nep-isf New Economics Papers
on Islamic Finance
Issue of 2018‒12‒10
six papers chosen by
Halimatun Aris

  1. Does Corporate Governance add value to Islamic banks? A quantitative analysis of cost efficiency and financial stability By Christos Alexakis; Khamis Al-Yahyaee; Emmanuel Mamatzakis; Asma Mobarek; Sabur Mollah; Vasileios Pappas
  2. Investigating International Portfolio Diversification Opportunities for the Asian Islamic Stock Market Investors By Yildirim, Ramazan; Masih, Mansur
  3. Shari'ah Screening Methodology- New Shari'ah Compliant Approach By Yildirim, Ramazan; Ilhan, Bilal
  4. Some higher education issues in Muslim countries with Islamic economics as an illustrative case By Hasan, Zubair
  5. Recent finance advances in information technology for inclusive development: a systematic review By Simplice A. Asongu; Jacinta C. Nwachukwu
  6. The Comparative Economics of ICT, Environmental Degradation and Inclusive Human Development in Sub-Saharan Africa By Simplice A. Asongu; Jacinta C. Nwachukwu; Chris Pyke

  1. By: Christos Alexakis (Rennes School of Business, France); Khamis Al-Yahyaee (Department of Economics and Finance, Sultan Qaboos University, Oman); Emmanuel Mamatzakis (University of Sussex Business School, UK; Rimini Centre for Economic Analysis); Asma Mobarek (Cardiff Business School, Cardiff University, UK); Sabur Mollah (Hull University Business School, University of Hull, UK); Vasileios Pappas (School of Management, University of Kent, UK)
    Abstract: In this paper, we examine the impact of corporate governance practices on cost efficiency and financial stability for a sample of Islamic and conventional banks. In our analysis we use a set of corporate governance variables which include, board size, board independence, director gender, board meetings, board attendance, board committees, chair independence and CEO characteristics. The above corporate governance data set was constructed by the study of annual reports and other documents of Islamic banks, and is unique in this field. In our analysis we employ stochastic frontier analysis and panel VAR (PVAR) models in order to quantify long run and short run statistical relationships between operational efficiency of Islamic banks and corporate governance practices. According to our results, Islamic and conventional banks exhibit important differences in the effects of corporate governance practices on cost efficiency and financial stability. Our results warrant caution when Islamic banks select international corporate governance practices. A blind general adoption of corporate governance practices of conventional banks might lead to losses in terms of efficiency of Islamic banks as such adoption of, for example, a third layer of binding practices over and above the already existing ones imposed by the Sharia Board and the Board of Directors may lead to cumbersome business operations. In this respect we believe that our results may be of a certain value to regulators, policy makers and managers of Islamic banks.
    Keywords: Islamic banking, corporate governance, stochastic frontier analysis, panel VAR
    JEL: G20 G21 G34 D24
    Date: 2018–11
  2. By: Yildirim, Ramazan; Masih, Mansur
    Abstract: The purpose of this paper is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic-dynamic conditional correlations (MGARCH–DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCH-DCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the time-scale dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g. Portfolio Management, Strategic Investment Management).
    Keywords: MGARCH-DCC, MODWT, Continuous Wavelet Transform CWT, Contagion, Volatility Spillover, Shariah Indices
    JEL: C22 C58 G11 G15
    Date: 2018–05–19
  3. By: Yildirim, Ramazan; Ilhan, Bilal
    Abstract: The purpose of this paper is to address to a long-standing criticism of the various Shari’ah screening methodologies implemented by Islamic index providers. This study aims to provide evidences derived from the Islamic sources (Qur’an and Sunnah) and offers a potential solution for the harmonization of Shari’ah screening methodologies. Strong evidences from the Qur’an reveal that the most righteous and fair judgment is provided when the only factors that are considered are the entirely endogenous factors. This study further emphasizes the importance of using a screening methodology that supports the main notions of Islamic finance as a whole, and adheres to the essence of the ayah (Al-Baqarah: 275). This study exhibits a potential towards the harmonization of Shari’ah screening methodologies which encourages the participation of Muslim investors by ensuring better awareness and confidence regarding stock investments. This paper fulfils an identified need to study how Shari’ah screening methodologies can be derived from the Islamic sources yet is based on “out-of-the-box” thinking.
