Financing Mode Research Articles

Impact of the Islamic Modes of Finance on the Profitability of Islamic Banking Sector in Pakistan

The persistence of Islamic finance in any economy is arguably essential to address the economic needs of the society. The golden principles of Islam that is, profit and loss sharing, honesty, and doing business keeping in view the welfare of the people can play a vital role in alleviating poverty. The primary objective of the current study is to investigate empirically the impact of the Islamic modes of finance and their contribution in enhancing profitability. For this purpose, time series quarterly data ranging from 2014Q1-2020Q4 of the Islamic modes of finance (including Sukuk) wereused to find their impact on the profitability of the Islamic banking sector as measured by Return on Asset (ROA). The ARDL and bounds cointegration approach were used to examine the level relationship among the underlying variables. The results provided strong evidence of a long-run equilibrium relationship. The results also showed that Murabaha, Musharaka, Istisnaa, and Diminishing Partnership have a prominent positive and significant impact on ROA. However, the impact of Murabaha on profitability remains significantly higher as compared to the other modes of finance. The second most important determinant of profitability is Musharaka, followed by Istisnaa. The estimated value of error correction term showed a significant adjustment towards the long-run equilibrium. These findings may help the managers of Islamic banks in allocating funds to different modes and portfolios for optimal returns. They may also have a big impact on the ability of policymakers to create policies appropriate for interest-free windows and branches. Moreover, they would allow Islamic banks to retain their competitive edge and improve the quality of their services.

Empty container leasing and channel coordination in a Dual-Channel container transportation service chain based on joint contracts

In this paper, we study the empty container leasing decision and coordination problem of dual-channel container transportation service chain (DCCTSC) under stochastic demand in the presence of financial constraints of the carrier. First, we introduce the advance payment financing mode to solve the capital constraint problem of the carrier and analyze the optimal empty container leasing strategies under decentralized and centralized modes respectively. Then, we design a joint contract with advance payment financing parameters to coordinate the DCCTSC and discuss the conditions for contract enforceability. Finally, we verify the validity of the proposed model and coordination mechanism as well as the effects of contract and financing parameters on the DCCTSC through numerical examples. The results of the study show that the joint contract can effectively coordinate the DCCTSC and increase the total system profit by 5.23 % at most. The combination of contract parameters is flexible, and the adjustment of contract and financing parameters only changes the profit distribution between members and does not affect the coordination of the overall system

Money Multiplication in Islamic Banking – A Discussion on its Impact on Distributive Justice

This paper explores the legitimacy of the use of Fractional Reserve System in Islamic banking from the normative premise of Islamic economics. The paper uses a methodology of structured literature review and a conceptual analysis of the literature following the approach of Critical Interpretive Synthesis (CIS). The first section of the paper presents the analysis on fractional Reserve Bank (FRB) system, how it leads to multiplication of money supply and influence the long-term inflation and business cycles; the second part of the article explains the extent to which this framework obstructs in the achievement of the objectives of Islamic Economics. This is followed by a reflective analysis of concepts and information gathered from the literature to evaluate how FRB system fits into the fabric of Islamic Economic. The second section of this paper explains how Islamic Banks, with an FRB model and its inclination towards debt-based instruments, would allow Islamic banks to contribute to the problem of inflation, even if they use Musharakah and Mudarabah as a mode of finance.

Spatial spillover effect of Green Finance and Clean Energy on China's Provincial Green Economic Development.

Green finance is a new financing mode that pays attention to environmental benefits. Achieving a balance between the economy and the environment requires clean energy. For formulating policies to achieve sustainable development goals, it is very important to explore whether integrating green finance and clean energy is conducive to promoting green economic development (GED). This study applies a non-radial directional distance function (NDDF) to assess China's provincial GED using panel data from 2007 to 2020. It adopts the spatial Durbin model to empirically analyze the spatial spillover effects of green finance and clean energy on GED. The results indicate that: 1) The influence of green finance on GED shows a "U" curve relationship of first suppression and then rise. 2) A 1% increase in the synergy between green finance and clean energy yields a 0.1712% raise in the local GED and a 0.3482% boost to the surrounding area's GED through spatial spillovers. 3) The integration of green credit and clean energy has an apparent spatial spillover effect, and the interaction between green securities and clean energy can promote local GED. This study suggests that the government should accelerate and improve the development of a green financial market and establish a long-term linkage and co-ordination mechanism for the promotion of GED. It is crucial that financial institutions allocate more resources to clean energy development, and all regions will have to utilize the spatial spillover effect of clean energy to facilitate China's economic transformation and development in theory and practice.

