Presence Of Islamic Banking Research Articles

The causality between returns of interest-based banks and Islamic banks: the case of Turkey

PurposeThis paper aims to shed light on the risk structure in the presence of Islamic banking. The author concentrates on the relationship between Islamic banking and conventional banking in Turkey. Islamic banking and conventional banking are considered to be different kinds of sources for funding. Returns in the conventional banking are expected to be heavily influenced by the interest rate in the money market. However, Islamic banking returns are interest-free so that interest rate changes are not expected to affect the deposit returns in Islamic banks. Interest rates in the economy are a proxy to highlight the general risk level of the economy. By looking at the causal relationship between the deposit returns of both Islamic banks and conventional banks, it is possible to address the different types of banking in the general risk structure of the economy. This is one of the first studies to address the mentioned difference in banking sector in Turkish economy.Design/methodology/approachThis paper tries to identify the direction of causality between Islamic and conventional banking term deposit rates by means of Granger Causality. Also, Granger Causality test results will guide to explore the Islamic and conventional banking deposit return linkages. The author has extended the study with vector autoregressive analysis to understand the correlation structure between conventional deposit rates and the profit–loss sharing ratio of Islamic Banks. The author has also extended this study with impulse response functions to see whether the shocks hitting into the conventional banking affect Islamic banking and vice versa.FindingsThe results suggest that there is no significant clear relationship between both banking sectors. This result can be interpreted, as Islamic banks do not adjust their profit–loss sharing (PLS) ratios pegged to the interest rate offered by conventional banks. Also, conventional banks determine their interest rate without any connection to the Islamic banking PLS ratios. Overall results of this study contradict the findings of studies which conclude that Islamic banking might not be different from the conventional banking. It is reported that inferences from pair-wise Granger causality alone might be spurious, as the analysis based on non-stationary series can be a consequence of time functional characteristics of the time series.Social implicationsThe results can be taken as counter evidence to the hypothesis “Islamic banks determine their PLS ratios based on the interest rates offered by conventional banks”. This address that the Islamic banks may offer alternative financing methodology which has different procedure. Hence, Islamic finance can be taken as an alternative method with its asset-based healthier structure.Originality/valueThis is one of the first studies to address the Islamic versus interest-based banking difference in banking sector in Turkish economy. This paper tries to identify the direction of causality between Islamic and conventional banking term deposit rates by means of Granger causality.

Islamic banking and risk: The impact of Basel II

The expansion of Islamic banking raises questions about its impact on financial stability. We question whether the implementation of Basel II standards influences the gap in risk between Islamic and conventional banks. We use a sample of 558 banks from 24 countries that had an Islamic banking presence between 2007 and 2013. We exploit the variation in Basel II implementation across countries to use a differences-in-differences approach. Risk is considered according to insolvency risk and credit risk indicators. We find that Basel II standards enlarge the gap in risk between Islamic and conventional banks at the expense of Islamic banks. These findings are also observed when separately considering small banks and large banks. We thus support the view that the relationship between Islamic banking and risk is conditional to the regulatory framework.

PERKEMBANGAN BANK SYARIAH DI INDONESIA

This study aims to find out about the development of Islamic banks in Indonesia. This research is qualitative descriptive. This study included literature to examine the written sources such as scientific journals, books referesni, literature, encyclopedias, scientific articles, scientific papers and other sources that are relevant and related to the object being studied. As for the object of study of this research is in the form of texts or writings that describe and explain about the development of Islamic banks in Indonesia. Results from this study is Indonesian banking now enlivened by the presence of Islamic banks, which offers financial products and investment in a different way than conventional banks, as Indonesia is the largest Muslim country in the world. The development of Islamic banking in Indonesia has become a benchmark for the success of the Islamic economic existence. Bank Muamalat as the first Islamic bank and a pioneer for other Islamic banks in Indonesia.Keywords: Islamic banks, conventional banks, banking

ANALISIS IMPLEMENTASI PRINSIP BAGI HASIL, RISIKO DAN PENANGANAN PEMBIAYAAN BERMASALAH TERHADAP PEMBIAYAAN MUSYARAKAH DAN PEMBIAYAAN MUDHARABAH (STUDI KASUS:BANK SYARIAH MANDIRI KC MANADO)

