The Islamic Capital Market Essay example

Islam is more than a religion, it’s a culture, and as such has an effect on political, social, and economic aspects of life—this is especially true outside of the Western world. Followers of Islam believe in full submission to God and this submission is practiced in the secular realm (Taha, 114). Of the five pillars of Islam, one (the zakat) has a direct affect on economic policy and ethics. The culture of Islam has shaped economic and business guidelines In the Islamic World and continues to do so. Cultural ideals attributed to the Qur’an or the Prophet Muhammad, have been a vital source for economic and business practices that have helped to shape the history of many Islamic nations, and are guiding the creation of policies

A rule making body issues authorative shari’a auditing standards for all Islamic banks and other Islamic businesses and it will be the most effective way to eliminate problems within the Islamic economy. The most effort to develop a body of consistent standards for shari’a audits has been undertaken by

Becoming an expert in Islamic economics and finance field is one of my long-term goals in life. I started to organize and made a plan towards achieving that dream since senior high school. The concern towards Islamic economics and finance concept, and its application for society and the country began when I was reading a book entitled Islamic banking-theory and practice. After finishing reading the book, my interest in Islamic economic and finance topics rose and strengthen my own determination to become the expert of Islamic economics and finance. The main principle of Islamic economics and finance which offers the just and ethics in economic activity, poverty alleviation through income distribution mechanism, and prevention of economic and

In this case study on investment-linked takaful, there are some shariah issues. The following are some but not limited Shariah issues at the conception of the contract, the fund management and at the level of distribution of profit.

the First International Conference on Islamic Banking, held in Dubai in 1979, it has not been widely implemented throughout Islamic financial system (Bendjilali and Khan,1995, p. 16). It is a relatively new and very little used product available for Islamic banks. The paper claims that MMQ is more in line with Shari’ah teachings and as such should be used more by Islamic financial institutions. The study indicates that MMQ possibly has a comparative advantage for both financiers and the customer when compared with

Financial equity is a standout amongst the most critical lessons of Muslims. As indicated by the Qur 'an, the essential mission of all messengers of God was to set up equity in this world (Al-Hadid 57: 25). Most the Qur 'anic lessons are guided towards empowering individuals to live with each other in peace and to satisfy their shared commitments genuinely and steadfastly to guarantee equity and general prosperity (falah). Inside the domain of this mission of the Messengers, the Qur 'an predicts, and which is all well and good, that treachery drives eventually to demolition (Ta-ha 20: 111).

Islam is the world’s second largest religion with over 1.65 billion followers, which constitutes 24% of the world’s population (Kettani, 2010). Islam is a religion that encompasses all aspects of a Muslim’s life, from issues of an ethical, social and civil nature to economic and legal matters. In this way it is quite different to the secular view normally held in the West, which separates business decisions

Islamic banking is banking action that is reliable with the ethics of sharia and its applied presentation over the change of Islamic economics. As such, a more right word for 'Islamic banking' is 'Sharia compliant finance'.

It regulates public and private behaviors and actions of people” (Mulcahy). Sharia law consists of an exceptionally broad topic span and has been interpreted many ways, especially on unclear points. Mulcahy said “Although the word of Sharia cannot be altered, like any other religious text it should not be interpreted word for word. This has obviously not been the case and has led to religious extremism and a strong split between Muslims”. The rules of Sharia are single-handedly what distinguish Islamic Accounting from other methods.

Many people are sceptical about Islamic banks performances into the niche as newcomers to the market according to Samad, (2004). As previously mentioned, Islamic finance operates in accordance with the Qur’an. Islamic banks are non-conventional financial institutions which completely prohibit the action of ‘Riba’ (Interest) under Islamic Banking. As Islamic finance follows strict ethical practices in its dealing with jurisprudence to the Qur’an, it is only natural that Islamic banks as new competitors face steep challenges in sharing deposit and credit markets

Now that, Islamic law has been defined and explained in detail, Islamic Banking can be observed further. There are four rules that govern investment behaviour in Islamic banking (Suleiman 2001):

It is undeniable fact that Islamic banking system has been flourishing for last few decades and now has become the focus of global market forces. Pioneers of Islamic banking proclaim that foundational principles of Islamic banking is allied with Shari’ah guidance and their accounting practices, policies and financial reporting mechanism is based on Sharai’ah values. Consequently, Islamic institutions have the responsibility to follow Islamic rulings in all their practices. The core purpose of this study is to confirm that either current practices are align with Islamic ethical values or just based on shari’ah terminologies. However, author find that current practice of Modarbah are not just contrary to its theoretical foundation of Islamic Banking but also to basic shari’ah guidance to some extent. It has been also identified that whenever an issue arises in Islamic banks they try to make it shari’ah compliant instead of resolving particular issue they are busy in just manipulating or islamizing conventional banking products by using Shari’ah terminologies to capture the attention of Muslims who are thirsty for transparent ideal Islamic system. This behavior of Islamic banks has made the practices of Islamic banks more controversial. Proper implication of current study can make great contribution in the literature of Islamic banking as it will help Islamic banks to review their practices in order to fulfill the basic ethical principles of Islam.

Despite of increased attention on Islamic banks, recent studies have evidenced mixed result on the stability of Islamic banks over its conventional counterparts (Belouafi et al. 2013; Kassim & Abd. Majid 2010; Rokhim & Gamaginta 2009; Bourkhis & Nabi 2013). Thus, indicates that there is non-consensus on the stability of Islamic banks over its conventional counterparts.

Similarly, Mobarek & Kalonov (2014) provided empirical evidence, using two frontier approaches, from many OIC countries to compare Islamic and conventional banking. They found that though conventional banks more efficient in their operations, Islamic banks had an upper hand when it came to financial stability. Their extensive study covered pre-crisis and crisis periods. The finding of Mobarek & Kalonov (2014) is validated by an earlier study conducted by Al-Hares, AbuGhazaleh, & El-Galfy (2013) in which they studied banks from 2003-2011. Al-Hares, AbuGhazaleh, & El-Galfy (2013) found that Islamic banks in Gulf Cooperation Council (GCC) were less efficient than

The gale of economic liberalization currently sweeping across the globe provides another reason for looking into the efficiency of Islamic banks since it poses a further competitive challenge to the Islamic banking institutions. It is expected that by the year 2007, trade liberalization will require Malaysian domestic banks to compete with other global players on an equal playing field. Such a change implies that local Islamic banking institutions will have to be efficient, innovative, competitive and resilient players in the market. This is particularly important since foreign banks that are arguably more efficient may also offer Islamic banking products to take advantage of brisk demand for Islamic banking products.