Organization Of Islamic Cooperation Countries Research Articles

How diverse are Shariah supervisory boards of Islamic banks? A global empirical survey

PurposeThis study aims to examine diversity in the composition of Shariah supervisory boards (SSBs) of Islamic banks (IBs). It investigates diversity from two perspectives: existing composition of SSBs and the regulatory frameworks and standards of selected Organisation of Islamic Cooperation countries. Diversity characteristics include education, nationality, gender and age.Design/methodology/approachA list of all full-fledged Islamic commercial banks (FFICBs) globally has been carefully prepared and confirmed. Conventional banks with Islamic windows, non-commercial banks, takaful companies and other Islamic financial institutions are excluded. The available profiles of 428 SSB members have been scrutinised and analysed. These board members occupy 522 SSB positions in 238 FFICBs operating in 52 countries around the globe. From the regulatory perspective, 12 national and international Shariah governance frameworks and standards have been examined.FindingsFindings of this paper indicate various levels of diversity in SSBs of the reviewed IBs. The level of diversity in educational background and in the nationality of SSBs can be described as generally acceptable. However, a lack of diversity in gender and age among SSB members is evidently observed in IBs. While the lack of age diversity in SSBs may be relatively justified as a common trend in the composition of corporate boards, SSBs of IBs are seriously lagging behind in gender diversity. On the regulatory level, this study concluded that provisions on diversity as a requirement in SSBs are almost non-existent in the existing regulatory frameworks and standards.Research limitations/implicationsThe major limitation of this study is the lack of available information on the SSB members.Practical implicationsThis paper provides insights for IBs and policymakers concerned with the corporate governance of IBs and all Islamic financial institutions. First, it offers an excellent bird’s-eye view of the status of diversity in SSBs of IBs. Second, it motivates policymakers and standard-setting bodies to ensure, through the relevant regulatory frameworks, adequate levels of diversity in the composition of SSBs. Diversity in SSBs of IBs and Islamic financial institutions should be given special emphasis, not only in boards and top management positions but also in the workplace. This is of profound significance to the reputation of Islamic finance industry which has been recently under mounting pressure to translate the rhetoric about the Islamic finance industry being ethical, fair, just, equitable and inclusive into genuine implementations.Originality/valueTo the best of the authors’ knowledge, this study is the first of its kind to examine the diversity of SSB members from the regulatory as well as from the implementation perspective.

Macroeconomic fundamentals, institutional quality and shadow economy in OIC and non-OIC countries

PurposeThe purpose of this paper is to analyze the relationship between macroeconomic fundamentals, intuitional quality and shadow economy.Design/methodology/approachBy utilizing data setspanning from 2004 to 2015 of 141 countries, the study has employed advanced panel technique, i.e. Generalized Method of Moments (GMM) method. In order to check consistency of the results, the study also used fixed effect and random effect for robustness.FindingsThe study finds that for the full sample, institutional quality has negative effect on shadow economy while macroeconomic fundaments effect shadow economy differently. After splitting the sample into Organization of Islamic Cooperation (OIC) and non-OIC countries subsamples, it observes same influence of macroeconomic fundaments and institutional quality on shadow economy, but the effect of macroeconomic fundaments and institutional quality on shadow economy is less observed for OIC countries. The results are found consistence by using different estimation methods.Originality/valueThe current literature has focused on estimating the size of shadow economy and literature linking the macroeconomic fundaments, institutional quality and shadow economy is scarce. Additionally, this study provides the evidence for cross comparison between OIC economies and non-OIC economies.

Impact of trade openness, human capital, public expenditure and institutional performance on unemployment: evidence from OIC countries

PurposeThis study examines the impact of trade openness, human capital, public expenditure and institutional performance on unemployment in various income groups of Organization of Islamic Cooperation (OIC) countries.Design/methodology/approachTraditional panel data methodologies neglect the issue of cross-sectional dependence and provide ambiguous outcomes. A novel approach, “dynamic common correlated effects (DCCE)”, is utilized in this study to tackle with aforementioned issue. Pooled mean group (PMG) estimation is also applied to verify the robustness of the findings.FindingsThe long-run estimates show that trade openness has a significant and negative relationship with the unemployment rate in overall and lower-income OIC economies and a positive correlation with unemployment in higher-income OIC countries. Public expenditure is negatively and significantly correlated with unemployment in higher-income and overall OIC economies. Moreover, human capital reduces unemployment in higher-income and overall OIC countries while increases unemployment in lower-income OIC economies.Practical implicationsThe research tends to endorse the argument for continuous trade openness policy along with efficient use of public expenditure and improved institutional performance to reduce unemployment in OIC countries.Originality/valueThe DCCE approach in this research considers heterogeneity and cross-sectional dependence between cross-sectional units and thus gives robust outcomes.

