nep-isf New Economics Papers
on Islamic Finance
Issue of 2019‒04‒22
five papers chosen by

  1. ضوابط وأدوات تجاوب المؤسسات المالية الإسلامية مع المستجدات الاجتماعية By Abozaid, Abdulazeem
  2. UAE Banks’ Performance and the Oil Price Shock: Indicators for Conventional and Islamic Banks By Magda Kandil; Minko Markovski
  3. الحكم الشرعي للاتجار بالديون الناشئة عن الوساطة المالية By Abozaid, Abdulazeem
  4. هل تعترف الشرعية بثمنية العملات الرقمية المشفرة By Abozaid, Abdulazeem
  5. The performance of Islamic banks in the MENA region: Are specific risks a minor attribute? By Imène Berguiga; Philippe Adair

  1. By: Abozaid, Abdulazeem
    Abstract: The Islamic financial institutions are criticized for failure to play their perceived role in terms of assuming social responsibility. They are expected, based on their inception philosophy, to contribute to the social welfare in the societies in which they operate and to the advancement of these societies. The study examines the validity of assuming these institutions some social responsibility, the different tools and vehicles through which these institutions can provide the desired social benefit, and the Shariah rules to carry out this role. The research concludes that Islamic financial institutions must assume some social responsibility in a manner that does not harm the very purpose for which they have been established. The fact that they fail to carry out their social responsibilities is often the result of administrative shortcomings in these institutions, in addition to the adoption of some controversial financing instruments that would defy and social good. The paper also proposes some vehicles through which Islamic financial institutions shall play a positive social role.
    Keywords: Social responsibility, Islamic banks, Islamic finance, corporate social responsibility
    JEL: K0 P0 Z13
    Date: 2018
  2. By: Magda Kandil (Central Bank of the UAE); Minko Markovski
    Abstract: This study attempts to identify whether the oil price fall to a “new normal” in mid-September 2014 has had an impact on banks’ performance in the UAE, such as Return on Assets (ROA) and Return on Equity (ROE) in addition to credit and deposit growth. The sample is for a sample of 22 national banks in the country over a period of 15 quarters. The oil price fall has had a negative structural break impact on all four banking indicators. In addition, the analysis evaluates the difference in ROA, ROE and creditand deposit growth by bank type, conventional vs. Islamic banks, across the sample of 22 banks. The results indicate that Islamic banks have a higher lending and deposit growth rates, however conventional banks tend to have better indicators of performance. Further, the oil price fall has impacted banks’ performance adversely, and the growth of assets and liabilities as a result of the slowdown in economic activity, fiscal consolidation, and decreasing levels of employment and corporate profitability. Further, Islamic banks, judged by lending and deposit growth, have managed to tailor their products to cater to a growing demand. However growth objectives appear to have reduced the margins of return in Islamic banks, compared to conventional banks.
    Date: 2019
  3. By: Abozaid, Abdulazeem
    Abstract: Debt creation is one of the most serious problems faced by modern economies. It occurs through financial institutions using the huge funds they have mostly from depositors to create debt through providing financing to clients. Then comes the issue of selling the debt resulting from the financial intermediation to exacerbate the risk further. The totality of these two things, excessive creation of debt and then selling it, is one of the most important causes of financial crises, and the recent global financial crisis in 2008, is the best witness to this fact. Huge amount of real estate debt was created by means of home financing in the United States, securitized and then sold locally and abroad. Debtors defaulted and consequently collateral damage occurred affecting debts owners, debt insurance companies and banks all over the world. Although Islam in principle does not oppose to the issue of financial intermediation, since selling at a deferred price may involve financial intermediation, like in the banking Murabaha, Islam however prohibits the trade of debt arising from this mediation for its risk being a major reason for economic crises, and this reflects the invulnerability of the Islamic economics to crises. The research comes to investigate this issue and criticize the contemporary interpretations that justify the sale of debt by various means, since such interpretations deprive Islamic finance of its major element of immunity against financial crises.
    Keywords: sale of debt, the financial crisis, subprime mortgage, commercial debts
    JEL: G0 G01 K0 Z0
    Date: 2019
  4. By: Abozaid, Abdulazeem
    Abstract: Undoubtedly, the emergence of cryptocurrencies has imposed upon Shariah scholars the challenge of addressing related Shariah issues and providing Muslims with clear answers as to whether or not they can deal with, or invest in, these currencies. The challenge, however, is in demystifying these currencies and understanding their technicalities and economic implications. Hence, it is necessary to first study the technicalities of these currencies in order to address their various Shariah issues. Cryptocurrencies involve various Shariah matters, including the very permissibility of their issuance in view of the fact that they are not backed by real valuable assets or supervised by governments or financial authorities, such that people dealing with them are vulnerable to possible fraud and manipulative fluctuations in their values. Other Shariah issues also include trading in them and whether or not they are considered as interest-bearing (ribawi) commodities such that the injunctions pertaining to interest (riba) may apply to them, as they apply to conventional currencies. In addition, they have potentially negative implications for the market, such as their use in money laundering, drugs trafficking and other illegal dealings. This paper treats the Shariah aspects of cryptocurrencies.
    Keywords: Cryptocurrency, Bitcoin, Shariah rules on Bitcoin, digital money
    JEL: K1 K10 O3
    Date: 2018–12
  5. By: Imène Berguiga; Philippe Adair
    Date: 2019

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