Application of blockchain in enterprise financing: literature review and knowledge framework

PurposeIn recent years, the application of blockchain in enterprise financing has become a hot topic in academic research. This study aims to review the existing literature, construct a knowledge framework for this research topic and propose an agenda for future research.Design/methodology/approachBased on 181 papers published from 2016 to 2020 in core journal databases in China and abroad, this study used bibliometric tools to identify and analyze an overview of literature publications, research hotspot trends and research theme clustering. This study also qualitatively analyzes literature from the dimensions of enabling mechanisms, multitechnology synergy, challenges, theoretical perspectives and research methods.FindingsThis study presents the research progress of blockchain applications in direct financing, bank credit, supply chain finance and other financing modes and analyzes the similarities and differences between domestic and international literature. This study also reveals enabling mechanisms of blockchain in enterprise financing, reflected as information quality improvement (data elements), trust mechanism innovation (business process) and collaboration structure enhancement (network structure). The study found several challenges (e.g. technological uncertainty, data security and organizational change) and trends (e.g. integrated innovation of multiple digital technologies). Additionally, the authors identified several gaps and opportunities for further research.Research limitations/implicationsThis study adopts a strict strategy of selecting search terms when retrieving the literature, leading to the exclusion of certain papers on this topic.Practical implicationsThis study provides valuable insights into the innovative development of enterprise financing modes enabled by blockchain and emphasizes that managers should clarify the applicable boundaries and necessary conditions of blockchain innovation in different financing scenarios to match technological innovation with industrial expectations.Originality/valueThis study constructs a knowledge framework on this topic based on a comprehensive review of existing research and proposes several important issues for future research based on the identified research gaps.

Financial intermediation through risk sharing vs non-risk sharing contracts, role of credit risk, and sustainable production: evidence from leading countries in Islamic finance.

The asset side of Islamic banks has two different portfolios running side by side, namely risk-sharing (PLS) and non-risk sharing (non-PLS) financing. The segregation of PLS and non-PLS financing has gathered some attention recently owning to its relative importance for sustainable economic output. This study attempts to analyze the impact of decomposed Islamic financing modes (PLS and non-PLS) with a particular focus on their impact on real economic activity. In addition, we moderated the relationship with asset quality of aggregate Islamic banking sector. Quarterly data from 2014 to 2021 have been sourced from datasets of the Islamic financial service board (IFSB), the International Monetary Fund (IMF), World Bank, and Central banks' data streams. Eleven countries have been selected based on the highest local and globalshare in global Islamic financial assets. Panel data regression model has been used in this study. The findings indicate that PLS financing is a weaker driver to channelize funds. However, industrial production output is significantly affected by non-PLS financing. Further the results suggest, Islamic finance-output nexus found to have a stronger relationship in the presence of higher asset quality of Islamic banks. The results show that firms mostly rely on non-PLS financing, due to reduced asymmetry and higher transparency in non-PLS contracts compared to PLS modes. The results have implications for governing bodies of Islamic financial system in boosting risk-sharing contracts and firms to limit agency conflicts arising from fluctuating cost of financing.

Price timing and financing strategies for a capital-constrained supply chain with price-dependent stochastic demand

We investigate the pricing timing strategy in the context of trade credit (TC), under which the capital-constrained retailer applies for deferred payments from its supplier. Based on the wholesale price offered by the supplier, the retailer determines the order volume before observing the random demand and the selling price after observing it (a.k.a., price postponement). We formulate the Stackelberg game to show how their equilibrium decisions and profits are affected by: the pricing timing, financing mode, the demand structure. In a multiplicative demand framework, the analytical and numerical results indicate that TC alleviates double marginalization problem, depending on price timing and demand structure. With the traditional bank finance (BF) as a benchmark, the supplier is reluctant to provide TC to the retailer without postponement when the market is extremely sensitive to price. Postponement not only benefits both members, but also enhances retailer’s repayment ability and thus participants’ preference for TC. They can reach an agreement on utilizing price postponement and trade credit as long as the supplier choose a suboptimal wholesale decision for deferred payment that is slightly lower the optimal one. We further extend our results to consider the additive demand structure.