The banking system in Indonesia is conducted by the dual banking system where the system is divided into conventional and Islamic. Presence of Islamic banks has provided investment alternatives without worrying about the risk the development of remuneration with an uncertain interest method. But on this implementation, Islamic banking requires special treatment different from conventional banks, especially in terms of handling the risks and challenges faced by Islamic banks. The problem is how to implement the profit sharing of principal and risks and how the handling Non Performing Finance of the implementation the profit sharing. To answer the problems of research using qualitative methods by analyzing primary and secondary data so as to produce the results of interviews. The result of this study show that in musyarakah principle not much different from the mudharabah, that both a system of partnership between the two sides or more to administer a particular business with profit sharing corresponding portion (ratio) were agreed at the beginning of the agreement. On this Implementation Mudharabah and Musyarakah have a some differences. While the risk in financing the Musyarakah and mudharabah, especially on this the financing application, high relatively, among other side streaming, negligence and misconduct willful, concealment of profits by customers when customers are not honest. The amount of financing risk is shown in the ratio of non-performing finance (NPF). The high of NPF indicates the large number of borrowers who can’t repay their finance in accordance with the initial agreement that has been agreed between the bank and the customer, so financing becomes problematic. Funding problems can be caused by the bank itself, the customers or external parties. Bank Syariah Mandiri (BSM) Branch Office Manado has been anticipating the event of a dispute banking, especially in the provision of financing problems. On this theory of completion financing problems, be done with several measures including the rescue action by intensive bill, rescheduling, re-requirements and realignment. Rescue actions made by bank on this condition that the customer is still considered to have good faith to settle the payment. Keywords: Islamic Banking, Profit Sharing, Risk, and Financing Problems

Pendekatan Terintegrasi Corporate Social Responsibility Perbankan Syariah dalam Pengentasan Kemiskinan di Jawa Timur

As one of Indonesian province playing barometer for the development of Islamic economic and Muslim aspiration, the Islamic banking presence in East Java is expected to have broader social role in poverty alleviation process. Through synergy process with stakeholders, a relatively new approach to support government program needs to be analyzed its feasibility. Study about integrated approaches on corporate social responsibility is necessary to undertake in order to comprehend the possible space and opportunity in enhancing East Java’s poverty reduction program. Methodology of study employing qualitative analysis with library research is done to answer potency and feasibility of CSR program in East Java. The result of study has concluded that although CRS concept is not relatively new in Islamic Economics, this strategy has been selected to sound inclusive and acceptable terminology for stakeholders involved. Integrated-CSR strategy approaches led by Islamic banking require an institution (SPV-special purpose vehicles) that can manage CSR fund productively and sustainably. This program must be supported by the availability of zakat (alms) fund as the pillars to provide basic needs for the poor. After the poor people (dhuafa) are able to fulfill their basic needs, the East Java’s micro-enterprises programs are effectively introduced in empowering them.

Politics of National Laws on the Establishment of Islamic Banking

The aim of this research is to know politics of national laws on the establishment of Islamic banking. The method used in this research using qualitative and historical. Qualitative data is based on the content or quality of a fact. While historical data based on past experiences that describe fully the whole truth of events or facts. This data is sourced from the '45 Constitution, laws, government regulations, PBI, SK Directors Circular BI, and Instruction (Fatwas) DSN-MUI relating to Islamic Banking, newspapers, magazines, journals, articles and research or scientific papers related to the issue being discussed is collected through observation and in-depth interviews. The results of this study revealed that; First, the involvement of government and society in the establishment of Islamic banking, such as; capital (assets), institutions and legislation; second, the internal and external factors that affect both domestic and abroad who encourage the presence of Islamic banking.

