shows that the level compliance of government sharia banks towards social responsibiity is higher than private sharia banks. This might prove that government sharia banks might more commit to social welfare than private sharia banks. Future reseach with more samples and variables might be required to make the finding more valid.

Pengaruh Tata Kelola Perusahaan terhadap Pengungkapan Tanggung Jawab Sosial Perusahaan (Studi Perbandingan pada Bank Umum Syariah Milik Pemerintah dan Milik Swasta)

Previous studies highlight the relationship between Corporate Governance and Corporate Social Responsibility. Good corporate governance has been found significantly influence the level of a company social responsibility whether in conventional or Islamic companies context. Most of the studies focus of the studies focus on conventional banks or Islamic banks belong to government or provate actors. However, limites or even none of the studies has tried to compare the impact of corporate governance on social responsibility between government and private owned syariah banks. Through quantitative method, we studied the differences between government and private owned syariah banks using six syariah banks samples. The sample was purposively selected from Indonesian Bank website. Our data analysis shows that all three variables; independent commissioners, boards of directors, and sharia supervisory boards are significantly impact the companies’ corporate social responsibility pactices. Eventhough, the difference between government and private owned syariah banks in social responsibilty practices is not significant, the result shows that the level compliance of government syariah banks towards social responsibiity is higher than private syariah banks. This might prove that government syariah banks might more commit to social welfare than private syariah banks. Future reseach with more samples and variables might be required to make the finding more valid.

Salama Insurance: the need of an Islamic legal framework

Many Muslims, for religious convictions are reluctant to take up conventional insurance as it is deemed to have uncertainty, gambling and interest, which are prohibited by religion. The purpose of this paper is to examine Islamic Insurance in Algeria and analyse a suitable regulatory framework. 
 One can argue that the trend towards Islamic insurance in Algeria contributes to raising the level of insurance culture, which will help to mobilize more savings. After studying the topic, we can provide a road map to better regulating the Islamic insurance market because the Islamic companies could not function in the absence of an Islamic insurance act. In the absence of such a framework, regulators often treat Islamic insurance companies similarly to conventional insurance companies, which hinders the development of Islamic Insurance Industry.

Impact of the Corporate Structure and Sharia-Compliant Status to Average Degree of IPO Underpricing in Malaysia Market

Initial Public Offering (IPO) for sharia-compliant companies is an alternative way for Islamic companies to raise capital. Many empirical studies regarding IPO underpricing have been developed to understand the numerous issues related with IPO phenomenon especially in different types of markets. Therefore, this study examined factors that relate to the short term performance of IPO in Malaysian market. The initial results show that the average degree of IPO underpricing is 8.1% during the period of 2012–2015. This concludes that the rate of underpricing is at low level. Secondly, the determinants of IPO underpricing are examined using a linear regression analysis. The results show that the average degree of IPO underpricing was driven by corporate structure, sharia-status, initial return and closing pricing. In addition, the result from R-square analysis is 92.3%. This result indicates that corporate structure, sharia-status, initial return and closing pricing can explain the 92.3% variation of the average degree of IPO underpricing. The F-value is 56.9 indicating that this hypothesis is statistically significant at 1% level of significant between the dependent and independents variable. Therefore, this study suggests that the corporate structure can determine the performance of IPO companies. This is indicates that for any company that has more subsidiaries, it can reduce the financial problem caused in their corporation by diversifying their market segmentation.

Evolution of Corporate Entity in Islamic and Western Perspective

Both in Islamic and western perspectives a corporation is renowned by virtue of its distinct legal personality. However, the Roman legal culture is influential in the development of western corporate system but the principles of Islamic law of contract are regarded as comprehensive business arrangements among the business communities. The principle of partnership played a significant role in the development of Islamic and western companies and their governance. Company being a separate legal entity from its shareholders has the same legal rights like an individual to enter into contractual arrangements, own property, sue and be sued in its own name rather than in the name of its shareholders. In Islamic system of state (Khilafah), companies operate in pre-determined spheres of the economy because any utility designated by Islam regarded as indispensable for the community. The Islamic law is not only presumed comprehensive but also provides elasticity for legislation to meet-out the needs of modern-society in accordance with Qur’an and Sunnah of the Prophet (SAWS). The Islamic law not only covers the personal affairs of the people but also many aspects of politics, economics, banking, business or contract law such as Shirkat al-Amwal (The Company of Capitals), Shirkat al-A‘mal (The Company of Bodies) and Shirkat al-wujooh (The Company of Reputations). These Companies may be ‘Inan (limited) and mufawadah (unlimited).

