This paper argues that the introduction of the investment account (IA) in Islamic banking amongst others should reduce potential Shariah non-compliance risk arising from the disproportionate distribution of income to depositors and banks. While impairment expenses are changed to depositors, the returns on mudaraba deposits (ROMD) do not seem to favour depositors as the ROMD has been consistently lower than returns on equity (ROE) despite evidencing some form of credit-risk sharing between banks and mudaraba depositors as outlined by Framework of Rate of Return of Bank Negara Malaysia. When investment accounts are channeled to fund murabaha transactions, the credit risk should be solely carried by the IA holders and hence, the return on investments accounts (ROI) can be the reference point in assessing the risk-taking activities of investment account holders which is comparable to the ROE of bank's shareholders.

This book provides the underlying principles of Shariah financial instruments and presented them in actual and practical form. Since 1983, Malaysia has been making significant inroads into the Islamic financials landscape. Today Islamic financial transactions have made their presence felt in almost all financial institutions including banks, unit trusts, insurance, discount houses, fund management, factoring, pawn broking and project financing. And with more than USD200 billion Islamic funds available in global finance today, it is logical that the business of Islamic banking, insurance and fund management is fast expanding and encroaching into non-traditional financing.

This paper examines the nature of economic principles in Islam. Two types of economic principles are identified. The first type refers to the economic laws derived from revelation-based sources namely the Quran, Sunnah, Ijtihad and Ijma. The second type refers to economic lwas derived from reasoning and experience. The former is the economic system and the latter is economic theory. Both forms of economic laws are in harmony and have no basis for compartmentalization as there is no conflict between revelation and science in Islam. in theory building, it is shown that Quran based assumptions act as the linking mechanism in harmonizing revelation and science. As revelation is superior to reason and experience. Modification of economic models for empirical verification must not involve changes in Quranic based assumptions. Only the observed or tabi' based assumptions are subjec to modifications.

Ever since the establishment of Islamic banks in the 1970s, the difficulty in executing actual buy and sell transactions as the Quran commanded in the verse "Allah has permitted al-bay but prohibits riba" (Al-Baqarah 275) has spurred the industry into using questionable products that resemble interest-bearing loans as evident now in tawaruq munazzam and earlier in bay al-enah. Much of this unfortunate development in Islamic banking has to do with its deposit-taking function. Doing so requires the bank to follow stringent Basel Accord capital requirement against any risky positions it took in the business such as equity, leasing and trading positions. The trading business, namely buy and sell is the focus of this discourse. In addition to high capital charges, it is also besieged by inventory costs that can escalate bank overheads. These two problems can justify the lack of interest in the buy and sell model also known as murabaha by purchase order (MPO) or true sale murabaha financing (TSMF) as it requires the bank to hold risk of ownership of the purchased asset before making the credit sale to the customer.

Islamic investments as a critical component of the Halal supply chain received considerable attention in the global financial market when the Dow Jones Islamic market Index (DJIM) was established in 1999, followed by Financial Times Stock Exchange (FTSE), Standard and Poor (S&P) and others. Malaysia took global leadership in the construction of Shariah Indices in 1999 and launched the FTSE Bursa Malaysia Emas Shariah Index in 2007. One fundamental feature of the Shariah Indices is the screening process before the stock can be identified as Shariah compliant. The screening methodology differs to some degree among the major Shariah stock indices but essentially settle to affirm consensus on major issues especially those associated with qualitative screening such as the prohibition of riba, gambling and trading of prohibited commodities. Greater disparities of consensus were evident in the quantitative screening with differing stance on financial ratios bearing interest (riba) elements. Of most concern is the debt/total asset financial ratio in which conventional debt over total assets of the company must not exceed 33 percent, otherwise the firm will be delisted from the Shariah compliant list of companies. Companies can be included again in the list once corrections are made to comply with Shariah principles.

The slides highlight: 1) an overview of al-Ghazali's Ethical Theory; 2) the research objectves and questions, research methodology and framework, and empirical findings of the study; 3) potential applications and policy implications.

To do the right thing, the contract ('aqad) method is usually employed to define Syariah legitimacy of Islamic banks. Equally important, the Islamic banking business is expected to operate on the moral principles of risk-taking (ghorm), work (kasb) and responsibility (daman). By doing so, the ethico-legal dimension of Islamic banking can be made evident. While claiming Syariah legitimacy, doing things right is critical where Islamic banks must compete on the basis of efficiency. In this way, factors affecting bank performance such as size of capital, scale economies and adverse selection must not be discounted in determining the success of the Islamic banking business.

