Benchmarking Islamic Finance

Pricing or benchmarking is a process of evaluating the performance of a financial company’s products and services or systems, against other businesses, considered to be at the top of their field, by applying a measurement of “best in performance.” This book includes contributions from the leading global experts in the field who tackle topics such as whether the Islamic financial system has been dependent on the LIBOR / EURIBOR in its benchmarking exercises to date, and thus, whether it will be affected negatively by the predicted non-existence of the LIBOR / EURIBOR from 2021 onwards. They also address the question of whether the Islamic financial system requires benchmarking of its products and services and consider the emergence of Sharī ͑ah-justified benchmarking in today’s Islamic financial system. Additionally, they look at how benchmarking formulas should be adapted to ensure the satisfaction of customers within the principles of Maqasid al-Sharī ͑ah. It takes a legal and institutional approach to the subject, which readers will find particularly valuable, as there are various forms of Islamic finance institutions that do not conform to established models in the finance industry. Furthermore, there are emerging business models that will benefit from this line of investigation. This book offers a timely analysis of these issues and redresses the existing misconceptions and misinterpretations pertaining to benchmarking, in an Islamic finance context, and, as such, provides guidance and strategies for future directions. It will appeal to researchers of Islamic banking, finance, and insurance, as well as, practitioners, particularly standard setting bodies, regulators, and policy makers.

Islamic finance’s phenomenal growth owes to the Shariah compliant nature of its financial instruments. Shariah forbids the charging of interest (Riba) and instead promulgates risk-sharing and trade-based modes of financing. The Islamic financial industry has been subject to both critique and admiration. Critics argue that Islamic instruments (bearing debt-based structures) differ from their conventional counterparts only in legal lexicon and not in economic impact. The admirers argue that such instruments, irrespective of wider economic implications, rigorously comply with ‘juristically sound’ Islamic principles. This book aims to reconcile the above dispute. It argues that the financial impact of instruments is a consequence of the way they are priced and structured. The similarity in pricing and structures is an outcome not of the underlying Islamic financial modes but of the competitive environment in which Islamic instruments compete. Even risk-sharing and trade-based Islamic structures, if implemented in such an environment, would have a financial impact similar to that of conventional instruments. This book has a wider appeal for both academic and non-academic audiences. It can complement undergraduate and graduate courses as an additional reading on the intricacies of Islamic financial instruments and markets. For PhD students, it would help identify future research areas. To non-academics, it offers a deeper understanding regarding the working of the Islamic finance industry.

This book covers the recent literature concerning Islamic banking and finance (IBF), focuses on the history of IBF since its inception and introduces the latest innovative concepts and practices in the field. The authors cover important topics such as the role of ownership, Shari`ah compliance and governance structures in raising debt capital using IBF practices, including Fatwa issues and the use of benchmarking practices. The book also addresses topics like archival data, the influence of leverage on ownership structure, and sukuk structures, as well as misconceptions, threats, challenges and opportunities in IBF. Finally, the book deals with prominent issues such as business score-carding, Takāful (Islamic Insurance), IBF implications for block-chain-based fintech and finance hub concepts in Islamic microfinance models. This edited volume is an important contribution to the IBF literature as it provides a much-needed in-depth look into industry practices through the perspective of corporate finance and governance. With its interdisciplinary approach covering legal and financial issues along with a wide variety of notable contributors, this book will be a valuable reference guide to both teachers and students of Islamic banking and economics.

The concept of risk-sharing in financial and social contracts is one of the unique features of Islamic finance. Many theoretical studies generally claim superiority of an Islamic financial system based on pure equity and participatory modes of financing, while empirical studies provide mixed results. Studies and discussions are needed to fully understand how Islamic finance could contribute to the ongoing discussion of financial stability. Against this background, this book addresses various aspects of Islamic finance and the risk-sharing mechanism contributions to the overall macroeconomic and financial stability. Undoubtedly, the findings and recommendation from this book should be of great interest not only to future academic researchers in the field of macroeconomic stability and Islamic finance, but also to policy makers and regulators who are keen on drawing lessons from Islamic finance experiences to prevent similar crisis in the future.

