nep-isf New Economics Papers
on Islamic Finance
Issue of 2019‒07‒29
three papers chosen by

  1. A Look to Cash Waqfs as an Indicator of Ottoman Financial Mentality By Bulut, Mehmet; Korkut, Cem
  2. Problematics in Development and Management of Money Affairs (Cash Affairs) in Indonesia By Nashihah, Faidatun
  3. A Comparative Performance Evaluation of Islamic and Conventional Mutual Funds in Saudi Arabia By Ahmad, Shabbir; Alsharif, Danyah

  1. By: Bulut, Mehmet; Korkut, Cem
    Abstract: In spite of the fact that the waqfs have existed with the history of humankind and are helpful in all social communities, they have a different and important place in Islamic societies. The waqfs have made assistance and solidarity between individuals organized and institutionalized. Especially in Islamic societies, a great importance has been attached to waqfs. The waqfs that helped institutionalize the concept of infaq met many needs of the community. One of the Islamic states where the waqfs are very active was the Ottoman Empire. The size of the waqf services in the Ottomans expanded so much that, besides the human services, waqfs for injured birds and sick animals were established. The fact that the waqfs are so widespread in the state has made it possible to refer the Ottoman Empire as a waqf civilization. One of the waqf types operating in the Ottoman Empire was the cash waqfs (CWs) which had cash money as capital. The CWs operated its capital with various Islamic finance methods. Revenues from the operating money were used in the direction of waqf purpose. The CWs provided the vital necessities of the society such as education and religion in the period they were active in the Ottoman Empire. Another function of these waqfs was to operate as a micro-credit mechanism. Through these waqfs, the surplus and the accumulated savings in the hands of the asset owners were made available to merchants, farmers, craftsmen, and artisans. Hence, these waqfs have served as resource transfer channels as well as functioning as a charity in the society. The main goal of CWs, which is the pioneer of modern Islamic financial institutions, is different from the goal of Islamic interest-free financial institutions. The CWs did not transfer the profits they got to the waqf founder or owner. The income obtained was spent to fulfill the charitable services. Therefore, these institutions created an altruistic finance model operating within the borders of Islamic prohibitions and orders. This model has its own principles. In our study, the financial mentality of the Ottoman society in the context of the CWs and how this mentality shaped the CWs will be discussed. The basic principles of this mentality and model will be emphasized.
    Keywords: Cash Waqfs; Ottoman Empire; Islamic Finance; Philanthropy; Altruistic Finance Model; basic principles of cash waqfs
    JEL: G21 N20 P45 Z12
    Date: 2019
  2. By: Nashihah, Faidatun
    Abstract: This article explains the problems in the development and management of cash waqf in Indonesia. Cash waqf by people, groups of people, and institutions or legal entities in the form of cash. Waqf cash is still debated among scholars whether it is legal or not, and managing cash waqf professionally is still a discourse and not many people or institutions can accept such waqf models. This article also discusses understanding, legal basis, problematics, management and solutions. Also discussed about cash waqf as the basis for community economic development by opening up Muslim rigidity to cash waqf, as well as the economic prospects of waqf property. The potential of waqf is one of the instruments of economic empowerment for Muslims even though management in Indonesia is still not good. But seen from the number, waqf property in Indonesia is quite large. Money waqf has played an important role as one of the new Islamic fiscal instruments in the economy. Money waqf has two functions as a means of worship and the achievement of social welfare. This article tries to explore how the problems in developing money waqf management such as the way it is distributed and its circulation and how the waqf is able to have a good impact on the surrounding community.
    Keywords: Problems, Development, Management, Cash Waqf, Indonesia.
    JEL: A10 G00 G23 G24 H00 P4 P43
    Date: 2019–07–10
  3. By: Ahmad, Shabbir; Alsharif, Danyah
    Abstract: Abstract Purpose The literature on the comparative performance of Islamic and conventional mutual funds provides conflicting results. Some studies find superior performance of Islamic mutual funds (IMF) to conventional mutual funds (CMF) whereas others conclude to the contrary. This study aims to contribute to the debate on the comparative performance of Islamic and conventional mutual funds in Saudi Arabia. Design/methodology/approach This study participates in the ongoing debate by analyzing the performance of IMF and CMF based on risk-adjusted returns measures such as the Sharpe ratio, Treynor ratio, and Jensen’s Alpha. Furthermore, we examine the selectivity and the market timing skills of IMF and CMF using Treynor and Mazuy model. Five-year monthly data from 2013 to 2017 for forty mutual funds located in Saudi Arabia are used for analysis. Findings We find that IMF and CMF have almost similar performance on the basis of Treynor ratio and Jensen’s Alpha. However, results from the Sharpe ratio indicate that Islamic funds perform better than their conventional counterpart. The study also finds that the selectivity and the market timing abilities of both Islamic and conventional mutual funds outperform the market portfolio. Superior selectivity skills of IMF to the CMF and similar timing ability of both types of fund managers is also observed. Practical implications Islamic mutual funds are less risky than conventional mutual funds and they provide better hedging prospects for stockholders in general Originality/value This study aims to contribute to the debate on the comparative performance of Islamic and conventional mutual funds using the latest data and applying the equality of means and the Random effect model, which no other study has used in the context of Saudi Arabia.
    Keywords: Islamic Mutual Funds, Performance Evaluation, Saudi Mutual Funds, Risk Adjusted Measures, Selectivity and Market Timing Abilities, Random Effect Model.
    JEL: G11
    Date: 2019–01

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.