Financial Inclusion and Human Development in OIC Member Countries: Evidence from Panel Quantile Regression Method

The Organization of Islamic Cooperation (OIC) member countries has the lowest human development index (0.63) compared with the world average (0.73) and developing countries’ average (0.68). However, the level of human development varies among the member countries, with the majority of the members categorized under low and medium levels of human development. To explore more information about the effect of financial inclusion on human development across different level of human development of OIC countries, this study used panel quantile regression to examine the effect of financial inclusion on low, medium, high and very high human development levels of OIC countries. The results revealed that financial inclusion promote higher human development in countries with medium human development, because of increase in income and investment in countries that move from low-income level to medium income status. Institutions found to promote higher human development in countries with high and very high human development and negatively affect human development in countries with low and medium human development levels. Also, remittance inflows have positive effect on human development across all levels of human development but stronger in countries at lower level of human development. Thus, policymakers in OIC should formulate policies that will promote financial inclusion in low- and meddle-income countries to achieve higher human development. In addition, policymakers should revitalize institutions especially in countries with low and medium human development levels. Also, the cost of sending remittance into OIC should be reduce to attract more remittances into the member countries.

Can religious values reinvigorate the links between development and falāh?

PurposePrevious studies have challenged the Human Development Index’s (HDI) ability to emulate the achievement of falāh (happiness). This paper aims to evaluate the role of religious values in establishing a positive link between the current measurement of development and falāh.Design/methodology/approachFirst, this study derives an improved value-loaded development measure from the concept of Maqasid al-Shari’ah (the higher objectives of Islamic law). Second, this paper compares the calculated Maqasid al-Shari’ah Index (MSI) with the HDI of some Organisation of Islamic Cooperation (OIC) countries by using the parametric pair difference z-test and t-test along with the non-parametric Wilcoxon signed-rank test. Finally, the relationship of both indices and the proxy of falāh are examined by using the ordinary least square and the generalised method of moments estimations.FindingsAs far as the religious-led development is concerned, the HDI underestimates OIC countries’ development progress. Here, the MSI can better embody the attainment of falāh than the HDI.Research limitations/implicationsThis study only covers limited OIC countries due to the data availability issue.Practical implicationsThe cultural-based development stemming from the religious values proves useful for putting the government effort towards the attainment of the objective of human well-being in the right direction.Originality/valueTo the best of the authors’ knowledge, this is the first study examining the empirical relationship between the MSI and falāh.

The Influence of Financial Inclusion and Macroeconomic on Foreign Direct Investment (FDI) Flows in The Organization of Islamic Cooperation (OIC) Countries

Foreign capital flows are important factors in the development of sustainable economies, especially in developing countries such as the OIC countries. Lately, the rapid development of the financial sector and macroeconomic stability became a serious concern by foreign investors, where financial inclusion and macroeconomics played an important role in attracting direct foreign capital flows (FDI). The study aims to investigate the role of financial inclusion and macroeconomic variables on the foreign direct flow of capital (FDI) by using data panels in 8 OKI member States during the 2012-2018 time span. The research uses the Fix Effect Model (FEM) Panel data Analysis tool, which is believed to be able to explain the correlation between independent variables and more accurate dependents. As for the results of the study showed that in partial only variable avaibility (the number of branches of the bank/100,000 adults) is a significant positive draws FDI in the OKI country. While on macroeconomic variables the exchange rates have significant negative effect on FDI, while interest rates and economic growth have significant positive relationships in attracting FDI.