    Keywords: Shariah Screening, Islamic Equity Index, Market Capitalization, Total Debt, Quran & Sunnah
    JEL: G11 G15 G18
    Date: 2018–04
  4. By: Hasan, Zubair
    Abstract: The purpose of this paper is (i) to state the objectives of higher education commensurate with Islamic requirements; (ii) to examine the current state of higher education in Muslim majority countries with reference to the stated objectives with a view to indentifying the main issues it faces and (iii) to present in outline a program for creating an Islamic space for higher education at the global level. The constraints of space, time and resources at our disposal do not permit us to present an all covering blue print on this vital subject. Instead of dealing with specifics, we shall focus on attitudinal and directional issues of evolution. We shall use Islamic economics including finance as an illustrative case. Even here a comprehension of the desired magnitude may be lacking. Thus, we are conscious of the limitations of the truncated approach the paper takes to the problem. Yet, we expect the exercise to be rewarding in lighting up a few dark corners in the area.
    Keywords: Objectives of education; Islamic economics and Issues in higher learning; remedial action.
    JEL: H5 H52 N1
    Date: 2018–11–20
  5. By: Simplice A. Asongu (Yaoundé/Cameroon); Jacinta C. Nwachukwu (Preston, United Kingdom)
    Abstract: The overarching question tackled in this paper is: to what degree has financial development contributed to providing opportunities of human development for those on low-incomes and by what information technology mechanisms? We systematically review about 180 recently published papers to provide recent information technology advances in finance for inclusive development. Retained financial innovations are structured along three themes. They are: (i) the rural-urban divide, (ii) women empowerment and (iii) human capital in terms of skills and training. The financial instruments are articulated with case studies, innovations and investment strategies with particular emphasis, inter alia on: informal finance, microfinance, mobile banking, crowdfunding, microinsurance, Islamic finance, remittances, Payment for Environmental Services (PES) and the Diaspora Investment in Agriculture (DIA) initiative.
    Keywords: Finance; Inclusive Growth; Economic Development
    JEL: G20 I10 I20 I30 O10
    Date: 2018–01
  6. By: Simplice A. Asongu (Yaoundé/Cameroon); Jacinta C. Nwachukwu (Preston, United Kingdom); Chris Pyke (Preston, UK)
    Abstract: This study examines how information and communication technology (ICT) could be employed to dampen the potentially damaging effects of environmental degradation in order to promote inclusive human development in a panel of 44 Sub-Saharan African countries. ICT is captured with internet and mobile phone penetration rates whereas environmental degradation is measured in terms of CO2 emissions per capita and CO2 intensity. The empirical evidence is based on Fixed Effects and Tobit regressions using data from 2000-2012. In order to increase the policy relevance of this study, the dataset is decomposed into fundamental characteristics of inclusive development and environmental degradation based on income levels (Low income versus (vs.) Middle income); legal origins (English Common law vs. French Civil law); religious domination (Christianity vs. Islam); openness to sea (Landlocked vs. Coastal); resource-wealth (Oil-rich vs. Oil-poor) and political stability (Stable vs. Unstable). Baseline findings broadly show that improvement in both of measures of ICT would significantly diminish the possibly harmful effect of CO2 emissions on inclusive human development. When the analysis is extended with the abovementioned fundamental characteristics, we observe that the moderating influence of both our ICT variables on CO2 emissions is higher in the group of English Common law, Middle income and Oil-wealthy countries than in the French Civil law, Low income countries and Oil-poor countries respectively. Theoretical and practical policy implications are discussed.
    Keywords: CO2 emissions; ICT; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2018–01

This nep-isf issue is ©2018 by Halimatun Aris. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.