Islamic banking presence and economic growth in Southeast Asia

Purpose The purpose of this study is to empirically assess the relationship between Islamic banking presence in Southeast Asian countries and the economic growth. Design/methodology/approach The presence of Islamic banks is measured by the ratio of Islamic to conventional banking assets as well as the ratio of deposits of Islamic to conventional banking. This study starts by checking the presence of cointegration using Pedroni’s and Westerlund’s specifications; short- and long-run dynamics are further analyzed with the panel autoregressive distributed lag model (ARDL)-based estimators: pooled mean group (PMG), mean group (MG) and dynamic fixed effect (DFE). Furthermore, a two-stage regression [two-stage least squares (2SLS)] was constructed to measure the sensitivity of economic growth to the Islamic banking presence. Quarterly data from Southeast Asian countries cover the period between 2000Q1 and 2012Q4. Findings A long-run relationship is evident between economic growth and the Islamic banking presence in the selected region, but not in the short run. Furthermore, the Muslim population share in a given country plays a positive and statistically significant role in fueling the contribution of Islamic banking share in the financial sector on the economic growth. Social implications The results of this study show that Sharia-compliant banks succeeded in mobilizing additional resources for the financial sector, which may increase the stability of the banking system and the efficiency of the whole banking sector. The authors believe that the inclusion of Islamic banking products in the financial systems will, along with the diversification effect, stimulate financial deepening and, therefore, improve the financial stability in the countries under investigation in particular, and all countries with significant Muslim population in general. Originality/value This study empirically assesses the contribution of Islamic banking presence on the economic growth with a focus on Southeast Asia, as this region encompasses the most developed and experienced institutions in the field of Islamic finance. Error correction-based models such as PMG, MG and DFE lend itself to the analysis of the panel data. This study also uses the instrument-based 2SLS to cope with the endogeneity problem between the real and financial sectors.

Resistensi Masyarakat Terhadap Perbankan Syari’ah di Kota Langsa

The People Resistance to Islamic Banking in Langsa The presence of Islamic Banking in Langsa since 2005 is in line with the aspirations of the Acehnese as an application of Islamic law. In this case the economic and finance tailored to the sharia is to establishe the people to be compete constructively in favor and the successful life such as happiness, glory, and the hereafter (falah). This things is to realized the shariah goal (maqashid sharia) especially in dharuriah five dimensions, such as: religion, life, thought, ancestry, and wealth. The Islamic banks has established in Langsa since 14 years ago, but the people in Langsa not yet fully trust the operational of Islamic banks. They think there is no difference between Islamic banks and conventional banks, beside using sharia label only. The people that become a conventional bank’s customer has a perception that either the Islamic banks or conventional banks still contains a riba. DOI: 10.15408/ess.v6i2.3571

Islamic finance and economic growth: The Malaysian experience

The increasing presence of Islamic banking and finance in Malaysia's financial sector and the country's exemplary role in the global Islamic finance industry has called for an evaluation of the contribution of Islamic finance to the real economic activity. In order to empirically investigate the impact of Islamic finance on performances of major macroeconomic indicators, this study applies the ARDL approach on quarterly data set for Malaysia covering the period from 1998 to 2013. The results suggest that Islamic finance has started to make important contributions to the real economy by effectively carrying out the financial intermediation role of pooling and channeling funds to the investment activities. In view of the important contributions of Islamic finance to the Malaysian economy, continuous efforts need to be undertaken to further expand the industry. This includes refinement of the legal and regulatory framework to enable healthier growth of the industry, thus further strengthens Malaysia's position as the leader in the Islamic finance industry at the global level.

Studi kritis model perjanjian mudarabah pada perbankan syariah di Indonesia

The presence of Islamic Banking in Indonesia on the one hand it should be welcomed because it is aproof of the excitement of the majority of Muslims in the country to attempt to practice the teachingsof Islam in the life of the muamalah each other. But very unfortunate if the concept of Islamic Bankingis still graft the principles of usury-based conventional banks. As shown in the mudaraba agreementscheme practiced by some Islamic Bank is still causing some problems from the viewpoint of Sharia,including Islamic Banking legal standing as related parties in the mudaraba agreement itself, the dualstatus, on the one side and the other side as mud}a>rib as s}ahib al mal. Held dual status that Islamic Bankingcourse diametrically opposed to the principles of sharia. Another serious problem that was seized inMud}arabah current agreement scheme is a scheme which is essentially an agreement contract debtsbetween Islamic Bank is positioning itself as a cahib al-mal with customers who position themselves asmud}a>rib. Being stuck mud}arabah made Islamic Bank debts into the scheme of course is very dangerousfrom the point of view of sharia because it would trap the usury-based parties in the transaction. For thereconstruction of the model that needs to be done mudaraba agreement on Islamic banking thatmodels the agreement actually purely on the basis of pure sharia upright.

