nep-isf New Economics Papers
on Islamic Finance
Issue of 2018‒04‒30
seven papers chosen by
Halimatun Aris

  1. Sukuk-waqf: The Islamic Solution for Public Finance Deficits By Oubdi, Lahsen; Raghibi, Abdessamad
  2. Methodology of Islamic economics: Is the subject worth discussing? By Hasan, Zubair
  3. A Suggestion on Mortgage Financing of Islamic Banks: Diminishing Musharakah By Dinc, Yusuf
  4. The Functioning and Accounting of Musharakah Financing in Participation Banks and Firms; Problems and Recommendations By Dinc, Yusuf
  5. The Effect of Retail Loans on Bank Profitability A Comparative Empirical Analysis By Dinc, Yusuf
  6. External Flows and Inclusive Human Development in Sub-Saharan Africa By Asongu, Simplice; Leke, Ivo
  7. Educational Quality Thresholds in the Diffusion of Knowledge with Mobile Phones for Inclusive Human Development in Sub-Saharan Africa By Asongu, Simplice; Nwachukwu, Jacinta

  1. By: Oubdi, Lahsen; Raghibi, Abdessamad
    Abstract: The majority of Muslim countries face increasing pressure on their budget, which pushes to more public spending. Eventually, the main victim of this situation will be the welfare of Muslim communities. Despite Islam does not tolerate negligence regarding the importance of State as major player in preserving the welfare of Muslim communities, it offers a third option to support public effort through the institution of Waqf. Indeed, this institution has played a crucial role all along Muslim civilization and it is invited to more innovation to answer to today’s challenges. Sukuk-Waqf can be seen as the perfect sustainable financing instrument offered by Islam to help sustain public spending by the people and for the people. This paper will try to examine the concept of Waqf, cash Waqf and Sukuk Waqf is Islam and their evolution during Muslim civilization. Finally, it will go through modern attempts to implement this model that can answer the need for financing to support public effort to preserve the welfare of Muslim citizens.
    Keywords: Sukuk-waqf, public spending, sustainability.
    JEL: I31 I38 O3
    Date: 2018–04
  2. By: Hasan, Zubair
    Abstract: The word methodology has several usages. Here, we shall use it to denote its two uses. First, it is the subject that fixed targets for economics to achieve and supervises the discipline from outside to see how far those targets have been achieved with the passage of time. In this sense, methodology is a branch of the theory of knowledge with philosophical import. In this sense, the discussions on methodology in Islamic economics are fruitless and misleading. Second, methodology as a part of economics helps design research and its supervision. In this sense, the methods used in Islamic economics are unduly loaded with Western approach and techniques and call for reform. The controversy and confusion on the issues involved has been lingering for long but has of late assumed disquieting proportions. The paper discusses the subject in the light of the prevalent puritan versus pragmatic approach to the study of Islamic economics. Indeed, their confrontation threatens the very survival of the subject as a distinct academic discipline. The paper suggests a way out of the predicament evaluating the efficacy of the rising concerns and focus on the subject.
    Keywords: World view; Positive versus normative; Empiricism; Predatory publishing on line
    JEL: A23 B4 Y8
    Date: 2018–04–04
  3. By: Dinc, Yusuf
    Abstract: Participation banks can produce house financing based on mortgage in Turkey. Mortgage of participation banks of Turkey is a type of Murabaha financing. Murabaha financing model is based on buying in advance and selling on credit terms. Other financing models of interest-free banking are not applied to mortgages of participation banks in Turkey. Diminishing Musharakah is an interest-free financing model for any type of credits and also applied to mortgages in the world. In this essay Diminishing Musharakah is argued as a unique financing model of interest-free banking. Also applicability of Diminishing Musharakah for Turkish participation banks’ mortgages is evaluated. The findings that were obtained in Turkey may be generalized for the other regions of the world.*
    Keywords: Diminishing musharakah, mortgage, Islamic banking, participation banking, Sukuk.
    JEL: G21
    Date: 2016–12–12
  4. By: Dinc, Yusuf
    Abstract: Main income source of participation banks is loans. Participation banks keep the loans they generate in their balance sheet and distribute the income generated by these loans into participation pools and into their equity. The loan processes of participation banks are unique and not evaluated enough for literature. Musharakah financing as a unique financing model of non-interest financial institutions is currently in the foreground. Describing the process of musharakah financing is important to understand the difference between conventional and participation banks. This research evaluates the process of musharakah financing of participation banks for the first time. Accounting of musharakah and the problems are also included in the research. Moreover, with this research, it is included in the results that there is no difference between accounting of normal loans and musharakah financing.
