Promoting a Sharing Economy in the Islamic Finance Industry: A Study of Selected Oic Countries

Razak, Dzuljastri Abdul; Abdul-Wahab, Abdul-Hamid

doi:10.18196/ijief.114

Cited by 3 publications

(2 citation statements)

References 2 publications

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“…From Figure 13, it can be seen that the most widely utilized financing mode is Murabahah financing. Previous studies by different scholars and reports from different institutions also suggest that Murabahah has been the most popular financing mode, although it is asset-based (Razak & Abdul-Wahab, 2018;Elasrag, 2016b;Nawaz, 2019;World Bank & Islamic Development Bank, 2015). The reason for its popularity is its simple implementation process and similar criteria compared to conventional financing for SMEs.…”

Section: Sources Of Islamic Finance For Smesmentioning

confidence: 98%

SMEs, Employment Generation, and Islamic Finance

Azam,

Abdullah

2024

IJIEF

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Almost wherever the economy is growing, small and medium-sized businesses (SMEs) are the ones doing the heavy lifting. Who are these SMEs? How does the definition of SME differ across different countries? What are the contributions of SMEs in terms of employment and GDP? How can Islamic finance play a significant role in scaling up the business performance of SMEs and, subsequently, their contribution to employment and the economy? What are the issues and challenges faced by SMEs and Islamic finance that would resolve into greater employment generation? Addressing all these questions, this paper provides an overview of SMEs globally and their definitions in different countries as well as in Malaysia. Simultaneously, some issues and challenges are discussed. Furthermore, the paper presents Islamic finance as a better solution to the financial accessibility of SMEs in future economic activities. The paper thus attempts to illustrate a model or framework that would work well for SMEs to generate productive employment opportunities in their respective economies. To achieve the objectives of this paper, secondary data was used to present all the statistical figures and tables. For any generalizations, recommendations, or conclusions, an extensive review of literature from various sources was conducted.

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Section: Sources Of Islamic Finance For Smesmentioning

confidence: 98%

SMEs, Employment Generation, and Islamic Finance

Azam,

Abdullah

2024

IJIEF

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“…At the same time, Malaysia, Indonesia and Pakistan have the highest numbers regarding musharakah financing. Other results show that murabahah financing increases more in Malaysia, Bangladesh, Indonesia, and Sudan than in mudharabah and musharakah financing (Abdul Razak & Abdul-Wahab, 2018).…”

Section: Introductionmentioning

confidence: 99%

Exploring Moral Hazard and Adverse Selection in Profit Sharing Contract

Salman¹

2023

J. Professional Business Review

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Purpose: The aim of this study is to review relevant articles on the problem of adverse selection and moral hazard in profit-sharing contracts in Islamic Banks. Adverse selection and moral hazard problems are problems that occur in profit-sharing contracts, so they impact the low porti on of this contract financing compared to margin-based and fee-based contracts. Theoretical framework: The profit sharing contract in an Islamic bank has two potential problems, namely adverse selection and moral hazard that arise due to asymmetric information. Asymmetric information can occur due to limited information owned by Islamic banks as owners of funds (shahibul maal) regarding the business to be run by customers (mudharib). This asymmetric information mainly causes the agency problem. If an agent is negligent in making decisions with negative consequences and does not want to take responsibility for his actions, this can be classified as a moral hazard. Moral hazard can be in the form of self-interest, side effects, fraud, opportunism, and the behaviour of agents who commit willful mistakes, negligence and breach of contract. Meanwhile, adverse selection arises when the principal cannot observe the agent's characteristics because of asymmetric information before the contract is signed. Design/methodology/approach: The study uses a qualitative approach by reviewing previous articles relevant to the discussion. The study is aligned with the practices that occur in profit-sharing contracts. Furthermore, discussions are deepened through forum group discussions with experts and practitioners in Islamic banks. Findings: The results show that the conflicts in profit-sharing contracts include principal-agent conflicts and principal-principal conflicts due to adverse selection and moral hazards. The study results reveal that signalling and screening measures can be applied to overcome adverse selection problems while monitoring actions and switching to debt contracts can overcome moral hazard problems. Research, Practical & Social implication: The study has implications for Islamic banks to draw up a clear and complete profit-sharing contract with the mudharib to reduce the moral hazard committed by the mudharib. In this case, Islamic banks can also ask the mudharib to submit comprehensive financial reports regarding their financial performance. Islamic banks must also pay attention to signalling and screening efforts to prevent adverse selection. Originality/value: The value of the study provides a new literacy regarding the potential for agency conflict in the form of moral hazard and adverse selection that will be faced by Islamic banks when applying profit-sharing contracts with other parties as managers (mudharib).

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Nonlinear effect of Islamic financing on economic stability: A Case of equity and debt financing

Shaheen

Kalim²,

Arshed³

2024

J Mgt Info

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The main purpose of this study is to differentiate between the effects of two major categories of financing of Islamic banks on the economic stability of the selected countries. This study determines the nonlinear effect of equity-based and debt-based financing of Islamic banks to assess how the stability of the economy can be achieved. This study acquires the data on Islamic banking product-wise financing at a national level from the Islamic Financial Service Board (IFSB), and the data on industrial production index is selected from International Financial Statistics for selected countries. The sample size comprises of all the countries included in the IFSB. The data ranges from 2014Q1 to 2019Q4. The economic stability is estimated using the GARCH volatility approach, and the nonlinear ARDL model is used to determine the causal effect of Islamic banking product wise financing. This study clarifies the empirical relationship between Islamic banking equity-based financing and debt-based financing and whether macroeconomic stability is linear or quadratic in terms of the marginal effect of financing, which helps policymakers to constitute strategies for expanding the size of Islamic banking financing. The results identified the inverted U-shaped effect of equity-based financing types on output instability. At the same time, both financing types are not causing price instability. The outcomes are instruments for the central bank to optimize the Islamic banking financing structure to achieve the goal of product-wise financing of economic stability.

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Promoting a Sharing Economy in the Islamic Finance Industry: A Study of Selected Oic Countries

Cited by 3 publications

References 2 publications

SMEs, Employment Generation, and Islamic Finance

SMEs, Employment Generation, and Islamic Finance

Exploring Moral Hazard and Adverse Selection in Profit Sharing Contract

Nonlinear effect of Islamic financing on economic stability: A Case of equity and debt financing

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