Islamic Finance Perspective Research Articles

Finance-growth nexus: Islamic finance development in Indonesia

Purpose There are many studies related to finance-growth nexus, but existing empirical evidences still have not provided conclusive result of the nature and direction of this relationship. Moreover, there are only few studies about finance-growth nexus seen from Islamic finance perspective, especially in Indonesia. Therefore, this study aims to examine the nature of causal relationship between Islamic finance development and economic growth in Indonesia seen from the development of Islamic banking, sukuk market and Islamic stock market. Design/methodology/approach By using quarterly data from 2002Q3 to 2017Q4, this study uses vector autoregressive (VAR) model, then uses granger causality and impulse response function to analyze the causal relationship between Islamic finance development and economic growth and also among three main sub-sectors of Islamic finance. Findings This study found that Islamic banking development and Islamic stock market development support neutrality hypotheses view, while sukuk market development supports supply-leading hypotheses view. Moreover, this study also found that there are unidirectional causalities from sukuk market development to Islamic banking development and from sukuk market development to Islamic stock market development. Research limitations/implications This study focuses only on the development of Islamic finance viewed from a macro perspective and only looks at how the three main sub-sectors in Islamic finance develop. In addition, the results of research related to finance-growth nexus are also sensitive to the object of research, the method and the proxies of variables used. Originality/value To the best of the authors’ knowledge, there is no study that examines the causal relationship between Islamic finance development and economic growth in Indonesia based on its three main sub-sectors simultaneously. So, this study gives empirical evidence to contribute on finance-growth nexus discussion based on three main sub-sectors of Islamic finance development in Indonesia.

Appear in Court thru Video Conferencing System: Recommendation for an Islamic Finance Perspective

Technologies applied in court is considered as a new type of method to settle dispute. Settlement of any dispute thru technology in court shall benefit all; Judges, Lawyers and parties concerned. Malaysian court especially in Sabah and Sarawak have dealt civil dispute cases thru technology approach. These development shows promising ways to decrease backlog cases that had been experienced in courts throughout the years. Hence, this paper suggested that the technology method apply in civil court particularly in Sabah and Sarawak court should adopted too in the Islamic finance disputes. It is important for everyone’s future that we study the current technology in order to develop more effective settlement for Islamic Finance dispute for Malaysia.

Digitalization, Innovation and Sustainable Development: An Evidence of Islamic Finance Perspective

Islamic finance has developed a unique and balance system that complies with the principles of Shariah. Shariah encompasses all aspect of human life that aims to provide a fair, equitable distribution of wealth, alleviate all form of poverty and promote sustainable development. This study focuses on discussing the current issue of digitalization, innovation and sustainable development based on the evidence of Islamic finance. The objectives of this study are to generate the discussion, how digitalization and innovation play their role to sustain development in Islamic finance perspectives. Moreover, the study also sheds light on the challenges faced by Islamic finance on applying this digitalization and innovation viewpoints. The evidence suggests that due to the rapid economic growth, digitalization and innovation are the catalysts to sustain the development. In Islamic finance perspectives, digitalization and innovation (Fintech- blockchain and bitcoin) are still in their infancy stage. The researchers agreed that FinTech is a Maslahah (interest) to broaden the area of sustainable development such as zero poverty, no hunger and the social well-being of the community.

Shariah Governance: Perspective of Islamic Finance

The present short paper is an attempt to anlyze the Shariah Governance of Islamic Finance. Corporate governance issues are especially important in developing economies, since these countries do not have a strong, long-established financial institution infrastructure to deal with corporate governance issues.

Argumenty przeciw „pieniądzom z helikoptera”

Since the outbreak of the latest financial crisis central banks in several countries have decided to apply non-conventional monetary policy measures. Other monetary authorities behaved more conventionally but conducted a very loose monetary policy anyway. The goal of the paper is to discuss threats and possible consequences of treating the money instrumentally (monetary easing, government financing by the central bank). The authorities tend to arbitrary reinforce just one function of money, a medium of exchange, in order to artificially increase the sales and production of goods and services while neglecting other major function: a store of value. Fast growing money aggregates, awareness that there is no limit for money creation, and ideas such as “helicopter money” stimulate the attempts to storage the wealth in different form, e.g. cryptocurrency. The remarks were formulated from the conventional and Islamic finance perspective. Statistical data come from the euro area, Poland, and Iran, where banking system is fully Islamic.

