Islamic Finance

Corporate social activities have become major subjects because of their effects on the quality of life of citizens, in particular, and on society at large. Currently, there is an increased awareness of social responsibility due to the challenges faced by financial institutions (particularly Islamic banking) globally. This paper examines the influence of characteristics of the board of directors, that is, board size, board composition, and the separation of the roles of chief executive officer (CEO) and chairman, on corporate social responsibility (CSR) disclosure.

Mainstream economics postulates the concept of scarcity as the defining concept in economics while heterodox economics denies the proposition of scarcity. In contrast, there is no clear stand among Islamic economists towards the concept of scarcity. This paper explores concept of scarcity ideologically and examines empirically the effect of scarcity thinking on human wants. The concept of scarcity is one of the unresolved issues in Islamic economics.

The impressive development of Islamic finance in the last three decades does not only attract wide attention from the people of the world, at the same time, it also pinned a hope that Islamic finance could offer a solid alternative and solution to the world crisis and the uncertain proposals for solving it. A coherent perspective for understanding real economic and financial problems as well as a viable alternative to the good financial practices to actualise human prosperity is avidly awaited.

Islamic finance has the same aim as conventional finance which is to gain profit through financial activities. What distinguishes Islamic finance against conventional finance is Islamic financial activities must be in line with Shari'ah (Islamic Law). Financing in Islamic finance is divided into two categories: equity financing and loan financing. For loan financing, Islamic hire purchase is a contract widely used in Malaysia after Bai' Bithaman Ajil.

Social performance is incumbent as one of the maqasid Shariah of Islamic banks. A perception study involving questionnaire surveys was conducted of 152 Islamic bank managers in Malaysia as a means of searching for empirical evidence of what constitutes Corporate Social Performance (CSP) indicators for Islamic banks. Using 50  indicators as a CSP construct, the study found that there are forty-seven important indicators for CSP in Islamic banks.

Conventional finance suggests that the higher the risk of an investment, the higher the return it should give. Nevertheless, whether Islamic stocks that offer alternative investment in the stock market suggest different risk-return relationship still needs to be investigated. This empirical study is aimed at assessing risk-return behavior of Islamic stocks. This study employs cross sectional data of portfolio developed using beta-rank and market capitalization, in which daily data will better reflect the real volatility.

Critics of the current situation of Islamic finance contend that the newly developed Islamic financial products are not compatible with the ideal of Islamic economics, because these products are approved at patchwork screenings by a Sharia advisory board. After the middle of the first decade of the twenty first century, in order to overcome this situation, several new ideas were proposed by those who aspire the ideal of Islamic economics.

Does inefficient bank assume more risk? Is there any major difference between Islamic and conventional banks in terms of efficiency and risk taking propensity? The paper aims to answer these questions in the context of Bangladesh. Although few studies are available in the existing literature that compare the performance between Islamic and conventional banks, almost no such study that examine the relationship between capital, risk and efficiency of banks in Bangladesh exists. The paper aims to fill this gap.

There is a huge number of definitions of Islamic Economics available in the literature. The vast majority take existing definitions from the western literature and modify them to incorporate an Islamic angle. This leads to the widespread belief that Islamic Economics is a variant or a branch of conventional economics. We argue that something can be called “Islamic” only if it is based on the Quran and Sunnah. In this paper we propose a new definition based purely and directly on Islamic ideas and sources.

Basel Accords promote Value at Risk (VaR) that is the most used method as the preferred one to measure and report market risks of financial institutions. Using VaR usually requires having asset valuation models and identifying their risk factors as model input parameters, allowing thus to stress them and calculate valuations (mark-to-market or mark-to-model). The previous requirements will make VaR calculation - roughly adapted from conventional finance - complicated for Islamic finance as there are not well-known valuation models and the risk factors may not be easily identified.