Monetary Policy in the Presence of Islamic Banking

This paper discusses key issues related to the conduct of monetary policy in countries that have Islamic banks. It describes the macrofinancial background and monetary policy frameworks where Islamic banks typically operate, and discusses the monetary transmission mechanism in economies where Islamic and conventional banking coexist. Most economies with Islamic banks also have conventional banks and this calls for a comprehensive approach to monetary policy. At the same time, a dual approach to monetary policy should be considered whenever the Islamic segment of the financial system is not as developed as the conventional one. The paper tries to shed light on potential spillovers between conventional and Islamic financial systems, and proposes specific recommendations on the design of Islamic monetary policy operations and for facilitating monetary transmission through the Islamic financial system.

Monetary Policy in the Presence of Islamic Banking

Monetary Policy in the Presence of Islamic Banking

Islamic Banking and Financial Development

AbstractAbstract With the growing number of Islamic banks worldwide, much ink has been spilled on heated debate about its merits and ability to improve the financial sector. In order to buttress the subject matter of this debate, this paper investigate the link between Islamic banking assets share and the financial development. Using five different proxies of financial development from 22 countries for the period between 2000 and 2013, this research employs the generalized method of moments to cope with the endogeneity problem, and concludes that the share of Islamic banking is positively associated with the banking sector activity as measured by private credit. The competition of banking sector intensifies in countries with higher Islamic bank shares resulting in smaller net interest margin, whereas the structure of the financial sector does not change. A financial sector index composite regression showed that in general, financial development is positively linked to the Islamic banking presence. These findings provide empirical evidence that Islamic banking presence benefits financial development in Muslim countries.

A Proposed Framework on the Relationship between Islamic Microfinance Related Factors and Women Entrepreneurs Business Performance in Nigeria

Microfinance plays a key role in poverty alleviation, employment generation, mitigating rural urban migration, utilization of local resources and raw materials and contributing to the gross domestic product (GDP) of Nigeria. Women, majority of who are poor and engaged in informal micro, small and medium scale businesses are mostly the target of microfinance institutions. However, women entrepreneurs find it difficult to have access to the products and services of the conventional banks due to their stringent lending requirement. The presence of Islamic banking which promotes the profit and loss sharing (PLS) concept increases the awareness among women entrepreneurs to alternative funding sources. Despite availability of financing options, women entrepreneurs are constrained by their reluctance to use interest based microfinance services. This paper aims to provide a proposed framework that examines the impact of Islamic investment and financing contracts (Murabaha financing and Mudharabah savings) and other microfinance related factors (training, social capital and self-esteem) on women entrepreneurs business performance. Religiosity is a new moderating variable within the framework that is hypothesized to enhance business performance of women entrepreneurs. The proposed framework will fill the gap in Islamic banking and finance studies since the area of Islamic microfinance and the moderating effect of religiosity has not been empirically investigated.

PRINSIP-PRINSIP KEUANGAN ISLAM MENURUT ABDULLAH SAEED

In the late 60s to early 70s, was born a consensus of Islamic law and economic experts who say that the interest in the banking system is part of usury, so the banks are not in accordance with the Islamic Shari’ah. As an alternative, the experts offer free banking model of the system of interest, with the concept of profit and loss sharing (PLS). However, the presence of Islamic banking bore the pros and cons among Muslim scholars. Among the leaders of the cons is Abdullah Saeed. This article discusses the thinking Abdullah Saeed who criticize the interpretation of usury and interest, the principle of PLS (mudarabah and loss), and the principle of sale (murabaha). The criticism is: (1) He said, usury is forbidden because of the exploitation of the poor, while the interest there is no element of exploitation so that interest is not included in the category of usury. (2) A number of requirements in practice only to protect banking PLS. So what happens is sharing the results, but do not share the risk. (3) Further Saeed see that Islamic banking is not better than conventional banking. Because in fact, the practice of Islamic banking also implement a “model of financial transactions such as interest” ie Murabaha. Murabaha profit are uncertain and affected by time, not much different from the concept of interest reproach.