    Keywords: Musharakah, accounting, Islamic banking, Islamic finance
    JEL: G21
    Date: 2017–02–10
  5. By: Dinc, Yusuf
    Abstract: Retail loans became an important instrument of banking during 1960s. The effect of retail loans, in which mortgage and consumer loans have a great share, in the profitability of banks has not been analyzed in detail so far. The main items of retail loans, like mortgage and consumer loans, contribute greatly to the risk management of banks with their characteristics like having regular cash flow in banks. Due to the structure of the guarantee and mortgage loans, which provides low risk weight, it is important to determine the capital needs of banks. However, due to relatively long maturity structure, mortgage loans also feed the maturity mismatch risk, which is the basic problem of banking system. Such loans, with which low costs are provided in favor of the clients, play a considerable role in the profitability of banks. Consumer loans, on the other hand, are provided to the clients in shorter maturity periods and with costs that are more in favor of banks. In the scope of this study, the effects of retail loans on conventional banks and participation banks, which are active in Turkey, have been investigated for mortgage and consumer loans. The findings of the study show that retail loan types have strong negative effects on Net Interest Margin (NIM), which has been selected as the profitability indicator for conventional banks in the scope of the study. For Participation Banks, on the other hand, unlike conventional banks, retail loan types have stronger and more positive influences on Net Profit Share Margin (NPSM). The findings of the present study are important for further studies that will be conducted on retail banking and for comparative studies on performance assessment.
    Keywords: Retail Loans, Profitability, Islamic Banking, Comparison, Participation Banking
    JEL: G21
    Date: 2017–08–05
  6. By: Asongu, Simplice; Leke, Ivo
    Abstract: The study assesses how external flows influence inclusive human development in a panel of 48 countries in Sub-Saharan Africa for the period 2000-2012. The empirical evidence is based on Tobit regressions and Generalised Method of Moments. The findings from both estimation techniques reveal that remittances and FDI increase inclusive development whereas foreign aid has the opposite effect. The results suggest some positive and negative impacts of interest for further analysis. First, remittances are negatively associated with: (i) Middle income countries compared to Low income countries where the effect is not significant; (ii) French Civil law countries compared to English Common law countries where the effect is positive and (iii) Resource-rich countries compared to their Resource-poor counterparts where the effect is positive. Second, foreign aid is more negatively linked to Low income, French Civil law, Islam-dominated, Un-landlocked, Resource-rich and Politically-unstable countries. Third, FDI is positively associated with: (i) Low income, French Civil law and Landlocked countries compared to respectively Middle income, English Common law and Un-landlocked countries where the effect is insignificant and (ii) Politically-stable countries compared to their Politically-unstable counterparts where the effect is negative.
    Keywords: Foreign investment; Remittances; Foreign aid; Inclusive development; Africa
    JEL: F21 F24 F35 I30 O55
    Date: 2017–01
  7. By: Asongu, Simplice; Nwachukwu, Jacinta
    Abstract: The study investigates critical masses or thresholds of educational quality at which the diffusion of information with mobile phones enhances inclusive human development. The empirical evidence is based on simultaneity-robust Fixed Effects regressions with data from 49 Sub-Saharan African countries for the period 2000–2012. The following findings are established: (1) There are positive marginal and net effects on inclusive development from the interaction between mobile phones and educational quality, (2) Between 10 and 27 pupils per teacher is needed in primary education in order for mobile phones to enhance inclusive human development, (3) From a comparative dimension: (i) English Common law countries enjoy higher net effects compared to their French Civil law counterparts, (ii) positive net effects are more obvious in politically stable (vis-à-vis politically unstable) countries, (iii) positive net impacts are also more apparent in resource-poor (vis-à-vis resource-rich) countries, (iv) low income (vis-à-vis higher income) countries have a higher net effect on inclusive development, (v) landlocked (vis-à-vis unlandlocked) countries experience higher net effects and (iv) Islam-dominated countries have a slightly higher net impact compared to their Christian-oriented counterparts.
    Keywords: Mobile phonesInclusive human developmentAfrica
    JEL: G20 I10 I32 O40 O55
    Date: 2017–01

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