Financing through the conversion of physical properties into securities: Juridical- Economic Study

The classical bond structure is based on the interest. On the other hand, in Islamic financial system charging interest is forbidden, therefore, bonds cannot continue to be issued and exchanged. As a consequence, we have to follow a structure that can be replaced or reissued with bonds for the purpose of avoiding usury (Riba). For the implementation of monetary policy, Sukuk (Islamic bonds) as one of the instruments of securitization is considered to be the most important financial instrument in Islamic financial system. This instrument has been issued by the Islamic governments and companies during recent years.In fact, companies convert their assets into securities through Sukuk issuance and by selling Sukuk, they can obtain cash capital. The question here is whether, the financial instrument of Sukuk is consistent with the principles of Shiite. There has also been question as to whether financing through this method is possible for financial institutions as a new instrument in modern marketing. In order to answer the above-mentioned questions, first, we have considered the financing mechanism through Sukuk issuance from the theoretical and applicable aspects in order to comment on its acceptability from the legal and financial terms. In the present research, firstly, the method of financing through Sukuk issuance is fully described, and subsequently, the validity of the process according to the Shiite jurisprudence principles is explained. The results of this research show an acceptable and successful implementation of Sukuk instrument, so that they meet the three main criteria of legality, efficiency and acceptability.

Islamic Finance: Opportunities for the Russian Economy

The article discusses the prospects for the development of the financial system and the economy, associated with the emergence of Islamic finance industry in the country. The author briefly describes the important features of Islamic finance, examines the main obstacles for functioning of Islamic financial institutions in the Russian legislation. Furthermore, the paper analyzes the economic benefits from the creation of economic infrastructure, which enables Islamic financial companies to operate on equal conditions with other subjects of the financial system in terms of financial, tax and administrative aspects.

Factors Determining Social And Environmental Performance Of Islamic Companies :, Analysis Of Sustainability Related Reporting Practices

Factors Determining Social And Environmental Performance Of Islamic Companies :, Analysis Of Sustainability Related Reporting Practices

Shari'ah corporate governance: the need for a special governance code

Purpose–With the advent of Islamic banking, a new species was added to the banking system which was then, only dominated by the conventional banking. Islamic banking expanded in the world within the last decade and as a result, Islamic finance emerged as an alternative to the conventional finance. This created Islamic companies and Islamic financial institutions which operate based on the principles of Shari'ah or Islamic Law. These Islamic corporate bodies, like the conventional corporate bodies do need good governance rules. In other words, they also need a good, sophisticated “Shari'ah Governance Code” which would be based on the principle of Islamic Law. This is mainly because the objective of the conventional and the Islamic Corporate governance is different as conventional corporate governance structure is more focused on the protection of the rights of the stakeholders; while Islamic corporate governance focus on retaining the Islamicity of whole corporation. The objective of this research is, as the title suggests, proposing the reasons why a special governance Code for Shari'ah corporate bodies are needed. This paper would suggest a proper governance structure to the Islamic companies and will also discuss why the conventional corporate governance Codes are unsuitable for the Islamic companies.Design/methodology/approach–This research which is primarily library based, is an exploratory legal research in nature.Findings–In the course of this research, it is found that there is a need to enact a Shari'ah Corporate Governance Code due to the widespread establishment of shari'ah compliant companies in the world. Hence, the authors had discussed the potential content of such a Code in this paper.Originality/value–This research will complement the knowledge based on shari'ah corporate governance and is targeted to the existing and prospective shari'ah compliant companies.

English

The purpose of the present study is to evaluate profit organizations’ financial tools development strategy in order to find limits. These limits can help the strategy to organize development internationally and locally without solving crises with negative effect. The study found out that there were negative outcomes because profit organizations were ignorant of their responsibility and were revenue oriented without considering the balance between their aims and that of their countries. This leads to weak monetary and financial policies. Islamic profit companies (as a case study) avoid interest with bad effects, being ignorant of one’s responsibility and negative effects on countries’ aims, by applying fixed and flexibility rules. Limits can speculate dealing and stages of financial tools life cycle. But this is not enough; there must be fixed and flexibility rules decided by law in addition to rules that control economic sectors for protection of communities. It is suggested that development be controlled up by contract conditions, which must be practical as Islamic companies share their account. Key words: Crises, profitable organizations, developing financial tools, limits.

English

The purpose of the present study is to evaluate profit organizations’ financial tools development strategy in order to find limits. These limits can help the strategy to organize development internationally and locally without solving crises with negative effect. The study found out that there were negative outcomes because profit organizations were ignorant of their responsibility and were revenue oriented without considering the balance between their aims and that of their countries. This leads to weak monetary and financial policies. Islamic profit companies (as a case study) avoid interest with bad effects, being ignorant of one’s responsibility and negative effects on countries’ aims, by applying fixed and flexibility rules. Limits can speculate dealing and stages of financial tools life cycle. But this is not enough; there must be fixed and flexibility rules decided by law in addition to rules that control economic sectors for protection of communities. It is suggested that development be controlled up by contract conditions, which must be practical as Islamic companies share their account. Key words: Crises, profitable organizations, developing financial tools, limits.