Comparison of Real Estate Market Level and Financing Mode of Real Estate Companies

Contemporarily, with the rapid development of the real estate industry, its market needs a large number of sources of capital. At present, real estate financing mainly relies on bank loans to solve the capital needs, and a small number of large enterprises through the listing of financing. However, these financing modes alone are not enough to solve the needs of real estate enterprises for capital. This study selects countries or regions with different levels of real estate markets and compares the financing of representative real estate companies in these locations in an attempt to identify the relationship between the level of real estate markets and the financing patterns of real estate companies. According to the analysis, Sun Hung Kai Properties in Hong Kong uses a variety of new financial instruments to finance itself, D R Horton in the US has diversified its financing, and DLF in India gets most of its financing from banks. Overall, the empirical analysis will be useful for guiding further exploration of the impact of real estate market levels on corporate financing patterns.

Century-Long Trends in the Financing and Ownership of American Health Care.

Who pays for health care-and who owns it-determine what care is delivered, who receives it, and who profits from it. We examined trends in health care ownership and financing over a century. We used multiple historical and current data sources (including data from the American Medical Association, the American Hospital Association, government publications and surveys, and analyses of Medicare Provider of Services files) to classify health care provider ownership as: public, private (for-profit), and private (not-for-profit). We used US Census data to classify physicians' employers as public, not-for-profit, or for-profit entities or "self-employed." We combined estimates from the official National Health Expenditures Accounts with other data sources to determine the public vs. private share of health care spending since 1923; we calculated a "comprehensive" public share metric that accounted for public subsidization of private health expenditures, mostly via the tax exemption for employer-sponsored insurance plans or government purchase of such plans for public employees. For-profit ownership of most health care subsectors has risen in recent decades and now predominates in several (including nursing facilities, ambulatory surgical facilities, dialysis facilities, hospices, and home health agencies). However, most community hospitals remain not-for-profit. Additionally, over the past century, a growing share of physicians identify as employees. Meanwhile, the comprehensive taxpayer-financed share of health care spending has increased dramatically from 9% in 1923 to 69% in 2020, with taxpayer-financed subsidies to private expenditures accounting for much of the recent growth. American health care is increasingly publicly financed yet investor owned, a trend accompanied by rising costs and, recently, worsening population health. A reassessment of the US mode of health care financing and ownership appears warranted.

INTERNATIONAL MONETARY FUND (IMF) AND ISLAMIC FINANCE

International Monetary fund is widely known for its financial support and stability programs toward week and unstable economies around the world. It was not until 21st century when Islamic modes of financing became an official part of IMF’s finance market after successfully generating record breaking revenues in Muslim countries like Malaysia and Saudi Arabia. The most important aspect of Islamic finance was Sukuk. In fact, it was the reason Islamic finance became a part of IMF. But the current working of IMF around the world and Islamic mode of financing don’t go side by side. The reason for this is interest based policies of IMF and increased risk factor for borrower countries. Moreover, IMF exploits week economies using funds obtained by strong countries and as a result, poor becomes poorer and rich becomes richer. It is the IMF who took out the values of the most important financial entities from Muslim countries; Oil and Gold. It can be said that as a result of IMF and its success, Muslim countries suffered the most and are still suffering. Pakistan is the living example of this suffering. The amount of debt payable by Pakistan is insane and send shivers down the spine. So it can be concluded that IMF started for a noble cause to support economies suffering from great depression and WWII but it has become a Mafia who cares only about gaining more power and hold over poor economies.

Financing the Three-Tier Supply Chain: Advance Payment vs. Blockchain-Enabled Financing Mode

Supply chain finance has shown remarkable results in alleviating the financial constraints of small and medium-sized enterprises. However, most studies have concentrated on the two-tier supply chain while ignoring the financing issues of the deep-tier supply chain. This study introduced the blockchain-enabled financing mode now utilized in the manufacturing industry and constructed a three-tier agricultural supply chain considering the farmer’s financial constraints. The main contributions of this article are (1) presenting the blockchain-enabled financing mode in the three-tier agricultural supply chain and (2) investigating supply chain decision-making in the three-tier supply chain when the tier-2 supplier is financially constrained, comparing advance payment and the blockchain-enabled financing mode. Relevant parameter estimations were realized using the data of the last ten years, and numerical analyses were conducted. The results show that when the farmer’s bank’s financing capability exceeds the acquirer’s, the farmer is motivated to select the blockchain-enabled financing mode. However, a win-win situation among the three-tier supply chain is only achievable when the transmission-fee rate falls within a particular range. In addition, if government agencies wish to promote blockchain technology by subsidizing blockchain-enabled financing, they might support the farmer in obtaining a bank loan at a cheaper interest rate. All members of the supply chain would benefit from this.

