1. Scholarly Works

In view of the heightened interest in Islamic Finance (IF) of some of the countries in the Middle East, in particular Morocco, which is currently initiating the promulgation of new laws on IF, it is thought to be timely to present in this paper the model of Cooperative Finance (CF) based on the system of mutual investment that is in line with Shariah. It is hoped that this model can be considered for integration within the new Moroccan legal framework. This approach provides alternatives to banking credit or financing that are in strict compliance with the legal Islamic Finance principles. Moreover it encourages solidarity within civil society or between groups of people demonstrating generosity because of the employment of the philosophy that is essentially based on cooperative principle. Of course, implementing economic structures to embrace the efforts of people with Islamic ethics and sensitivity to finance goods and services based on the cooperative spirit is a real challenge in IF. However, models relying on CF solutions have been implemented, in small scales, for nearly 25 years worldwide (Ansar-UK, Lariba-USA, Qurtuba Canada, etc.). It would make sense to integrate and develop such solutions in a significant industrial scale in Morocco. The purpose of this paper is to articulate the experience of ANSAR-UK as one of intermediate or transient solution before the implementation of monetary policy along the principles of Islamic finance. Specifically, we will present two types of financial products used by AFG structure: (i) Interest free credit facility (Qard Hasan) and (ii) Mutual housing finance model which can be studied for implementation in Morocco. The challenge is to bring out the principles of mutual aid and solidarity which lies at the heart of the IF system that meets with the requirements of the existing Moroccan legal and legislative system. Like ANSAR-UK, we hope this model can be extended to other products such as financing educational products, SMEs, SMIs, business services, etc. based on ethical principles and sharing of profits and losses at a certain level of risk.

The recent surge in demand for Shariah compliant instruments alongside the launch of Dow Jones City group Sukuk Index in 2006 has further catalyzed the increase in the number of issuance of global Islamic Sukuk. Saudi Arabia, UAE and Qatar have become major issuers of global Sukuk which are highly demanded by investors. The normal rationale given behind such behavior might be the religious commitments to involve in riba free investments. However, it is worth testing that is it only religious commitments that are driving the demand or there may be some other factors contributing to this surge. Realizing that the majority of global Sukuk issuance is from the oil exporter countries, one such factor could be the price of crude oil. The relationship between crude oil prices and global Sukuk Index is not much covered in the literature as the facility has just started gaining attention in global capital markets. Insufficient data and the lack of reliable benchmarks for global Islamic Sukuk performances add further to the difficulties. While being impaired by such limits, this study will attempt to find out the possibility of any impact of oil prices on the global Sukuk returns and hence their issuance. The aims are achieved using advanced wavelet techniques. Our results, based on discrete wavelet, showed that there turned out to be noticeable correlation between the heave in global Sukuk issuance and the crude oil prices on more times than not.

This study embodies a preliminary endeavour at analysing the impact of leverage on portfolio behaviour, with specific reference to return and volatility, in the European stock markets, using the debt ratio as one of the important benchmarks for Islamic stock screening. Given the focus of Islamic stock screening on the debt ratio, we use data from 320 firms for eight European countries which were classified according to their level of debt and size. For this, the portfolio optimisation based Mean-Variance Efficient Frontier (MVEF), the Sharpe Ratio and the Capital Market Line (CML) were employed. Our findings tend to demonstrate that, under shocks, high leverage worsens the portfolio return, volatility, and value at risk. The results further point out that optimal portfolio composition is obtained through a high proportion of low debt funds in the case of two separate equity funds, of low debt and high debt portfolios respectively. The systematic risk of several portfolio strategies is further explored with regards to a benchmark of European index and market-wide, return and volatility shocks.

The impact of leverage on financial market stability and the relationship with the real economy is a key concern among researchers. This paper makes an initial attempt to investigate the relationship between a firm's leverage, return and share price volatility from an Islamic finance perspective and capital structure theory. A multicountry dynamic panel framework and the mean-variance efficient frontier are applied to 320 sample firms from eight European countries, divided into portfolios of low and high debt using the shari'ah screening threshold of 33%. We find that the firm's return and volatility change with changes in the capital structure. Islamic compliant stocks show, in most cases, less volatility than non-compliant stocks but are no different in terms of return. Finally, our results tend to imply a case for limiting debt beyond certain levels.

Using wavelet techniques (discrete and continuous), this paper is the first attempt to investigate the co-movement dynamics at different time scales or horizons of Islamic Dubai Financial Market (DFM-UAE) index returns with their counterpart regional Islamic indices returns such as GCC index, ASEAN index, Developing Countries index, Emerging Countries Index, and the Global Sukuk. Finally, we examine the impact of the LIBOR on the Islamic DFM-UAE return. Our first finding is that the two markets DFM_UAE, and (GCC and Saudi) are converging, in the long run, to the same level of risk and volatility with the Global Sukuk index. The wavelet analysis based on betas indicates a strong non-homogeneous correlation across scales and for different periods of time. Closer markets tend to suggest a contagion effect showing higher correlation and higher interdependence with a certain time delay. Evidence shows a flight to quality to the less risky Sukuk market mostly during the last financial crisis. The lead–lag analysis tends to indicate that the GCC leads DFM-UAE which leads Sukuk. Finally, this study sheds further light on the important leading impact of the overnight LIBOR on the returns of Islamic stock indices especially during the big changes or under shocks indicating policy implications for portfolio diversification for the international investors. The results are plausible and intuitive and have strong policy implications.

This study investigates the relationship and shock transmission between firm leverage and systematic risk within the Shari'ah stock screening rules among seven European countries with a sample of 689 firms for the period from 2008 Q2 to 2013 Q1. Due to the fact that high leverage augments systematic risk and accentuates the firm's vulnerability to shocks,debt screening is used to examine the sampled portfolios. As it imposes limits on debt,we examined the impact of such an ethical screening and a risk moderating principle on stock volatility, susceptibility to contagion and the implications for portfolio diversification.Using a vector auto regressive dynamic panel of multi-country framework, systematic risk is analysed by taking into account firm characteristics, country effects, and the heterogeneity across firms, thereby ensuring the robustness of results. Our findings suggest that the systematic risk changes with changes in the capital structure; the Shari'ah-compliant stocks are shown in most cases to carry less risk than conventional stock, while they do not necessarily out-perform in terms of return; during the global financial crisis. We conclude that during the global financial crisis, Islamic compliant stocks demonstrated lower values of systematic risk in the case of "Low Debt" portfolios when comparison to "High Debt" portfolios.

Fund managers and investors began many years ago to take into account the Islamic component of the GCC stock markets in order to benefit from the diversification opportunities offered by the Islamic stock markets for their investments in equity markets. This can improve the return and reduce the risk associated with their investments. However, these investors are also concerned about linkage aspects of those markets in relation with the international ones regarding integration and shock transmission, in particular, during the financial crisis.

A series of financial crises in recent times resulted in an increase in contagion and correlations between assets making investments in conventional securities a little more unsafe. Therefore, global investors started looking for alternative assets to diversify their portfolios. One of the alternative assets that has been growing very fast over the recent period is the Islamic financial sectors which has been growing at an average rate of 15 percent to 20 percent per annum over the past decade. The risk-return profile of Islamic products, such as Islamic stocks, is expected to be different from that of conventional stocks.