Asymmetric openness-growth nexus in 20 highly open OIC countries: Evidence from quantile-on-quantile regression approach

This study analyzes the asymmetric association between trade openness and economic growth in 20 highly open Organization of Islamic Cooperation (OIC) countries. A novel technique, quantile-on-quantile (QQ), is applied by using the data for the period 1991–2018. The results consider the mode of how quantiles of trade openness asymmetrically affect the quantiles of economic growth by giving an appropriate framework to apprehend the overall dependence structure. A positive linkage between trade openness and economic growth is found in United Arab Emirates, Malaysia, Suriname, Kuwait, Mauritania, Turkey, Tunisia, Qatar, Brunei, Morocco, Sierra Leone, Bahrain, Libya, Oman, Saudi Arabia and Albania. However, there is a negative association between trade openness and economic growth in Guinea, Guyana and Mozambique. Hence 16 out of 20 OIC countries support the trade-led growth hypothesis. These outcomes intimate that the intensity of asymmetric association in openness-growth nexus varies with countries that require individual attention and caution for governments in postulating the policies related to trade and growth.

Mental health disorders research in the countries of the Organisation of Islamic Cooperation (OIC), 2008-17, and the disease burden: Bibliometric study.

The 57 countries of the Organisation of Islamic Cooperation are suffering from an increasing burden from mental health disorders. We investigated their research outputs during 2008–17 in the Web of Science in order to compare them with the burden from different mental health disorders and in different countries. The papers were identified with a complex filter based on title words and journals. Their addresses were parsed to give fractional country counts, show international collaboration, and also reveal country concentration on individual disorders and types of research. We found 17,920 papers in the decade, with output quadrupling. Foreign contributions accounted for 15% of addresses; they were from Europe (7%), Canada + USA (5%) and elsewhere (3%). They were much greater for Qatar and Uganda (> 60%), but less than 10% for Iran and Turkey. Schizophrenia and bipolar disorder were over-researched, but suicide and self-harm were seriously neglected, relative to their mental health disorder burdens. Although OIC research has been expanding rapidly, some countries have published little on this subject, perhaps because of stigma. Turkey collaborates relatively little internationally and as a result its papers received few citations. Among the large OIC countries, it has almost the highest relative mental health disorders burden, which is also growing rapidly.

Impact of Bank Concentration and Financial Development on Growth Volatility: The Case of Selected OIC Countries

ABSTRACT This study investigates the impact of bank concentration and financial development on economic volatility for the Organization of Islamic Cooperation (OIC) member countries. Employing dynamic panel models, we find no evidence that bank concentration is significantly related to economic volatility when it is entered independently in the models. Meanwhile, financial development lowers economic volatility. Extending the models to include market structure–financial development interaction, we note that the impact of bank concentration on volatility depends on the level of financial development within OIC countries. More specifically, the volatility-increasing effect of bank concentration tends to be moderated by financial development. Accordingly, in the wake of banking sector consolidation in these countries, policymakers and regulators in OIC countries should focus on further developing their financial markets such that the negative consequences of resulting market concentration can be mitigated.

Does corruption affect Islamic banking? Empirical evidence from the OIC countries

PurposeThis paper aims to examine whether the level of corruption affects profitability and soundness of Islamic banking.Design/methodology/approachThis paper uses a dynamic panel of 61 Islamic banks from 12 Organization of Islamic Cooperation (OIC) countries covering the period between 2016 and 2018.FindingsThis paper finds that the empirical evidence examined shows that corruption does affect the profitability and soundness of Islamic banks.Originality/valueThe value of this paper is to emphasize further understanding of corruption behaviour on Islamic banking in Islamic countries. This paper contributes to filling the gaps in the current literature on corruption and Islamic banking. Existing literature has only focussed on either profitability or soundness of Islamic banking, whereas this paper analyses the impact of corruption levels for both performance measurements simultaneously.

Institutional Quality and Trade Flow: Empirical Evidence from Malaysia and Other OIC Member Countries in Africa

This article examines the impact of institutional quality on bilateral trade flow between Malaysia and selected 25 African Organisation of Islamic Cooperation (OIC) member countries. Four institutional qualities were selected from World Governance Indicators with other trade predictors from the period from 1985 to 2016. Using gravity model of trade and Poisson pseudo-maximum likelihood estimation method (PPML) technique, the results confirm that government effectiveness, regulatory quality and political stability have an adverse effect on bilateral trade flow among the OIC countries in Africa. On the other hand, these institutional quality variables were considered as a strength for Malaysian economic growth. Therefore, better institutional quality reforms are needed among OIC member countries in Africa in order to accelerate trade, economic growth and development in their region.