A Novel Risk Control Method of Supply Chain Finance for Commercial Banks with Big Data

Commercial bank supply chain financial business is mainly divided into accounts receivable financing mode, inventory financing mode and advance financing mode. Traditional supply chain financial business of commercial banks in different modes will form different risks, including small and medium-sized enterprise credit risk, the core enterprise credit risk and credit risk of the third-party logistics warehousing company. Under the background of increasingly powerful financial science and technology, we can use more financial technology through big data multidimensional collecting enterprise information, establishing intelligent risk control process, establishing the core enterprise credit evaluation system, preventing the core and small and medium-sized enterprises collusion fraud, preventing the third-party logistics warehousing enterprise credit risk, and reducing the risk of commercial banks supply chain financial business.

Comparison of Different Financing Methods of Real Estate Enterprises

Since China reform and opening, the real estate industry has gradually developed into a pillar industry of China's economy. In recent years, the Chinese government introduced a tightening policy to limit the expansion of the real estate bubble, but also put pressure on the real estate sector, financing problems are imminent. This article investigates the theme of China's real estate enterprises different financing methods. This study selects two Chinese listed real estate companies as the case, analyzes the relevant data in the financial reports published by the two companies contemporarily. It compares the advantages and disadvantages of different financing methods. According to the analysis, companies that pay attention to internal financing, develop diversified financing channels, have strong corporate strength, and have financing methods that respond to government policies are more capable of financing. These results shed light on helping the choice of financing methods of real estate companies in China and further exploration of financing modes.

Research on the Mode and Development of Internet Finance

With the advancement of modern science and technology, the Internet mode has been widely adopted across various sectors of society. The new Internet financial form, integrating the Internet mode and the financial industry, has realized the expansion of the financial industry in the form of lending in the new era; has made financial forms more convenient and life-oriented by taking advantage of the advantages of Internet technology, all of these has made a great contribution to expanding the financial industry. By examining the development and mode of Internet finance in depth, this paper analyzes the main mode and the development disadvantages of Internet finance, and proposes methods to encourage Internet finance development to promote sustainable development in a new era of Internet finance.

Comparative Analysis of Internet Financing Modes Based on Smes' Perspective

In China, it is difficult for small and medium-sized enterprises (SMEs) to gain access to external financial support under the traditional financial mode. However, the internet financing can alleviate this problem effectively, which broadens access to finance for SMEs and promotes their development. By comparing three mainstream Internet financing modes (i.e., equity crowdfunding, P2P lending and big data finance), this paper analyses the unique characteristics of each model and proposes more targeted and specific financing suggestions accordingly for SMEs at different development stages. According to the analysis, equity crowdfunding, P2P lending and online micro-credit loan can cater to the funding demands of SMEs in the introduction, growth, and maturity stages respectively. Meanwhile, enterprises in decline should seek financing strategies that suit their current situation. Based on the existing general risks of Internet financing in China, development suggestions from three levels (i.e., the state, the platform, and the SMEs themselves) are proposed. These results shed light on guiding further exploration of financing modes for Chinese SMEs.

What drives gearing in early-stage firms? Evidence from blue economy startups

In the blue economy start-ups play a critical role as they bring innovation, technology, and new business models, driving sustainable growth and development. However, blue start-ups also experience financing constraints and in this research, we evaluate the factors that drive their gearing ratio. Using a comprehensive sample of firms across twenty-seven EU member states between 2013 and 2020, we find a negative link between debt ratio and climatic and ocean disruptions. We also report a positive relationship between asset tangibility and gearing, while regulations have a negative influence on the choice of debt as the preferred mode of financing. Our findings also suggest that blue startups with more private equity, have a lower variation in their capital mix. Finally, the fundamentals play a favorable role to motivate the use of debt financing. These findings have important implications for blue start-ups and the related ecosystem.