This paper aims to develop and validate a scale for Islamic conception of psychological nature of man. Al-Ghazali's model of psychological nature of man considered as the theoretical background of the study. Content validity test and factor analysis are used to refine measurement items and define and validate the scale. In total, 362 samples were collected from Islamic banking practitioners in UAE. Item statements are refined through content validation test. Three dimensions are extracted, i.e. 'Intellect,' 'Satanic element' 'Divine Knowledge,' through exploratory factor analysis and evidence of validation of scale/construct is reported through confirmatory factor analysis.

The Halal industry comprising of bank and non-banking firms is hardly visible in theoretical rigor except for the Shariah rules it promotes to exert religious labelling. While Islamic banks pay greater attention the elimination of riba, gambling and ambiguities in financing contracts to claim Shariah legitimacy, non-banking companies are more concerned about halal slaughtering, avoidance of pork in the production process, prevention of food adulteration, promoting hygiene in food preparation and many more.

There are numbers of things one should consider to better understand project financing from an Islamic perspective. Most are interested in examining the nature and structure of Islamic instruments used to mobilise the capital needed by a project company. Structuring an Islamic bond (sukuk) is becoming more challenging among investment bankers. Most popular are the Al-bai bithaman ajil bonds (BAIDS) and murabaha notes issuance facility (MuNif)

This paper will argue that replacing riba' with al-bay' does not mean that the latter can imply any form of sale (al-bay') to justify Islamic legitimacy. Apart from the prohibition of uncertainties (gharar) in sale, the requirement of an equivalent countervalue (ciwa') must also be met. Risk (ghurm) and liability (iman) after sale and value-addition or effort (ikhtiyar) are the principal components of ciwa'. As such, any increase from sale must contain ciwa', otherwise riba' is implicated. In classical Islamic commercial contracts such as ijarah, salam and mudarabah, ciwa' is evident. However, the contracts of credit of al-murabahah or al-bay bithaman ajil are widely used by Islamic banking practitioners. To prove Islamic legitimacy, this contract must show that the financiers assume the risk of ownership in making the sale. It must also show evidence that the seller is liable to the option of defect (khiyar al ayb). The same holds for bay al-inah and bay al-dayn which are also widely used in Islamic money and capital markets in some Muslim countries.

In Malaysia, Sharicah scholars at the supervisory levels have advocated bay' al-'inah as a mode of finance. Under the label of al-bay', the contract of bay' al-'inah contains interest-bearing features, such as earning a contractual return without the implication of risk and value-addition. Seeking a broader consensus on the permissibility of bay' al-'inah is thus critical. This study shows that Malaysian Sharicah scholars outside the supervisory bodies do not fully support bay' al-'inah. The survey indicates that bay' al-'inah can be applied under a state of darurah or when the maslahah of the Muslim people is under threat, which is not the case in Malaysia. Since Sharicah scholars in Middle-Eastern countries have condemned bay' al-'inah, it is crucial that a diversification policy is pursued to invite greater participation of global Islamic funds in Malaysia.

This paper aims to examine the influence of ethical judgement on decision-making behaviour related to ethical issues of Islamic banking practitioners in the United Arab Emirates (UAE). The study adopted a confirmatory approach in which validated/established "normative ethical standards" are taken into the consideration as theoretical underpinning. In total, 262 samples are collected from Islamic banking practitioners in the UAE and data analysis is conducted using structural equation modelling. The empirical findings indicate that the decision-making behaviour related to ethical issues of Islamic banking practitioners in UAE does not adhere to any set of normative ethical standards and respondents are pragmatic in nature when it comes to the decision-making behaviour related to ethical matters.

Islamic banking institutions are established to provide an alternative financing arrangement that uses trading (al-bay) as opposed to usury in their business. The banking modality however is still based on the deposit-taking function where deposit funds are used by banks to make loans. Deposit funds are in essence loans acquired from depositors who can make withdrawal on call, thus bank faces withdrawal risk and also potential bank run under economic shocks.