Prospects of a Sharī ͨ ah Audit Framework for Islamic Financial Institutions in Malaysia

The need to be in conformity with religious and ethical principles, or to be Shariah compliant, is the unique and distinctive feature of Islamic finance which sets it apart from its conventional counterpart. Islamic financial institutions (IFIs) are to be audited not only on financial performances but also on their adherence to Shariah precepts, including broader ethical and moral parameters. Currently there is no proper framework to govern the practice of internal Shariah auditing in IFIs. The recently issued Central Bank of Malaysia’s Shariah Governance Framework (CBM-SGF) has made it compulsory for IFIs to perform a regular internal audit of transactions, operations and information systems particularly at the product implementation stage to ensure a comprehensive compliance with Shariah. This has posed a challenge to Islamic banks and Takaful companies, to develop their own internal Shariah audit architecture and to train a new breed of internal auditors in the science and ethics of Shariah audit based on generalised guidelines under the new directive. This paper highlights persistent problems relating to inadequate auditing at the business operations level and prevailing issues in Shariah audit. Recommendations are made for the industry to adopt a common internal Shariah audit framework as a move towards standardisation and uniformity of audit practice.

Organisational evolution in Kuwait: a comparative study of the evolution of two Islamic finance companies

This paper discusses a study to examine whether a particular evolutionary model of organisational growth is applicable to a particular industry in a specific geography. Greiner's evolution and revolution model is the framework being examined, and the rapidly growing Islamic finance industry in Kuwait provides the empirical data for the study. The conclusions suggest that Greiner's model is only partially applicable to the Islamic finance industry in Kuwait. Greiner proposes that organisations go through distinct phases of evolution as they grow in age and size. However, this empirical research has not identified distinct phases of evolution at the present point of the case organisations' histories. Instead, the evolution of these organisations shows simultaneous evolutionary phases.

The development of Islamic finance: Egypt as a case study

PurposeThe purpose of this paper is to analyze the political and economic dilemma that Islamic finance (IF) poses on some Muslim Governments of either encouraging or restraining this global phenomenon; in spite of their awareness of the developmental role that IF plays. Egypt, in this concern represents a peculiar example where government's policies apparently determine the performance of Islamic financial institutions.Design/methodology/approachThe paper begins with an overview of IF and the momentums that catalyzed the development of IF in general and in Egypt in specific. It then analyses the policies of the Egyptian Government towards Islamic financial institutions since its inception in 1963 until 2007, with a specific focus on Islamic banks and Islamic companies. This is followed by a discussion on the current practices of these institutions in the Egyptian economy. Finally, the paper presents a prospect vision of the future path of Egypt in the field of IF.FindingsThe paper finds that the shares of IF in the Egyptian economy are modest at local, regional and global levels. Such backward position could be justified in the light of the governmental policies and their manipulation over the legal, economic and religious institutions in a way that restrain the performance of Islamic financial institutions. However, the responsibility is not solely the government's; Islamic financial institutions share part of such retreat due to their practices that divert them from their mission.Practical implicationsThe paper concludes that the nature of the Egyptian Government's attitudes towards IF stems from its tendency to maintain the stability of its economic system besides its suspicion to the nature of Islamic financial institutions and their links with Islamist groups. In addition, Islamic financial institutions suffer from administrative and legal problems that shape their practices and reveal their divergence from their Islamic and developmental role that they are supposed to play.Originality/valueIn the final analysis, the paper offers an insight into prospective development of IF in Egypt on both local and external levels.

Trusted Markets: The Exchanges of Islamic Companies

In recent years, Turkey has witnessed a new form of corporate finance in which companies, commonly called ‘Islamic’, borrow directly from lenders without using any financial intermediaries. Trust among lenders and borrowers has initiated market exchange, secured deals and lowered transaction costs. This paper claims that the base of trust in direct financing for Islamic companies should be largely attributed to the self-interest of the parties rather than just to Islam or ‘shared values’. Here we do not see an individual calculation of ‘economic man’, as argued by neo-classical economists, but individuals embedded in relations within social groups and sharing ethics of money-based relations. Second, we illustrate that self-interest based trust stems from the calculations of trusters using available information in the market about trustees. However, information asymmetry between borrowers and lenders in favour of borrowers has been a source of deep instability and abuse. Finally, the paper shows how groups have used the rhetoric of Islamic economic revival to expand the scope of transactions while trust eroded in favour of abusers. The anonymity came with thousands of investors who eroded the strength of reciprocity, surveillance and retribution in trust-based relations. This case study also illustrates that Islamic societies seek new solutions within capitalist economic systems to maximise their gains and they do not wish to be destined to live in poverty.

The hidden economy in Egypt

A hidden economy in Egypt has been a feature of this centrally-planned state for several decades. Although this aspect of the economy has more typically been known as the 'informal' sector, after 1973 and the initiation of the economic liberalization policy the infitah, it became considerably easier to engage in all forms of private economic activity that could be more readily 'masked'. That is, the scope, range and the specific kinds of economic activities being conducted, and the amounts of money involved, are largely indeterminate and unknown. Accordingly, the term 'hidden economy', as defined here, refers inter alia to a number of spheres of this unknown activity: traditional informal economic activity; 'black' market operations; 'gray' market operations; and, the more purely domestic economic activities of the military establishment. In addition, two major enabling mechanisms, remittances and the primary agents for these, the money dealers (changers), the Islamic companies and other Islamic banking and financial institutions which are integral to the operation of the hidden economy, are included in the term 'hidden'.