Comment on “Higher Education in the United States: Laissez‐Faire, Differentiation, and Research”

Comment on “Higher Education in the United States: Laissez‐Faire, Differentiation, and Research”

Pro-gender policies and the empowerment of women in the DRC

PurposeThe purpose of this study was to show how pro-gender public policies in the agricultural sectors can contribute to the reduction of gender inequalities in the labour market and the diversification of the Congolese economy.Design/methodology/approachComputable general equilibrium model that has been adapted to the Congolese economy from the Democratic Republic of the Congo (DRC)'s SAM.FindingsThe results reveal that policies of increasing women's land allocation and government cash transfers to rural female households contribute to the reduction of inequalities in the labour market. However, only the policy of increasing women’s land allocation improves economic diversification.Research limitations/implicationsThe implementation of the policy of government cash transfers to rural women's households comes at a cost to the government. Future studies to look at the most effective mode of financing for this policy. Moreover, the policy of increasing women's land allocation is feasible in the DRC as there is a lot of unused arable land available.Social implicationsIn Pillar 1 of the National Strategic Development Plan (PNSD) on Economic Diversification and Transformation, the policy of increasing land allocation to women could be added to the objectives related to strengthening the contribution of agriculture to economic growth and employment creation. In Pillar 3 of the PNSD on Social Development and Human Resource Development, the policy of increasing land allocation to women as well as the policy of increasing government transfers to female rural households could be added to the objectives related to the promotion of employment of youth, women and vulnerable groups.Originality/valueTo the best of the authors’ knowledge, this is the first study of its kind for the DRC, which highlights the impact of pro-gender policies on women's employment, particularly in the agricultural sectors and in the diversification of the Congolese economy. This study contributes to policy orientation in DRC. The two policies (increasing land allocation to women and cash transfers to rural women) analysed in this study were chosen in light of the DRC's National Strategic Plan, the first phase of which focuses on promoting employment for vulnerable groups and economic diversification through the development of agricultural sectors.

Analysis of Financing Mode of Real Estate Enterprises: Taking Evergrande and Vanke as Examples

The development of the real estate industry has been increasingly restricted, especially after the novel coronavirus. In this case, it restricted development trend is more obvious, and some enterprises have fallen very sharply. This paper mainly analyzes the different financing situations of Evergrande and Vanke in real estate companies. To be specific, this study investigates and analyzes the financing mode of Evergrande and Vanke, combined with the real estate financing mode, and puts forward the future prospects and limitations of these financing models. The research methods we adopt are comparative analysis method and experience summary method. At the same time, we will analyze the differences between Evergrande and Vanke, and discuss why one of them went bankrupt after experiencing restricted development, while the other was able to continue to survive. According to the analysis, it is related to the financing methods they adopted. These results shed light on guiding further exploration of the real estate in the more volatile situation the most suitable financing model as well as policy implementation.

Blockchain-Driven Supply Chain’s Financing and Coordination Strategy under Nash Bargaining Scheme

Blockchain-driven supply chain finance (SCF) has become an emerging supply chain financing mode. Compared with the traditional SCF mode, blockchain-driven SCF can shorten the transaction process and provide real trade data that cannot be tampered with, thereby improving the efficiency of capital operation. This article explores the financing and coordination problems of a blockchain-driven supply chain. Based on the three most common supply chain contracts (revenue-sharing contract, profit-sharing contract, and two-part tariff contract), we construct a comparative model of bank credit financing (BCF) and blockchain-driven SCF, discuss the optimal decision-making strategy of the supply chain, and quantitatively analyze the performance of supply chain under each mode. The results show the following: (i) there is a threshold for the usage rate of the blockchain-driven SCF platform; (ii) only when the platform usage rate is lower than the threshold, the blockchain-driven SCF mode which benefits both manufacturer and retailer is a better choice; (iii) the above results always hold if supply chain contracts can coordinate the supply chain in terms of quantity decisions; (iv) the blockchain-driven SCF mode is more efficient for supply chains which are less capital-constrained. This article provides a decision basis for the selection of supply chain financing channels and provides an idea for future research on blockchain-driven SCF.