Abstract: The level of penetration of Islamic banking products and services has recorded a reasonable growth at an exponential rate in many parts of the world. There are many factors which have contributed to this growth including, but not limited to the rapid growth of number of Muslims who are uncomfortable with the conventional ways of banking, interest and higher interest rates scheduled by conventional banks and financial institutions as well as the financial inclusion campaign conducted in many countries. The system is facing legal challenges which open the research fdoor for practitioners and academicians for the sake of finding out solutions to those challenges. This paper tries to investigate the development of the Islamic banking system in the United Kingdom (UK), Saudi Arabia, Malaysia, Iran, Kenya, Nigeria and Uganda in order to understand the modalities which have been employed to run an Islamic banking system in the aforementioned countries. The methodology which has been employed in doing this research paper is Doctrinal, of which legislations, policies and other legal tools have been carefully studied and analysed. Again, papers from academic journals, books and financial reports have been deeply analysed for the purpose of enriching the paper and come up with a tangible results. The paper found that in Asia, Malaysia has created the smoothest legal platform for Islamic banking system to work properly in the country. The United Kingdom has tried harder to smooth the banking system without affecting the conventional banking methods and without favouring the operations of Islamic banks. It also tries harder to make UK as an Islamic banking and finance hub in Europe. The entire banking system in Iran is Islamic, while Nigeria has undergone several legal reforms to suit Islamic banking system in the country. Kenya and Uganda are at a different pace in making Islamic Banking system work alongside the conventional banking system.
Abstract: This paper discusses the risk management in Islamic banks and aims to determine the difference in the practices and methods of risk management in those banks compared to the conventional banks, and to make a case study of the biggest Islamic bank in Egypt (Faisal Islamic Bank of Egypt) to identify the most important financial risks faced and how to manage those risks. It was found that Islamic banks face two types of risks. The first type is similar to the risks in conventional banks; the second type is the additional risks which facing the Islamic banks only as a result of some Islamic modes of financing. With regard to the risk management, Islamic banks such as conventional banks applied the regulatory rules issued by the Central Banks and the Basel Committee; Islamic banks also applied the instructions and procedures issued by the Islamic Financial Services Board (IFSB). Also, Islamic banks are similar to the conventional banks in the practices and methods which they use to manage the risks. And there are some factors that may affect the risk management in Islamic banks, such as the size of the bank and the efficiency of the administration and the staff of the bank.
Abstract: In this article, we have elaborated a study over the
nature of financial intermediation in Islamic banks by comparison to
those of conventional ones. We have found a striking difference
between two kinds of intermediation. We tried, from another side, to
study the relationship between the capital level and deficiency risk
relying on econometric model, and we have obtained a positive and
significant relation between the capital and the deficiency risk for the
conventional banks. This means that when the capital of these banks
increases, the deficiency risk increases as well. In return, since the
Islamic banks are constrained to respect the Sharia Committee as well
as customers’ demands that may, in certain contracts, choose to
invest their capitals in projects they are interested in. These
constraints have as effects to reduce the deficiency risk even when
the capital increases.
Abstract: This study examines the value analysis in Islamic and conventional banking services in Pakistan. Many scholars have focused on co-creation of values in services but mainly economic values not non-economic. As Islamic banking is based on Islamic principles that are more concerned with non-economic values (well-being, partnership, fairness, trust worthy, and justice) than economic values as money in terms of interest. This study is important to know the providers point of view about the co-created values, because, it may be more sustainable and appropriate for today’s unpredictable socio-economic environment. Data were collected from 4 banks (2 Islamic and 2 conventional banks). Text mining technique is applied for data analysis, and values with 100% occurrences in Islamic banking are chosen. The results reflect that Islamic banking is more centric towards non-economic values than economic values and it promotes team work and partnership concept by applying Islamic spirit and trust worthiness concept.
Abstract: This paper examines the relationship between financial
risks and profitability of the conventional and Islamic banks in
Malaysia for the period between 1996 and 2005. The measures of
profitability that have been used in the study are the return on equity
(ROE) and return on assets (ROA) while the financial risks are credit
risk, interest rate risk and liquidity risks. This study employs panel
data regression analysis of Generalised Least Squares of fixed effects
and random effects models. It was found that credit risk has a
significant impact on ROA and ROE for the conventional as well as
the Islamic banks. The relationship between interest rate risk and ROE
were found to be weakly significant for the conventional banks and
insignificant for the Islamic banks. The effect of interest rate risk on
ROA is significant for the conventional banks. Liquidity risk was
found to have an insignificant impact on both profitability measures.