Master

This study focuses on the possibility of applying salam wakalah, modified mudarabah and musharakah mutanaqisah as underlying concepts for SMEs financing in Malaysia. It is a known fact that SMEs are having difficulties in obtaining bank financing as compared to large and established corporations. Due to the financing bias, SMEs generally will not seek for bank financing. Although Islamic banks in Malaysia offer SME financing products, the majority is based on tawarruq which is a debt-based financing and for SMEs, debt financing is not their top preference as it will affect the financial leverage; over-reliance on tawarruq will cause contract concentration risks for banks as well. This paper proposes three models with profit and loss sharing feature which is believed to be a better option for both SMEs and Islamic banks. The processes and flows of the proposed models are discussed in this paper. Hypothetical examples are used to illustrate the payoffs of the models towards SMEs and Islamic bank, showcasing the benefits of adopting the models over tawarruq financing. The models address the unique financing needs of SMEs under different business stages: salam wakalah for short term working capital financing that is vital during introductory phase; modified mudarabah for specific projects that enhance the business productivity during the growth stage, and; musharakah mutanaqisah for purchase of equipment and machineries during business expansion. At the same time, this paper also discuss on the potential of adopting the models into Investement Account Platform (IAP) to have involvement from the investors while encouraging Islamic banks to provide more equity-based contracts for SMEs.

The ability of banks in giving out loans and investments depends very much on their ability of attracting deposits. Unlike its conventional counterpart, Islamic principles forbid Islamic banks to take any interest-related income amid the fact that deposits are an important source of fund for its operational and financing. Consequently, the risk of deposit withdrawal by depositors is an important aspect that should be well managed in both conventional and Islamic banking system. Therefore, the objective of this study is to examine the effect of selected economic and bank specific variables on deposits placed at the Islamic and conventional banks ...

Establishing a Shariah compliant liquidity risk management framework for Islamic banks in the West African Economic and Monetary Union (WAEMU) is fundamental for the development of the industry, 40 years after the licensing of the first Islamic bank in the Union. This paper provides a gap analysis of the current liquidity management framework of BCEAO, the central bank of WAEMU s member countries, focused exclusively on conventional banks activities. Institutional and operational challenges of a secular jurisdiction to fully comply with AAOIFI and IFSB standards regarding liquidity deploying and liquidity absorption, are highlighted alongside with the constraints for the establishment of a well-functioning Islamic interbank money market. After a review of the practices in mature Islamic finance jurisdictions (Malaysia, Bahrain, Indonesia and Pakistan) and in a secular jurisdiction like the United Kingdom, the paper identifies the relevant tools to manage these challenges. Finally, guidelines are proposed to establish a suitable risk management framework for Islamic banks in the WAEMU countries, in particularly the provision of a Shariah Lender of Last Resort mechanism in BCEAO s regulations and the creation of an Islamic interbank money market. This paper is hoped to accelerate the on-going work since 2012 within BCEAO and the regional Securities and Exchange Commission (AMF-UMOA), to promote the development of Islamic finance in the region with the technical assistance of the Islamic Development Bank.

Studies of Islamic banks' profitability are an important tool towards improving performance, evaluating bank operations and determining management plan to help in increasing the chance for the banks to survive in competitive markets. The robust growth in financing and investment activities across most jurisdictions in various real sectors has helped Islamic banks to record generous asset growth rates in their balance sheets. However, the returns become subdued during the financial crisis of years of 2008-2009, reaching lows of ROA 0.74% and ROE 6.16% in 2009 (IFSB, 2014). Over the last twenty years, market conditions in banking sector have undergone extensive changes on both demand and supply sides ...