4. Theses

This study attempts to measure the relative efficiency of the takaful industry and the conventional insurance industry in Malaysia. A sample of 18 firms consisting of 7 takaful operators and 11 insurance firms is examined over the period 2004 to 2009. The study employs Data Envelopment Analysis (DEA) to estimate the technical, cost and profit efficiencies for the takaful and insurance industry ...

The claim of this thesis is that the waqf is not just a religious institution, but is an economic institution capable of contributing to economic growth. Accordingly, this thesis enquires into three questions: what factors led to this centralization process in Malaysia and its undesirable results, why we should care to change the situation, and what would be the solution to enable the waqf to achieve its full economic potential in this country. The objective of this thesis is to find a modern and efficient governance framework for waqf institution in Malaysia so that it can fulfill its intended purpose. The research methodology used was qualitative in nature. These were literature review, legal reasoning, interviews, case studies and comparative analysis. Findings suggested that although the British policies and the English common law introduced during the colonial period in the Malay States had impacted the local attitude towards waqf, the State controlled situation was also caused by an impulse on the part of the Malay sultans to consolidate what remained of the autonomous space allowed to them: matters relating to Malay culture and Islamic religion. These were reposed in the newly introduced State Islamic Religious Councils, over whom the Sultans presided. Other than centralization, two other major changes from the classical Islamic position on waqf were also inserted even after Malaysia gained independence. These were a removal of express reference to family awqaf in any written laws, and a restriction of endowments of more than 1/3rd of the waqif’s property even whilst he is living. The result of these changes were less than desirable, showing that up to the year 2008, awqaf properties in Malaysia were under utilized and had not been sufficiently managed to be self-sustaining, requiring state funding in order to meet their purposes. Compared to the flourishing foundations in the United States and the post 1967 republican vakiflar of Turkey that have moved in ways that would meet community and society’s needs thus contributing to the economy, it is a finding of this thesis that the Malaysian situation must and can be changed. Amongst the proposals given arising from the research are that an incorporated waqf form should be allowed with independent management by a board of trustees, restoring the legal rights of freedom to endow for family waqf and any amount of property during the life of a waqif (other than by bequest or death-bed endowment), ensuring in the case of current management of awqaf by the State Islamic Religious Councils that an appropriate check and balance mechanism is emplaced by way of separation of judicial and administrative duties between Sharia’ courts and the Mufti’s role in the governance of awqaf, economic incentives such as tax-deduction and tax-recognition introduced, relooking into asset management and funding possibilities and developing the social capital to encourage people to endow more awqaf. Finally and most importantly, a modernized waqf governance framework and an appropriate oversight and regulatory institution are recommended in order to address the agency issues that were the original concern of this thesis.

Current sukuk structures often fall short of adequately meeting the Shariah conscious investors' needs. The objective of this dissertations is, therefore, to address this issue by conceptualizing and operationalizing three innovative models of sukuk. The first proposed model of sukuk is based on the concept of musharakah and is meant for companies and revenue generating infrastructure projects. The model has an incentive-compatible feature by making the share of the issuing entity in the profit positively related to its performance ...

This study investigates the impact of capital regulation to the risk-taking behaviour of Islamic banks by examining the impact of bank-specific variables, regulatory pressure and relationship between capital ratios and bank riskiness; using two simultaneous equations namely the changes in capital ratios equation and the changes in bank riskiness equation over the sample of 70 Islamic banks extracted from BankScope database for the period 2004 to 2010 ...

This research provides insights into the factors influencing takaful penetration rate of the Malaysian takaful industry from the period 1985-2008. The methodology employed consist of both the quantitative and qualitative approaches. Three research objectives have been identified. First is to investigate the factors thats influence the market penetration from the perspective of takaful participants. Second is to find the obstacles that prevent non-takaful participants from participating in the takaful industry. Third is to gain further insight from the experience of the senior managers of Takaful operators ...

This study is motivated by the desire to test empirically whether the contagion seen in conventional stock indexes are also present amongst Sharia'ah-compliant stock indexes. This study is the first attempt at testing whether there has been any contagion among the Shari'ah-compliant stock indexes during the most recent international financial crisis - the US subprime crisis of 2007-2009. The study uses a technique known as the "wavelet approach" which has been very recently imported to finance from engineering sciences ...