The recent turbulence in the global financial markets has drawn attention to an alternative system of financial intermediation: Islamic banking and finance, which has so far remained on the sidelines of the unrest. Islamic Finance in a Nutshell is a quick and easy guide to understanding the fundamentals of Islamic Finance and how the Islamic Financial markets work. Designed as a quick read for practitioners needing to pick up the basics of the industry, it will enable readers to understand the differences Islamic and Western finance. Starting with the rise of Islamic finance, the book highlights the key areas which practitioners need to grasp to understand the marketplace including financial statement analysis, Sharia’a law, making money in the absence of interest and regulation. The book also provides readers with a basic guide to Arab terminology and a guide to the top financial institutions within the Islamic markets. This is an ideal guide for anyone with an interest in how these financial markets work, but who do not want to be bogged down in complex and unnecessary terminology.

Islamic finance is founded on principles that constitute the guidelines governing any Islamic economic or financial dealings. Innovative financial engineering today constitutes one of the most critical needs of Islamic financial institutions. It represents the forces that will drive Islamic finance toward continuous growth and efficiency. The structuring of new financing and Shariah-complaint instruments plays an important role in the enhancement of Islamic financial markets, and Islamic risk management practices, combining basic Shariah-complaint financial instruments within Shariah structures to precise identified needs. The financial engineering process in Islamic finance is a process that is very sensitive and complex. It requires multidisciplinary considerations, involving deep knowledge of finance, economy, Shariah law and commercial law. Divergence of opinions among different Shariah scholars and boards, as well as the absence or lack of effectiveness of a central regulatory body, is perceived as an obstacle to the growth of investment confidence in Islamic finance. Hence, innovation, along with greater uniformity, is essential to make Islamic finance an international financial system and to attract a greater number of customers. This book addresses the main issues of concern within Islamic banking, namely the development of conceptual framework, the viability of interest-free banking, and the assessment of its performance and future. In a world where conventional interest-based finance is the dominant framework, Islamic banking faces many challenges that must be addressed. This book discusses these issues and challenges and will be of great interest to both researchers and practitioners. It analyses the past experiences of Islamic banks worldwide, and provides an objective assessment of their successes and failures.

The book provides comprehensive compilation on Islamic legal documents related to Islamic financial system consists of legal statutes, frameworks, guidelines, circulars and internal compliant manual covering Islamic banking, takaful and Islamic capital markets. Brief description of those documents are laid down to assist non-legal background readers in having comprehensive view of Islamic finance legal system. Few special focuses are done to Shariah screening methodologies for stocks, Islamic fund and real estate with special review on few sukuk issuances as to familiarize reader with the principle terms and conditions (PTC) of the sukuk. Islamic finance is not just a system but it is a way to achieve the spirit of Shariah i.e. maqasid Shariah in providing prosperity to the society in blessing ways avoiding all prohibited elements as stated in Islamic law.

This book demonstrates how the global market for Islamic financial services has shown strong growth in recent years and shown remarkable resilience during the global financial crisis. Drawing on a range of international perspectives from the Gulf Cooperation Council countries, Malaysia, Pakistan, Australia and Europe, this book explores the characteristics and performance of Islamic finance and banking and discusses future prospects. It offers a comprehensive theoretical framework for Shariah governance in Islamic financial institutions, explores Shariah-compliant equities, as well as issues in productivity, technology and efficiency. It includes a number of comparative studies on Islamic and conventional banks, Islamic and conventional unit trusts, and Islamic and conventional banks’ product mixes. The challenges and opportunities for the expansion of Islamic finance and banking into Europe are explored through the contexts of the UK, Germany and Italy.