This chapter attempts to argue that an organized effort to avoid such risks due to the financial infrastructure rigidities may invite non-compliance with shariah rules. This is due to the fact that the shariah requires Islamic financial institutions to take ownership of the goods it intends to sell as a fundamental principle in contract law and to move the title to the buying party once the sale is executed. Hence this chapter critically examines the concept of al-bay and property rights in Islam in relation to the constraints posed by the existing financial infrastructure, namely capital requirement and taxation, on the taking of risks by Islamic banks.

The purpose of this paper is to study the differences or variance in the yields of Islamic and conventional bank deposits and capital, respectively, in view of their contractual differences, namely the former which is based on equity and the latter on debt. The paper uses a financial ratio approach. It was found that deposit yields in conventional banks were lower than return on equity (ROE), which truly reflect the contractual differences between fixed deposit and bank's capital. Also, it was found that Islamic banks' deposit yield and ROEs do not reflect their risk-taking properties, as their variances were found to be smaller.

The widespread application of al-bay' bithaman ajil (BBA) contract in the Islamic banking business today requires a serious reexamination. This is to see that the welfare of consumers is protected, which all Islamic contracts must provided for. It is made by way of making the existence of 'iwad in profit arising from BBA or murabahah transactions evidently clear. One of the component of 'iwad is the right of the buyer to annul the contract when a defect is evident in the product sold, namely Khiyar Al-'Ayb. It follows that the contract of BBA must include the provision of Khiyar Al-'Ayb as the natural right of the buying party. This paper has argued that this right was not granted by the Islamic bank who is acting as the selling party to the BBA contract. It has thus undermined the legal maxim Al-Kharaj bil- Daman, which all selling parties taking part in the contract of al-bay', including al-bay' bithaman ajil, must readily observed.

The contract of bay' al-'inah normally involves a sale of an asset or property by a first party to a second party for immediate or spot payment followed by an immediate sale of the same asset by the second party to the first party for a higher amount on deferred payments. The asset is by no means useful to both parties either for consumption purposes or derivation of usufruct (manfaah). Apparently this device is used to bypass the Quranic prohibition of interest as riba since the main objective of the contract involvess two consenting parties both of whom are willing to pay and receive a contractual rate of return on a loan.

This paper aims to present a synthesized conceptual model for ethical decision-making in marketing that accommodates both humanistic and religious aspects. A religious-humanistic approach is adopted on synthesizing. “Ferrell and Gresham’s (1985) contingency framework for ethical decision-making in marketing” and “Al-Ghazali’s ethical philosophy” are considered to be the theoretical base for the synthesized model. Al-Ghazali’s ethical philosophy that stands for the religious dimension in this study was found appropriate for incorporating into the Ferrell and Gresham contingency framework for ethical decision-making in marketing. The approach (religious-humanistic) adopted for synthesizing the two aspects into one model was justified accordingly. A newly synthesized model is only conceptually validated. Statistical validity is required based on the variables included in the conceptual model. Future studies are recommended to attain the model fit.

This paper aims to develop and validate scale for ethical decision-making model in marketing that confirms religious-humanistic approach with special reference to ethical philosophy in Islam. Synthesized model of Ferrell and Gresham contingency framework for ethical decision-making in marketing and Al-Ghazali's ethical philosophy are considered as theoretical background of this study. Content validity test and factor analysis are used to refine measurement items and define as well as validate the scale, respectively. A total of 362 samples were collected from Islamic banking practitioners in the United Arab Emirates. Item scale of the constructs comprised in the conceptual model defined and validated by using content validity test (CVT). Underlying theoretical dimensions of the constructs were extracted through exploratory factor analysis (EFA), and evidence of validation of scale/construct reported through CFA. The scope of this paper is limited to development and validation of scale. Future studies are suggested to use the newly validated scale/construct in descriptive model, and examine the hypotheses prescribed in the model. Further, explanations on theoretical background of this paper is limited as the main objective of this paper is to statistically validate the conceptual model adopted.

This paper introduces some theoretical aspects of Islamic banking asset management strategies for reducing economic instability. Since public welfare deteriorates during periods of inflation and unemployment, the procyclical behavior of modern interest-based commercial banks is known to aggravate these fluctuations and ipso facto produce an even more severe impact on welfare. The paper will show that equity-based Islamic banks contain some structural features that reduce these procyclical tendencies and therefore shield public welfare from further deterioration.