The issue of liquidity and under development of OIC stock markets has caused problems to companies in those countries that seek higher equity capital. Many institutions such as Islamic Development Bank (IDB), International Organization of Securities Commissions (IOSCO) and OIC agree that the introduction of the Islamic Depositary Receipts (IDRs) could aid these companies in enhancing their value. As this instrument is yet to be introduced, this study aims to examine the financial implications of cross-listing via the existing Depositary Receipts (DRs). This is done by studying the impact of companies that have resorted to using American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) ...

The study of currency exposure in the context of small open economies such as the ASEAN-4 region is important in view of the higher degree of openness of the economies and the progressive growth of the Islamic finance industry. This study examined the presence of currency exposure in a sample of 405 listed non-financial corporations from Indonesia, Malaysia, Singapore and Thailand over a duration of 18 years from 1993 to 2010. This study is different from previous studies as it combines two assessment methods, i.e., the cash flow (CF) and stock returns (SR) approaches. Furthermore, this study covers two major events of the financial crises ...

Since the recent financial crises, increases in contagion and correlation between assets have reduced the possibility of minimizing risk by way of diversification. The investors are therefore, looking for alternative assets such as, commodities, Islamic portfolios, etc. However, despite the very rapid growth of Islamic finance, there has hardly been any rigorous empirical research investigating the risk-return profiles of combining commodity portfolios with Islamic equities and/or with the mainstream equities. This study is aimed at filling this gap in the finance literature ...

Every human needs a good and quality life. A quality living is essential to ensure positive physical, mental as well as spiritual development in an individual. This balanced individual will form a stable family unit and later on contribute to a progressive community in a bigger social entity. A comfortable life is usually challenged by indispensable social ill called poverty. It is a global phenomenon that has challenged the economic, social and political landscape of every society in the world including Malaysia ...

This research will look at the reasons for the civil courts being the preferred mode of dispute resolution for Islamic finance disputes in Malaysia and how arbitration, based on the shari'ah can play an active role to resolve disputes in Islamic finance cases. Various features of arbitration in general and Islamic arbitration in particular will be looked into, followed by a study of the arbitration rules under two arbitration centres to find the common themes of these centres and the differences in their approach, if any ...

This dissertation discusses a number of issues in Islamic equity, which can be broadly defined as equity investments that meet certain Shari'ah compliance requirements. A particular stock is deemed as Shari'ah compliant when it "passes" a screening process which encapsulates a number of relevant Islamic principles, rules and tenets. This process, commonly termed Shari'ah stock screening, essentially involves the negative screening or filtering of stocks. While variations may exist from one jurisdiction to another, and between a number of different Islamic index providers ... Available in physical copy only (Call Number: t HG 4551 N336)

Efficiency measurement has received increased attention amid global changes and growing competition within the finance industry in all countries, including developing countries such as Yemen. The evaluation of efficiency is crucial for players in the industry, not only to assess their ability for survival, but also to remain competitive in the market. Besides, efficiency would have consequences on other areas including bank margins and earnings manipulations. Like others, Yemen's banking industry has witnessed structural changes over the past decade, which paved the way for the industry to upgrade its efforts to emulate international standards. The present study analyses the efficiency of Yemen's banking sector during the 1996-2011 period. A two-stage analysis using Data Envelopment Windows Analysis (DEWA) was employed in the first stage of the research to measure the efficiency trends of industry, followed by the panel regression technique in the second stage to examine the determinants of efficiency. As efficiency of is a major concern for all stakeholders given its implications for various areas of banking operation such as bank margins and the opportunistic behaviour via discretionary accruals "manipulation" of earnings, the study also examines on whether the effeciency would have impacted the bank margins and earnings quality.

Over the past decades much effort and research has gone into establishing a viable set of Islamic financial institutions. An area of utmost importance, which still has gaping holes, is the development of instruments for government financing on a global level. Most developing countries including the bulk of Muslim nations, are heavily indebted with high reliance on multilateral financing primarily based on high interest rates. This vicious cycle of interest rates and debt have stunted the growth of these nations and worsened the conditions of the masses. This research brings to the forefront the concept of an equity in nature GDP linked paper, which allows for enhanced risk sharing based sovereign financing ...

