Islamic Finance

Alam, Nafis; Gupta, Lokesh; Shanmugam, Bala

doi:10.1007/978-3-319-66559-7

Cited by 33 publications

(16 citation statements)

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“…With the emergence of Islamic banking in dual banking economies which employs different underlying contracts for financing (Alam et al, 2017), the nature of credit risk has evolved within the banking domain. Islamic banks' exposure to credit risk differs from conventional banks in the sense that different Islamic banking contracts have a different level of credit risk.…”

Section: Introductionmentioning

confidence: 99%

“…Credit risk may also arise in the event borrower default, whether intentionally or unintentionally. In murabaha (sale-based markup financing) credit risk arises when a customer fails to honor the payment obligations (Alam et al, 2017). Musharaka (profit and loss sharing) contract is exposed to the least of credit risk among Islamic banking contract while Boumediene (2011) noted a presence of credit risk in binding Ijarah (leasing) contract when the lessee may cancel the lease before the stipulated time.…”

Section: Introductionmentioning

confidence: 99%

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Credit risk in dual banking systems: does competition matter? Empirical evidence

Ali

Khattak

Alam

2021

IJOEM

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PurposeThe study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of Islamic banking system, a fierce competition between Islamic and conventional banks have started to emerge which in turn is impacting credit riskiness of both banking system.Design/methodology/approachUsing the system GMM technique on 283 conventional banks and 60 Islamic banks for the period of 2006–2017, this paper explores the important impact of size and competition on the credit risk in 15 dual banking economies.FindingsThe authors found that as bank competition increases credit risk seems to be reduced. On the size effect, the authors found that big Islamic banks are less risky than big conventional banks whereas small Islamic banks are riskier than small conventional banks. The results are robust for different panel data estimation models and sub-samples of different size groups. The findings of this paper provide important insights into the competition-credit risk nexus in the dual banking system.Originality/valueThe paper is specifically focused on credit risk in dual banking environment and tries to fill the gap in the literature by studying (1) do the Islamic and conventional banks exhibit a different level of credit risk; (2) does competition in the banking system impact the credit risk of Islamic and conventional banks and finally (3) do the big and small banks exhibit similar levels of credit risk.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Credit risk in dual banking systems: does competition matter? Empirical evidence

Ali

Khattak

Alam

2021

IJOEM

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“…According to Alam et al (2017), the number of Islamic financial institutions present throughout the world has increased from 1 in 1975 to over 300 today in at least 75 countries, bearing in mind that around a 25% of these firms already operate in countries that do not Contemporary Islamic banking and finance have a Muslim majority (Rizvi and Alam, 2016). In addition, the volume of operations that, in one way or another, is related to the Sharīʿah-compliant assets represents a figure of nearly $2.6tn, showing a self-sustained annual growth of around 10-15%.…”

Section: Discussionmentioning

confidence: 99%

The ancestral Andalusian water courts: a resilient model for contemporary Islamic banking and finance

Martín-Cervantes

Rambaud

Martínez

2021

JIABR

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Purpose This paper aims to examine the functioning and organizational structure of the historic Andalusian water courts, institutions of Islamic origin whose basic model should be considered in light of the regulation of modern Islamic banking and finance. Design/methodology/approach The methodology of this study has been focused on the contextualization of al-Andalus during the European Middle Ages, highlighting its enormous contributions and implications in the creation of Western knowledge. In the same way, the ordinances of the Castilian-Aragonese kings, aimed at the persistence of the Andalusian water courts in the Southeast of Spain after the Muslim period, have been used as the main sources of reference. Findings This research has detected that the main features of the Andalusian water courts, i.e. integrity, democracy, transparency, credibility, moral authority or simplicity (among many others), can be conveniently replicated in the scope of the current Islamic banking and finance. Research limitations/implications Several implications can be derived from this study: first, it highlights the total resilience of a regulatory model that “it was already there,” given by the history of the Andalusian civilization. This model will be always welcomed by the Muslim community in Western countries as it is a matter of regulating themselves according to the way their ancestors did. The main limitation faced by this research is the relative scarcity of original sources, which is justifiable given that most of the royal ordinances come from the 13th century, having unfortunately lost a good number of sources over time. Originality/value This paper seeks a feasible alternative to the controversy arising from the resolution of possible disputes in Islamic banking and finance taking into account that Western judges do not know (nor do they have to) the principles on which this discipline is based. The application of the historical Andalusian model would allow the creation of an independent jurisdiction, while subordinated to the established juridic power, without contravening the principle of “jurisdictional unity.” The last element that gives an added value to this research is spreading the achievements of the Andalusian culture and civilization, unjustly omitted by a great part of the existing literature.

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“…What is often not clearly understood or glossed over in the ribā -related discourse is that besides involving exploitation, ribā also has a dimension of unearned income or wealth. Major works on Islamic economics and finance do note in reference to ribā and interest “unearned income” (Masood and Ghauri, 2015, p. 43; Alam et al , 2017, p. 36), “unearned capital or wealth” (Karim, 2010, p. 15), “unearned accretion” (Ballantyne, 2013, p. 277), and so on.…”

Section: The “Unearned” Dimension Is Broadly Ignoredmentioning

confidence: 99%

Rent-seeking behaviour and ẓulm (injustice/exploitation) beyond ribā-interest equation

Farooq

2019

IJIF

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Purpose The purpose of this paper is to explore the concept of rent-seeking behaviour and rentier state in the context of ẓulm (injustice and exploitation), which is one of the key concerns in Islam in general and Islamic economics and finance in particular. Design/methodology/approach As a conceptual paper, it draws on the literature of rent-seeking as part of public choice theory and examines the potential vulnerabilities as well as existence of rent-seeking in Muslim-majority countries, where Islamic finance industry primarily operates. Findings The paper identifies several areas where both actual and potential rent-seeking exists. Research limitations/implications The paper is conceptual. Based on the analysis presented here further studies can be undertaken to determine the scope of rent-seeking and their impact in Muslim-majority societies. Practical implications Incorporating rent-seeking in the theoretical and conceptual framework of Islamic economics and finance can enhance understanding about ẓulm and its ubiquitous presence, as Islam has a firm stance to aspire to have a ẓulm-free society. Social implications Understanding rent-seeking behaviour can help appreciate why corruption, inequality and poverty are so entrenched, and why limiting the discourse to ribā (interest) ignores the broader scope of injustice and exploitation. Originality/value This might be the first focused paper that conceptually deals with rent-seeking behaviour, connecting the discourse about ribā-interest equation.

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Islamic Finance

Cited by 33 publications

References 0 publications

Credit risk in dual banking systems: does competition matter? Empirical evidence

Credit risk in dual banking systems: does competition matter? Empirical evidence

The ancestral Andalusian water courts: a resilient model for contemporary Islamic banking and finance

Rent-seeking behaviour and ẓulm (injustice/exploitation) beyond ribā-interest equation

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