Religion, risk, and return arab and islamic laws, vol. An analysis of islamic banks exposure to rate of return risk zairy zainol1 and salina h. Sharia or shariah,25 islamic finance is subject to political risk in markets. Islamic financial instruments when the idea of islamic finance was put into practice on a large scale, few of islamic financial instruments did exist. May 25, 2014 minhas, imran, risk management in islamic finance february 22, 2014. Religion, risk and return kluwer law international, 1998. Islamic finance weekly, english law a safe haven for islamic finance 2004 accessed 9 january 2010. Islamic microfinance, summary index, risk, religiosity dunia aburish department of economics university of san francisco 2 fulton st. Islamic law and finance religion, risk, and return preface xiii chapter 1 introduction 1 part i the islamic law of finance by frank e. The law of islamic financial institutions and instruments. And return 56 1998 discussing generally the growth of the. The rise and rise of islamic finance law legal cheek. The subprime lending crisis that shook the world in 2007 showed the limits of the traditional financial system fakhfekh et al.
In addition, the book offers helpful guidance and understanding for the legal departments of islamic financial institutions, as well as lawyers, legal firms, shariah. Indeed, legal education consists primarily of learning to. Issues and challenges by nurhafiza abdul kader malim phd abstract in view of the massive failure of banking institutions in response to the global financial crisis 20072009, there has been proliferation of writings on risk management as never before. Islamic finance by asma hanif, 18 march 2008 islamic finance is on the rise in what in many parts of the world can be called an antisharia age, and it has been proven compatible with western financial systems and legislation. A critical perspective on the principles of islamic finance. The original and fundamental source for islamic finance, including islamic banking, is shariah law which plays a varying role in different countries. An analysis of islamic banks exposure to rate of return risk.
The pioneers of the idea were not given blueprint of islamic finance in practice. The law of islamic financial institutions and instruments pt. Dec 16, 2017 late assertions of shariah noncompliance create extra risk in islamic finance, thereby making it more expensive. On the role of structural breaks in identifying the dynamic conditional linkages between stock and commodity markets. Kassim2 the objective of this study is to analyze the dynamic effects of interest rate changes on the rate of return of islamic banks and the amount of deposits in the conventional and islamic banks. A viewpoint from classical and contemporary islamic scholars noraina mazuin sapuana, adepartment of finance. Rate of return risk arises because of unexpected changes in the market rate of return, which adversely affect a firms earnings. Religion, risk and return, vol 16 arab and islamic law series, 1st edn, kluwer law international 1998 8990. Mirroring the expansion of wealth in the middle east and asia and. Islamic law and finance describes the dynamic set of islamicallysanctioned ways financiers can transacat business. Studies in christian muslim relations christians why this muslim. Injunctions from the quran and the sayings of prophet muhammed have generated a web of interrelated norms which prohibit islamic financiers from engaging in transactions that involve interest riba and speculation gharar.
Market risk, the risk originating in instruments and assets traded in welldefined markets interest rate risk, the exposure of a banks financial conditions to movements of interest rate. Risk, religion, and islamic microfinance masters thesis international and development economics key words. A growing number of institutions and mutual funds akin to western socially responsible funds have established islamic investment and other practices to. Here at home, amid all the losses in the banking and housing worlds, there is one conspicuous exception.
Financing education, revitalizing african higher education. Real risk free return represents the time value of money which is the rent of money and this is forbidden in islamic law. Aaoifiaccounting and auditing organization for islamic financial. And return 5 1998 the end of colonialism and a rising tide of. Jun 04, 2018 central to islamic banking and finance is an understanding of the importance of risk sharing as part of raising capital and the avoidance of riba and gharar risk or uncertainty. Chapter 4 islamic financial instruments and infrastructure. This paper has been published by edbiz consulting based in london, uk in its latest annual publication namely global islamic finance report 2014. This short overview has shown that the sharia board and the sharia compliance departments within the financial institutions play an important role.
Shariah compliant asset pricing model scapm the formula of. Feb 08, 2016 islamic finance refers to the means by which corporations in the muslim world, including banks and other lending institutions, raise capital in accordance with sharia, or islamic, law. Sharia boards and sharia compliance in the context of. Rice university often, the true grounds of legal decision are concealed rather than illuminated by the characteristic rhetoric of opinions. A financial analysis of islamic banking and finance samuel l. Islamic financial instruments and infrastructure institutions supporting islamic financial market 4. Islamic law and finance religion, risk, and return brill. Managing the farflung enterprise greenwood publishing group, 2006. Credit risk, the risk that counterparty will fail to meet its obligations timely and fully in accordance with the agreed terms 2. In a conventional financial institution, returns are fixed.
Risk management in islamic finance by imran minhas ssrn. A financial analysis of islamic banking and finance. Interest and the paradox of contemporary islamic law and. Contractual uncertainty in islamic finance must be minimised. All financial institutions have been destabilized and the economy was crippled while the islamic financial system kept its stability and sustainability ftiti et al. Religion, risk, and return arab and islamic laws series, 16 9789041106247. Problems with sharia boards and sharia compliance departments in the context of corporate.
Vogel and hayes are also coauthors of the book islamic law and finance. An important element of management of risk is to understand the riskreturn tradeo. Interest and the paradox of contemporary islamic law and finance mahmoud a. Until now, there has been little demand for islamic finance among german muslims. This book is my contribution to the healing of nigerias religious relationships. Mirroring the expansion of wealth in the middle east and asia and a surge in islamic selfidentity, islamic banking practices have either become the law of the land or coexist and compete with western practices in at least six countries. Islamic finance rests on the application of islamic law, or shariah, whose primary sources are the quran and the sayings of the prophet muhammad. Apr 10, 2009 islamic financing april 10, 2009 bob abernethy, anchor. It will deal with the issues of third party guarantee, principal insurance and return broadening and fixation in islamic finance and suggest methodology of integrating risk mitigation within new islamic financing products. The return of kwashiorkor in nigeria 18th june 2017 tschumi, r. Religion is still relevant because the same ancestral laws still guide. In this paper, the authors explore the timevarying linkages between two strategic commodities covering the energy sector crude oil and natural gas and the qe al rayan islamic index over the period march 15, 2011december 25, 2014. Contractual forms in islamic finance law and islamic inv. This book offers a thorough look at noncompliance risk and explains the legal documentation necessary to ensure compliance for professionals in the islamic finance industry.
How to do business in islamic countries harvard business school. Vogel, director, islamic legal studies program, harvard law school, cambridge, ma, usa. The opportunity rate of capital and islamic capital structure. Late assertions of shariah noncompliance risk discrediting. Just like conventional financial systems, islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies.
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