Leverage versus volatility: Evidence from the capital structure of European firms

The impact of leverage on financial market stability and the relationship with the real economy is a key concern among researchers. This paper makes an initial attempt to investigate the relationship between a firm’s leverage, return and share price volatility from an Islamic finance perspective and capital structure theory. A multi-country dynamic panel framework and the mean-variance efficient frontier are applied to 320 sample firms from eight European countries, divided into portfolios of low and high debt using the shari’ah screening threshold of 33%. We find that the firm’s return and volatility change with changes in the capital structure. Islamic-compliant stocks show, in most cases, less volatility than non-compliant stocks but are no different in terms of return. Finally, our results tend to imply a case for limiting debt beyond certain levels.

Cryptocurrency Framework Diagnostics from Islamic Finance Perspective: A New Insight of Bitcoin System Transaction

This paper analyses the operation of cryptocurrency system in perspective of Islamic finance. The purpose of this study is to evaluate the cryptocurrency framework whether it is meet the Islamic Finance rule. In addition, this study performed in providing the Islamic minded investor a proper information regarding investment in Bitcoin. Cryptocurrency is a digital currency in which encryption techniques that implement to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. A transaction is a transfer of Bitcoin value that is broadcast to the network and collected into blocks. A transaction typically references previous transaction outputs as new transaction inputs and dedicates all input Bitcoin values to new outputs. This cryptocurrency has no physical form and exists only in the network. Bitcoin also has no intrinsic value in that it is not redeemable for another commodity, namely gold. Then, this study evaluates the framework according to Islamic Finance rule. The bitcoin account holder is anonymous. Therefore, it is difficult to track the real account holder if any suspicious activity occurs. In addition, the value of Bitcoin is unstable because of high volatility. Bitcoin also suffers variance in perceptions of Bitcoin’s store of value and method of value. All of these three conditions contribute to uncertainty in transaction framework of Bitcoin. As a conclusion, Bitcoin transaction is classified as a transaction with high uncertainty (gharar).

Global Financial Crisis: Is There a Remedy

In this paper we seek to assess the stance of Islamic perspective with respect to global financial crises. The paper examines the adopted remedies and actions that deal with the current global financial crisis and evaluates them from the perspective of Islamic finance. The significance of tackling with this issue at this particular time is that there is general agreement among the economists, financial scholars and financial experts about the causes and consequences of global financial crises. However the search for the solution thus has proved to be mission impossible and remains the subject of an international debate. So in this paper efforts have been made to prove that Islamic finance is well endowed to deliver noteworthy contributions towards a more healthy and stable international economy. The paper has argued that an honest implementation of Islamic theory of finance is potentially capable of solving, and in all probability averting, such crises from happening –– simply because most, if not all, of the factors that have caused or contributed to the development and the spread of the crisis are not allowed under the rules and guidance of Shariah.

Regulation of Virtual Currencies : Mitigating the Risks and Challenges Involved

The many types of virtual currencies that have been developed recently are due to the assessment of their users and proponents that financial systems require reform based on their mistrust in governments and financial institutions. To the users of virtual currency, its use in trade and commercial transactions suggests an attempt towards empowerment of consumers by by-passing the regulated currency regimes and intuitional regulations to create an open payments network – an Internet for money. This article makes an attempt to create awareness on what virtual currency is, in highlighting the differences between virtual currency and the national currency in circulation. This would include discussion on the interaction of virtual currency with the real economy and its risk to the real economy. Further, the article draws attention to consumer protection issues and the significant consumer risks associated with the use and ownership of virtual currency. An Islamic finance perspective on virtual currency is included, given Malaysia’s dual financial system which support both conventional and Islamic finance. Finally, this article also draws attention to some of the possible regulatory challenges that virtual currency may create.

Central Counterparties from the Islamic Finance Perspective

The paper focuses on central counterparties (CCPs) becoming the buyer to everyseller and the seller to every buyer and thereby ensuring the performance of opencontracts. The role of CCPs increased considerably after outbreak of the crisisin 2008.In 2012 BIS and IOSCO published the Principles for financial market (post-trade)infrastructures. The aim of the paper is to find out whether, and if yes – to whatextent, the mentioned principles have to be modified when applied to CCP servingIslamic financial institutions. It seems that all principles are appropriate forIslamic finance, however some of them should be modified in order to be Shariacompliant.Moreover, in some cases the modification might also be difficult dueto lack of standardized instruments.