Determinant of FDI Inflows in OIC Countries

This study aims to analyze the determinants of foreign direct investment (FDI) in the Organization of Islamic Cooperation (OIC) country members for the period 2005 to 2018 The determinant variables of FDI are corruption, political stability and macroeconomic variables such as inflation, exchange rates, economic growth, and trade openness. Analysis used in the study is the fixed effect model (FEM) of the OIC data panel.The results showed that economic growth and trade openness had a significant influence on foreign direct investment (FDI), while the effects of corruption, political stability, inflation and the exchange rate have no significant effect on foreign direct investment (FDI).

FINANCIAL INCLUSION, INSTITUTIONAL QUALITY AND FINANCIAL DEVELOPMENT: EMPIRICAL EVIDENCE FROM OIC COUNTRIES

This unique study examines the moderation effect of institutional quality (IQ) on the relationship between financial inclusion (FI) and financial development (FD) of 45 Organization of Islamic Cooperation (OIC) countries. For empirical analysis, panel data are used for the period 2000–2016. We use the Arellano–Bond generalized method of moments (GMM) and two-stage least-squares (2SLS) method in our estimations to draw multidimensional results. The empirical results confirm the significant positive relationship between FI, IQ and FD. Interestingly, we find that IQ moderates FI and has a significant positive impact on FD. Our findings are robust to alternative econometric specifications of FI, IQ and FD. Therefore, policymakers must sensibly understand the pivotal role of FI and IQ in establishing sustainable future development of OIC countries.

National Governance and Corporate Liquidity in Organization of Islamic Cooperation Countries: Evidence based on a Sharia-compliant Liquidity Measure

This paper investigates the determination of corporate liquidity in Organization of Islamic Cooperation (OIC) countries with emphasis on whether and how national governance (NG) has bearings on corporate liquidity in such countries. Using the Sharia-compliant liquidity measure to examine non-financial firms' liquidity in 22 OIC countries during the period 2000–2016, results reveal that liquidity determination in OIC countries resembles that in other countries. Additionally, NG positively affects corporate liquidity. Furthermore, the positive and negative effects of growth opportunities and leverage, respectively, on corporate liquidity strengthen with NG. Overall, results suggest that NG improves corporate governance in OIC countries.

Corruption and bank risk-taking: The deterring role of Shari’ah supervision

This paper investigates whether the risk-taking of Islamic banks is differently affected by corruption compared to conventional banks. Indeed, the presence of Shari’ah supervisory boards (SSBs), as a cornerstone of Islamic banking, is expected to deter the influence of corruption on risk-taking for Islamic banks. We consider a matched sample of 70 Islamic and conventional banks operating in 10 OIC (Organization of Islamic Cooperation) countries over the 2012-2017 period. We find consistent evidence that higher levels of corruption are associated with higher bank risk for both conventional and Islamic banks. However, this association is stronger for conventional banks. Furthermore, for Islamic banks, the impact of corruption on risk-taking is significantly reduced with higher representation of females in Shari’ah supervisory boards and higher academic qualifications of board members. The role played by such board members in mitigating the impact of corruption on risk-taking is more effective for Islamic banks than for conventional banks.

STATE OF ENVIRONMENTAL PROTECTION IN THE OIC COUNTRIES: GENESIS, ONGOING INITIATIVES AND RECOMMENDATIONS FROM HUMAN RIGHTS PERSPECTIVE

The article focuses on the state of environment protection at global and regional levels. It dwells in detail on the definitions, history, causes of climate change and the efforts made by the international community to address this existential threat in a just and efficient manner, as well as the ongoing efforts to salvage the future of humanity by embarking on the road to sustainable development. The article also focuses on explaining the state of environmental degradation from a human rights perspective and suggests requisite measures that ensure the promotion and protection of human rights of the most disadvantageous persons and segments of every society. The special emphasis is placed on the origin of Islamic ecological thought, the dichotomy between Islamic precepts, which are fully in line with the just and sustainable use of natural resources, and the contradictory practices of Muslim countries. Equally important in this regard are the various initiatives, policies and decisions taken by the Organization of Islamic Cooperation (OIC) to address the challenge of environment protection at the national, regional and international levels, as part of the global community. In dealing with the state of environment protection in the OIC countries, the article also situates the overall debate within the context of the right to a healthy environment and the concept of climate justice. It accordingly makes a number of recommendations to different stakeholders including the primary target of the article i.e. the OIC countries both from a developmental and human rights perspective.

