nep-isf New Economics Papers
on Islamic Finance
Issue of 2020‒08‒17
five papers chosen by

  1. Determinants of Islamic Bank Profitability: Evidence from Indonesia By Puji Sucia Sukmaningrum
  2. The Institutional Foundations of Religious Politics: Evidence from Indonesia By Samuel Bazzi; Gabriel Koehler-Derrick; Benjamin Marx
  3. Raskin Distribution In Islamic Economic Perspective By Persada, Pena; , Ismaulina
  4. Islam and the State: Religious Education in the Age of Mass Schooling By Samuel Bazzi; Masyhur Hilmy; Benjamin Marx
  5. Trade and Political Fragmentation on the Silk Roads: The Economic Effects of Historical Exchange between China and the Muslim East By Christopher Paik; Lisa Blaydes

  1. By: Puji Sucia Sukmaningrum (Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia Author-2-Name: Kashan Pirzada Author-2-Workplace-Name: Asian Research Institute for Corporate Governance (ARICG) and Tunku Puteri Intan Safinaz School of Accountancy, College of Business, Universiti Utara Malaysia, Sintok, Malaysia Author-3-Name: Sylva Alif Rusmita Author-3-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia, Author-4-Name: Fatin Fadhilah Hasib Author-4-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia, Author-5-Name: Tika Widiastuti Author-5-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia, Author-6-Name: Achsania Hendratmi Author-6-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia, Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - Islamic Banks have a distinct advantage that is not only conduct a commercial operation, but to also conduct social operations. Therefore, Islamic Banks plays an important role in developing the Indonesian economy. The aim of this study is to investigate the impact of internal and external factors that affect the profitability of Islamic Banks in Indonesia. Methodology/Technique – The methodology of this research is multiple regression. The object of this research is the Islamic banking industry in Indonesia. Internal factors include size, liquidity, asset quality, management, and efficiency ratio. External factors include interest rate and inflation. Return on Assets is used to measure profitability. The monthly data is collected from the financial reports of Islamic Banks between 2011 to 2016. Findings – The findings show that size, liquidity, assets quality, management ratio, interest rate and inflation lead to a greater Return on Assets (profitability) in Islamic Banks in Indonesia. Efficiency however does not have a significant effect on profitability of Islamic Banks in Indonesia. Novelty – Based on the results of this research, it can be concluded that the Islamic banking industry can use those variables to improve the profitability of Islamic banks in the future. In addition, there are two variables that affect the profitability of Islamic banking industry. For the Islamic banking industry should anticipate the movement of inflation and interest to improve the profitability of Islamic banks. Type of Paper - Empirical paper.
    Keywords: Islamic Banks; Profitability; Internal Factors; External Factors; Indonesia.
    JEL: G21 G24
    Date: 2020–06–30
  2. By: Samuel Bazzi (Boston University); Gabriel Koehler-Derrick (Harvard University); Benjamin Marx (Département d'économie)
    Abstract: Why do religious politics thrive in some societies but not others? This paper explores the institutional foundations of this process in Indonesia, the world’s largest Muslim democracy. We show that a major Islamic institution, the waqf, fostered the entrenchment of political Islam at a critical historical juncture. In the early 1960s, rural elites transferred large amounts of land into waqf —a type of inalienable charitable trust—to avoid expropriation by the government as part of a major land reform effort. Although the land reform was later undone, the waqf properties remained. We show that greater intensity of the planned reform led to more prevalent waqf land and Islamic institutions endowed as such, including religious schools, which are strongholds of the Islamist movement. We identify lasting effects of the reform on electoral support for Islamist parties, preferences for religious candidates, and the adoption of Islamic legal regulations (sharia). Overall, the land reform contributed to the resilience and eventual rise of political Islam by helping to spread religious institutions, thereby solidifying the alliance between local elites and Islamist groups. These findings shed new light on how religious institutions may shape politics in modern democracies.
    Keywords: Religion; Institutions; Land reform; Islam; Sharia Law
    JEL: D72 D74 P16 P26 Z12
    Date: 2020–05
  3. By: Persada, Pena; , Ismaulina
    Abstract: This research is field research (field research) with data result from observation, interview, and documentation. As for the result of the research, it was found that the mechanical distribution of Raskin in Blang Mangat sub-district was done with a flat sharing system to Target Household (RTS) which has been registered as recipient of Raskin program and to every household in Blang Mangat sub-district. The reasons are: (1) Difficulty in Establishing Target Household (RTS), (2) Culture of Togetherness, (3) Social Jealousy, (4) Lack of Socialization and Information and (5) Tradition. The practice of distributing Raskin rice in the Meuraksa settlement, Blang Mangat sub-district with a flat sharing system is not legitimate since taking the property that should be the right of the people (the poor and the needy) is haram, therefore, the practice is not appropriate according to Islamic Economics.
    Date: 2019–01–10
  4. By: Samuel Bazzi (Boston University); Masyhur Hilmy (Boston University (BU)); Benjamin Marx (Département d'économie)
    Abstract: Public schooling systems are an essential feature of modern states. These systems often developed at the expense of religious schools, which undertook the bulk of education historically and still cater to large student populations worldwide. This paper examines how Indonesia’s longstanding Islamic school system responded to the construction of 61,000 public elementary schools in the mid-1970s. The policy was designed in part to foster nation building and to curb religious influence in society. We are the first to study the market response to these ideological objectives. Using novel data on Islamic school construction and curriculum, we identify both short-run effects on exposed cohorts as well as dynamic, long-run effects on education markets. While primary enrollment shifted towards state schools, religious education increased on net as Islamic secondary schools absorbed the increased demand for continued education. The Islamic sector not only entered new markets to compete with the state but also increased religious curriculum at newly created schools. Our results suggest that the Islamic sector response increased religiosity at the expense of a secular national identity. Overall, this ideological competition in education undermined the nation-building impacts of mass schooling.
    JEL: H52 I25 N45 P16 Z12
    Date: 2020–05
  5. By: Christopher Paik; Lisa Blaydes (Division of Social Science)
    Abstract: The Silk Roads stretched across Eurasia, connecting East and West for centuries. At its height, the network of trade routes enabled merchants to travel from China to the Mediterranean Sea, carrying with them high-value commercial goods, the exchange of which encouraged urban growth and prosperity. We examine the extent to which urban centers thrived or withered as a function of shocks to trade routes, particularly political fragmentation along natural travel paths. We find that political fragmentation along the roads to Aleppo and historic Chang'an - major terminus locations for cross-regional trade - damaged city growth. These conclusions contribute to our understanding of how a pre-modern international system operated through an examination of exchange between the two most developed world regions of the medieval and early modern periods, China and the Muslim East.
    Date: 2019–12

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.