Residential Mortgage Crisis An Islamic Finance Perspective

In this paper, we try to analyze the US residential mortgage crisis in the light of the financial principles of Shari'ah. For this purpose, we will firstly present a summery of the US residential mortgage crisis. Then, in the second part of the paper, we will explore relevant financial principles of Shari'ah law. In this part, special attention is paid to analyze the residential mortgage crisis according to Shari'ah principles and Shia interpretation of Shari'ah through Civil Code of Iran. The main claim is that if mortgage transactions had been concluded in compliance with the principles of Shari'ah law, the whole chain of crisis would not have occurred.

Residential mortgage crisis - an Islamic finance perspective

In this paper, we try to analyze the US residential mortgage crisis in the light of the financial principles of Shari’ah. For this purpose, we will firstly present a summery of the US residential mortgage crisis. Then, in the second part of the paper, we will explore relevant financial principles of Shari’ah law. In this part, special attention is paid to analyze the residential mortgage crisis according to Shari’ah principles and Shia interpretation of Shari’ah through Civil Code of Iran. The main claim is that if mortgage transactions had been concluded in compliance with the principles of Shari’ah law, the whole chain of crisis would not have occurred.

Islamic finance: the capital structure and profitability perspective from MIDCAP companies

Capital structure theories in finance aim towards an ideal debt-equity ratio in the traditional interest-based financial system. The capital structure theories as per the Shariah law also aim towards an ideal debt-equity ratio but the debt contract used here is different with different intention. Also, since the debt-equity ratio affects the bottom line of a business organisation and thus becomes an important aspect to study. This paper is an attempt to study the relationship between capital structure and profitability from the perspective of Islamic finance. It is an empirical attempt to verify the application of the concepts and beliefs of Islamic finance focusing on financial risk as an issue of corporate finance. The study is particularly relevant in the light of current global financial crisis as the root of the crisis lies in the failures of some of the big multinational corporations. It aims to make a significant contribution to the available literature on the subject.

Conceptual and discursive hybridization in the Western-Islamic Academic genre of finance. A case study on ‘Riba’

The present study starts from the observation that there are Islamic concepts of Finance, such as ‘Riba’ which is to be explored here, that are totally inaccessible to Western students of Finance. Furthermore, they are also unavailable to them. Yet, in a globalized world, such concepts need to be understood, so as to make them accessible and then acceptable. Thus it is necessary to hybridize them with parallel Western concepts. The study, which is part of a wider research-in-progress, introduces a cognitive-functional approach (Halliday 1985) to the analysis of three selected mini-corpora of academic texts on Finance in English, respectively identified as ‘Corpus A’, ‘Corpus B’ and ‘Corpus C’. ‘Corpus A’ is made up of texts from original Islamic sources in their official translation into English. Texts from Corpus A represent the Islamic Finance perspective as reflected in both their specialized conceptualisation and their culture-based textualisation, as they are marked by the influence of the religious culture of Islam upon economic transactions. ‘Corpus B’, instead, is made up of texts from a Western/US perspective reflected in (a) the specialized concepts and (b) the Western ‘standards of textuality’ (de Beaugrande and Dressler 1981) that characterise them. Finally, ‘Corpus C’ is made up of Islamic texts that are here defined as ‘hybrid Islamic-Western texts’, representing an emerging academic genre that displays specific features in terms of both novel semantic and textual structures. Analysis of this Corpus C is aimed to highlight the varying degree(s) of discourse hybridization, this implying, as it will be shown in the ‘analysis’ section, a focus on acceptable concepts and textual structures for the prospective Western readers of the texts.

Preventing Residential Mortgage Crises: An Islamic Finance Perspective

The 2008 Financial Crisis has compelled the international financial industry, politicians and homeowners to search their souls for the root causes of the problem. Many point to insufficient regulatory supervision, others to a culture addicted to credit and sheer greed. While these issues certainly exist, we believe that the residential mortgage and capital markets harbor structural attributes that are fraught with uncertainty and create opportunities for unjust enrichment and exploitation. These malaises, among others can be prevented by applying some core principles from Islamic Finance, a system predicated on transparency and justice, and which seeks to benefit society as well as entrepreneurs. In this paper, we employ Islamic Finance principles to analyze the current predicament and to make recommendations that can prevent similar crises from recurring in the future.