Critical Issues and Challenges in Islamic Economics and Finance Development (eBook)

Velid Efendić is a professor in the faculty of economics at the School of Business and Economics at the University of Sarajevo, Bosnia and Herzegovina. His research interests include banking, bank management, Islamic banking and finance and investment and portfolio management. Professor Efendić is the founder of the European Association of Islamic Economics, Banking and Finance, Bosnia and Herzegovina.Fikret Hadžić is a professor in the faculty of economics at the University of Sarajevo, Bosnia and Herzegovina. He was previously the Vice-Director of The Bank of Reconstruction and Development, Sarajevo, Bosnia and Herzegovina. Professor Hadžić also serves on the Supervisory Board of the Development Bank of the Federation of BH, Sarajevo, by appointment of the Federal Government of Bosnia Herzegovina. Hylmun Izhar is an economist at the Islamic Research and Training Institute at the Islamic Development Bank in Jeddah, Saudi Arabia. His current research interests include the theoretical and empirical analysis of income ratio and risk-sharing structures, the development of global Islamic financial services and stress-testing within Islamic financial institutions.  

Preface 5
Contents 7
Notes on Contributors 9
List of Figures 11
List of Tables 15
1: How Do Sovereign Sukuk Impact on the Economic Growth of Developing Countries? An Analysis of the Infrastructure Sector 17
1.1 Introduction 17
1.2 Literature Review 19
1.2.1 Defining the Concept of Islamic Banking 19
Theoretical Underpinnings 19
Key Instruments of Islamic Banking 21
1.2.2 Defining Sukuk 22
Sukuk Structures 22
Differences Between Sukuk and Conventional Bonds 25
1.2.3 The Global Sukuk Market 26
Opportunities 26
Challenges Facing the Sukuk Market 27
1.2.4 Sukuk as a Tool for Economic Development Policy 28
Malaysia 28
Saudi Arabia 29
1.3 Methodology 30
1.3.1 Introduction 30
1.3.2 Research Design 30
1.3.3 Data Collection 31
1.3.4 Method of Analysis 31
1.4 Findings, Analysis and Discussion 32
1.4.1 Descriptive Statistics 32
Malaysia 32
Saudi Arabia 37
1.4.2 Test of Hypothesis 44
Malaysia 44
Saudi Arabia 46
1.4.3 Integrated Analysis 48
1.5 Conclusion 49
References 50
2: No Way Out for Sukuk Illiquidity? Proposing a Primary Dealer System for the Sukuk Market 54
2.1 Introduction 54
2.2 The Development of Sukuk 56
2.3 Primary Dealer System 64
2.4 Data and Methodology 65
2.5 Discussions and Analysis 66
2.5.1 Different Perceptions between the Sukuk Issuers and Investors 66
2.5.2 Untapped Potential Investors for the Sovereign Sukuk 68
2.5.3 Accounting Recognition for Investment in Sukuk: Trading, Available for Sale or Held-to-Maturity? 69
2.6 The Proposed PDS for the Indonesian Sovereign Sukuk Market 71
2.7 Conclusion 74
References 74
3: The Possibility of the Application of an Early Warning Sign System into the Quality Management System of a Credit Portfolio... 76
3.1 Introduction 76
3.2 The Importance of Credit Portfolio Quality Management in Islamic Banks 79
3.3 The New Role of Risk Management 81
3.4 EWS System Development 84
3.5 Monitoring Approach Based on EWS Significance Evaluation 90
3.5.1 Empirical Model Reliability 91
3.5.2 Normality of the Residual 92
3.5.3 Multicolinearity 94
3.5.4 Homoscedasticity 95
3.5.5 Autocorrelation 95
3.6 Conclusion 97
References 98
4: A Look at Cash Waqfs as Islamic Financial Institutions and Instruments 99
4.1 Introduction 99
4.2 Cash Waqfs 101
4.3 Cash Waqfs: Interest Versus Earnings 104
4.4 Examples of Cash Waqfs in Rumelia 105
4.5 Conclusion 108
References 109
5: The Implementation of Islamic Financial Services in Afghanistan: A Case Study 111
5.1 Introduction 111
5.2 Challenges with Islamic Financial Services for MSME Finance 112
5.3 Islamic Finance in the ADF 115
5.4 Background on the ADF 116
5.5 Islamic Financial Products in the ADF 117
5.6 Demand for Islamic Financial Services 121
5.7 Operational Readiness 121
5.8 Standardization of Documentation 122
5.9 Capacity Building 123
5.10 Additional Functions 123
5.11 Policies and Procedures 124
5.12 Client Feedback 125
5.13 Islamic Financial Services for Female Entrepreneurs: Zahra 126
5.14 Concluding Remarks 127
References 128
6: All-Weather Financial Portfolio Optimization with Islamic Constraints and Risk Minimization 129
6.1 Introduction 129
6.2 General Stochastic Model 131
6.3 Portfolio State Model 134
6.4 Risk (Volatility) Minimization 141
6.5 Standard Constraints 142
6.6 Shariah Constraints 143
6.7 The SHAW Strategy 145
6.8 Conclusion 149
References 149
7: The Usefulness of Financial Ratios in Discriminating Between Healthy and Distressed Companies: The Case of an Islamic Bank 151
7.1 Introduction 151
7.2 Methodology 159
7.3 Results 159
7.4 Conclusion and Discussion 164
References 167
8: The Empowerment of Women in Islamic Economies: The Bosnia and Herzegovina Experience with a Focus on Business Problems in a Woman's Small Entrepreneurship 170
8.1 Introduction 170
8.2 The Concept of Women´s Entrepreneurship 171
8.3 Differences: Women Versus Men Entrepreneurs 173
8.4 A View on Women´s Small Entrepreneurship Worldwide 177
8.5 Prospects for the Development of Women´s Small Entrepreneurship Worldwide 181
8.6 Women´s Small Entrepreneurship Worldwide: Problems and Constraints 184
8.7 The Bosnia and Herzegovina Experience with a Focus on Business Problems in a Women´s Small Entrepreneurship 191
8.8 Conclusion 195
References 198
9: Business Model and Operational Efficiency of Microfinance in Bosnia and Herzegovina: Lessons for Islamic Microfinance 203
9.1 Introduction 203
9.2 The Main Aims and Mission of Microfinance in Bosnia and Herzegovina 205
9.3 Business Lending Models 207
9.4 Operational Efficiency of the Microfinance Sector in Bosnia and Herzegovina 208
9.5 Sources of Funds for the MFIs 217
9.6 Lessons from the Development of Microcredit Institutions in B-H 218
9.7 Conclusion 220
Bibliography 221
10: A Brief Analysis of the Expected and Non-expected Outcomes from the Application of the Rome I Regulation in the European Zone in Light of Islamic Cross-Border Transactions 224
10.1 Introduction 224
10.2 Shariah as a Legal System or Set of Laws 225
10.3 Selected Clauses with Reference to the Choice of Law Stated in the Rome Convention on the Law Applicable to Contractual Obligations of 1980 227
10.4 Some Precedents Derived from the Rome Convention in Relation to Islamic Finance Instruments 228
10.5 Can Shariah Be a Proper Selection as a State Law? 231
10.6 A Different Approach Revealed Where a Specific National Law Is Chosen by the Parties 231
10.7 An Analysis of the New Rome I Regulation 233
10.8 Why Should British Judges Treat Islamic Finance Instruments in the Upcoming Disputes Differently? And if Not, How Can Parties Try to Overcome Existing Barriers? 237
10.9 Conclusion 240
References 241
Index 243