This study examines the concept of combination of contracts in Islamic commercial law and its application in the Malaysian Islamic financial services. Combination of contracts encounters some juridical issues by virtue of the three prohibiting ahadith mentioned by the Prophet (s.a.w.). The ahadith stated that the Prophet (s.a.w.) prohibited combining two sales in one sale, loan and sale, as well as two transactions in one transaction. Many debates have been raised among classical and contemporary Shari'ah scholars regarding the interpretation of these ahadith and the types of contracts that are combinable or non-combinable. Given the fact that these issues remain obfuscated, therefore this study is commenced. In so doing, this study employs two research methodologies; content analysis of Islamic jurisprudence's sources and case studies. The result of the study demonstrates that combination of contracts is generally permitted in Islamic commercial law, as long as there is no Quranic verse or Prophetic tradition that prohibits the combination. Concerning the understanding of three ahadith reported, they must be interpreted within specific context ...

In the aftermath of the recent financial crisis, the inherent linkages between banks' capital buffers and risk took center stage as policy makers promoted a more resilient global banking system. The growing recognition of Islamic banking as a viable alternative-banking model warrants the need to investigate the overall susceptibilities of Islamic banks' capital buffers (when compared to conventional banks) to unique risks emanating from their operating environments. We examine this issue over the period 2005-2012 in the 18 countries where Islamic and conventional commercial banks coexist. We employ a panel model using dynamic Generalized Methods of Moments (GMM) on a data set comprising 128 commercial banks of which 44 are Islamic commercial banks ...

Over the past three decades, the Malaysian economy has been experiencing economic growth, but at the same time inundated by a deterioration of overall fiscal balance and consequently a rise in national debt. As a country that has faced persistent fiscal deficits for the last 16 years, Malaysia now needs more fiscal space and a plausible fiscal sustainability plan that would place its economy on a trajectory to a higher growth path. Its budget deficit in 2013 stood at 4% of GDP while federal government debt stands at 53% of GDP ...

Wealth and property are the pride and splendor of humans, in so, those who are willing to donate could be considered as those seeking Allah's (s.w.t) blessing and mercy. Therefore, the practice of establishing and donating to waqf is an important medium to draw oneself closer to Allah (s.w.t). By willingly giving away things that are most loved, one is deemed to get Allah's (s.w.t) blessings. Apart from being a source of development for the economy of Muslims, this practice is strongly encouraged in Islamic doctrine given the benefits it guarantees in the hereafter and this world ...

Majority of Shari'ah scholars maintained the opinion that conventional insurance is not permissible in Shari'ah due to the elements of gharar "uncertainty", maysir "gambling" and riba "usury" that was found on it. This necessitated the establishment of takaful "Islamic Insurance" in the late 1970s, but this also did not go without criticisms as there are different opinions among Islamic scholars and also legal and regulatory practitioners on the permissibility of surplus sharing and takaful models that has been adopted by takaful operators ...

A good financial sector is an important requirement in any country in achieving economic growth. Withour proper regulations, a financial sector will not be deemed productive. The Somalia Federal Government has identified the development of the banking sector as one of the six crucial factors for reviving the country's economy. Hence, the federal government has allocated more than $2.5 million to regulate this sector. The Central Bank of Somalia Act 2011 states that all the banks should comply with Shariah laws, as Somali society being one hundred percent Muslim. However, with the absence of any Islamic bank regulations in Somalia, it enables the country to develop or adopt any regulation that is deemed workable ...

Market discipline is one of the main pillars for stability and resiliency in banking system (Basel II, 2004).The mechanism of market discipline primarily relies on the role of depositors who receive timely information and act accordingly through their respective accounts. Empirical evidence shows the presence of market discipline, whereby non-insured depositors react to risk factors of the bank accordingly either by withdrawing their deposit (quantity mechanism model) or demanding higher return (price mechanism model), although there is an interactive relation between the both mechanisms (interactive dynamic model). In tandem with conventional banking system, Islamic banking also emphasize on market discipline, signified by the global standard number 4 issued by Islamic Financial Services Board in 2007 ...