The Effects of Economic and Financial Development on Financial Inclusion in Africa

This study provides empirical evidence on the effects of economic and financial development on financial inclusion in Africa, using panel FMOLS for the 2005-2014 period. The study shows that economic growth has a significant positive impact on financial inclusion, meaning that African countries with higher economic growth have more inclusive financial systems. GDP per capita has a significant positive impact on financial inclusion. That is, income is an important factor in explaining the level of financial inclusion in Africa. It is, as well, established in this study, that although both economic and financial development promote financial inclusion, though the effects of economic development are much stronger. Also, inflation is negatively linked to financial inclusion, and as well insignificant across all specifications. Deposit interest rate is positively linked to financial inclusion, though insignificant. The low deposit interest rates in African countries do not encourage inclusive financial systems. Population, though positive, is insignificant. Internet has positive significant impact on financial inclusion, meaning that internet access is indispensable in a fast-moving and digital African economy. Literacy is also statistically significant, meaning that adult literacy is an important factor in explaining the level of financial inclusion in Africa. As well, Islamic banking presence and activity are associated with higher financial inclusion.

Sociological Foundation of Islamic Banking Law Legislation as The Legal Umbrella of Economic and Islamic Finance Development in Indonesia

Objective - Sociologically, the existence of Law No.21/2008 on Islamic Banking in the splendor of economic development and Islamic finance is an interesting thing to observe. This paper wants to discuss the sociological foundation of Islamic banking law legislation as the legal umbrella of economic and Islamic finance development in Indonesia. Methods – qualitative Research, includes the study of law. Conclusions – At least, there are several spectrums that can be understood from the emergence of this law. First , the establishment of Islamic Banking Act is essentially a response to the provisions of Islamic law that has become the popular belief in the majority of Indonesian people who crave the realization of banking institutions which are free from usury, which is the Islamic law since his arrival in the archipelago until now classified as living law in the community. This reality is associated with the construction established by von Savigny. Second , the formation of Law No. 21/2008 concerning Islamic Banking is a response to social economic demand both nationally and globally. The presence of Islamic banks have become a necessity in managing the economy and coping with the economic crisis based on the underlying transaction. Third , the Establishment of Law No. 21/2008 concerning Islamic Banking in legal political perspective, has a basic principle, an aim and a response to the dynamic development of Indonesian society, particularly in relation to the development of Islamic economy. Fourth , formation of Islamic Banking Act affects the Islamic economic development in Indonesia, particularly in relation to the development of Islamic banking in Indonesia. Keywords: Sociological Foundation, Islamic Banking Law, Economic Development.

Technical efficiency of single versus dual banking sectors: a comparative analysis of India and Pakistan

The study provides new empirical evidence on the efficiency of a dual compared to a single banking sector. Using data on the Indian and Pakistani banking sectors, we analyse the efficiency of both banking sectors in the recent financial crises of 2004–2010. We employ the Data Envelopment Analysis (DEA) method to compute the technical efficiency of each bank in the sample and its mutually exhaustive components of pure technical and scale efficiency. We also employ a series of parametric (t–test) and non–parametric (Mann–Whitney [Wilcoxon] and Kruskal–Wallis) tests to examine the difference in the mean of the obtained DEA results. The empirical findings indicate that the Indian banking sector has been relatively more efficient compared to the Pakistani banking sector. The empirical findings seem to suggest that presence of Islamic banks does not provide stabilising influence to the Pakistani banking sector during the period of economic turbulence.

Islamic Banking Regulation and Supervision: Survey Results and Challenges

The growing presence of Islamic banking needs to be accompanied by the development of effective regulation and supervision. This paper examines the results of the survey conducted by the International Monetary Fund to document international experiences and country practices related to legal and prudential frameworks governing Islamic banking activities. Although a number of countries have made considerable progress in creating legal, regulatory, and supervisory frameworks that accommodate Islamic banking, there are substantial differences. This paper also identifies a number of challenges faced by regulatory and supervisory agencies regarding Islamic banking.

Islamic Banking Regulation and Supervision: Survey Results and Challenges

The growing presence of Islamic banking needs to be accompanied by the development of effective regulation and supervision. This paper examines the results of the survey conducted by the International Monetary Fund to document international experiences and country practices related to legal and prudential frameworks governing Islamic banking activities. Although a number of countries have made considerable progress in creating legal, regulatory, and supervisory frameworks that accommodate Islamic banking, there are substantial differences. This paper also identifies a number of challenges faced by regulatory and supervisory agencies regarding Islamic banking.