THE CORRUPTION AND HUMAN DEVELOPMENT TO THE ECONOMIC GROWTH OF OIC COUNTRIES

This paper aims to estimate the effect of corruption (represented by data of Corruption Perception Index) and human development (represented by data of Human Development Index) on the economic growth (represented by data of Gross Domestic Product) in 44 (forty-four) countries who join the Organization of Islamic Cooperation (OIC). this paper uses multiple linear regression with panel data of Corruption Perception Index from transparency.org, Human Development Index from United Nations Development Program (UNDP) and Gross Domestic Product from World Bank. The 10 years range of data (2009-2018) finds the Corruption Perception Index does not have a significant effect on the economic growth, but The Human Development Index has a positive significant effect on the economic growth or Gross Domestic Product. It can be seen that the commitment of OIC countries in human development is on the right path, since they are in line with their economic growth rates. When viewed together, the Corruption Perception Index and the Human Development Index have a simultaneous influence on the economic growth. So, this result is important to help the OIC as additional references to their Annual Summit or Conference to focus more on Human Development strategy to enhance the economic growth.

Bank Concentration and Economic Growth Nexus

This paper examines the relationship between bank concentration and economic growth in Organization of Islamic Cooperation (OIC) countries. This is done using the system GMM estimators on a panel data sample consisting of 41 countries and 650 observations. Our analysis reveals that bank concentration has negative impact on economic growth and this relationship is non-linear. Furthermore, the impact of bank concentration on economic growth is found to be dependent on the country’s income and corruption levels. Therefore, it seems reasonable to conclude that bank concentration has negative impact on the economic growth in OIC countries.

Corporate governance and banking performance: the mediating role of intellectual capital among OIC countries

PurposeThe existing literature asserted that the Islamic banking industry progress significantly, but it has increasingly found asset deficient which assaulted the performance of Islamic banks (IBs). The aim of this study to examine the mediating role of intellectual capital (IC) on the relationship between corporate governance (CG) mechanisms and IBs performance is examined (ATO, NPM).Design/methodology/approachA panel sample of 129 IBs is drawn from the 29 organisation of Islamic cooperation (OIC) countries from 2008 to 2017. Two-step system generalized method of moments (2SYS-GMM) was used to account for the unobserved endogeneity and heteroscedasticity problem.FindingsThe empirical findings demonstrate that there is a significant impact of the CG mechanism on IC. Moreover, the empirical findings indicate that CG has a direct influence on banking performance but it affects indirectly through IC. IC also appears to have a mediation role in the relationship between the CG mechanism and the performance of IBs.Research limitations/implicationsAs the empirical research on IC from CG point of view in Islamic banking is generally new in the banking literature, the output of this research will contribute to the building up of empirical framework and practices regarding IC in the Islamic banking industry by using the resource-based theory as a leading theory and agency theory as a sub theory. It is anticipated that this study provided a superior comprehensive discussion of the IC in IBs across OIC countries which discovers the CG mechanism to influence the IC to improve banking performance.Practical implicationsThis study offers useful insights to the regulators and practitioners to draw the rules and regulations in improving the CG mechanism and the effectiveness of internal controls by acknowledging the importance of IC in Islamic banking institutions. Particularly, the findings of this study may be of benefit to bankers to efficiently use the IC as a premise to design new and creative strategies to achieve a competitive advantage in the banking industry.Originality/valueThe study is unique in its nature because it presents a successful model for IBs to concentrate more on the role of IC in enhancing banking performance, which might be used by the banks to rearrange the roles within CG, to place their priorities regarding the internal governance system and financial plans for competency enhancement.

Trade-induced Unemployment in Labor-abundant and Capital-abundant OIC Countries: Asymmetric Evidence from Quantile-on-Quantile Regression

This study aims to analyze the impact of trade openness on unemployment in labor-abundant and capital-abundant countries of Organization of Islamic Cooperation (OIC) by taking the data from 1991 to 2018. A new technique quantile-on-quantile (QQ) is applied to show how quantiles of trade openness asymmetrically affect the quantiles of unemployment by providing an appropriate framework to capture the overall dependence structure. 8 out of 10 capital-abundant countries show a positive association between trade openness and unemployment, while 7 out of 10 labor-abundant countries indicate a negative effect of trade openness on unemployment. Hence, the majority of selected labor-abundant and capital-abundant countries are validating Heckscher-Ohlin theory of international trade. The results show that the asymmetric intensity of trade-induced unemployment varies with countries at both bottom and upper quantiles of the distribution of data that require individual attention in postulating the policies related to trade and unemployment in OIC countries.