Hedging is in conformity with Islamic theories economics; hedging with derivatives is not, because derivatives make large scale speculation possible. Thus, derivatives are not actually acceptable in the practice of Islamic finance. However, the Islamic financial system does provide alternative means of ethical risk management solutions.
An Islamic banking system was established in Malaysia in 1983. To date, Islamic banking products are available at two full fledged Islamic banks, and at all commercial and merchant banks, in Malaysia. However, these products are still not popular with customers. At the end of 2000, total deposit at conventional banks was RM381 billion, while total deposit in Islamic system was RM31 billion. RM416 billion was loaned by conventional system, and RM21 billion was loaned by Islamic system.
The CARTER model can be used to measure the importance of service quality items. An analysis of the Kuwait Finance House suggested that the CARTER model is multidimensional and provides important implications for both academics and managers. For example, religious factors rated as the most important factor on the CARTER scale, with customers displaying strong religious preferences. CARTER can be adjusted in light of changing customers’ attitudes and preferences.
Under Islamic law, the beneficiary in an insurance policy cannot be determined based on a nomination clause. A nomination in a policy is only a formality. Policy holders own the benefits of their policies.
In an Islamic stock market, concerns about ethics and values must be taken into account. Regulators and potential investors often worry that this will take place at the expense of efficiency. No trade off has to exist between Islamic values and efficiency. This is due, in part, to a partial and incorrect definition of efficiency.
The sayings of the Holy Profit provide the framework for the development of Takaful. For example, the command to “Help you one another in righteousness and piety,†demands that mankind work together and form mutually beneficial agreements, such as
Resource mobilization through Islamic bonds is not only possible; it has proven to be practical through the implementation of several successful projects. However, bond issuing in Islamic finance presents unique challenges, because conventional bonds rely on riba and usury.
Due to strong competition and high technological demands, Islamic banks must think strategically to provide high quality products and services to their customers. It is essential for Islamic banks to take cultural differences into account when assessing and adopting plans for service quality. A new model, CARTER, has been developed to assess service quality based on 15 data points. There is a strong link between customer satisfaction and service quality, which can be viewed mathematically as a system of CARTER inputs and outputs.
This paper highlights various sources that could form the basis of law governing Islamic insurance or takaful. The paper covers primary sources of Islamic law, such as, the holy