nep-isf New Economics Papers
on Islamic Finance
Issue of 2020‒11‒02
eight papers chosen by
Mohamed Mohamed Tolba Said

  1. Economic uncertainty and bank stability: Conventional vs. Islamic banking By Mehmet Huseyin Bilgin; Gamze Danisman; Ender Demir; Amine Tarazi
  2. How Capitalism and Islamic Economics Supplement Each Other By Mamoon, Dawood
  3. Religion in Economic History: A Survey By Sascha O. Becker; Jared Rubin; Ludger Woessmann
  4. Reforming Islamic Finance By ALJARHI, Shadia
  5. Portfolio diversification opportunities for U.S. Islamic investors with its trading partners when the world catches a cold: A Multivariate-GARCH and wavelet approach By Lim, Siok Jin
  6. Total Quality Management (TQM), Management Accounting System, Islamic Leadership Style, Organizational Commitment, and Managerial Performance By Arum Indrasari
  7. International trade in travel and tourism services: Economic impact and policy responses during the COVID-19 crisis By Barkas, Panagiotis; Honeck, Dale; Rubio, Ester
  8. Religious Attendance and COVID-19. Evidence from Italian Regions By Vincenzo Alfano; Salvatore Ercolano; Gaetano Vecchione

  1. By: Mehmet Huseyin Bilgin (Faculty of Political Science, Istanbul Medeniyet University, Istanbul, Turkey); Gamze Danisman (Faculty of Management, Kadir Has University, Istanbul, Turkey); Ender Demir (Faculty of Tourism, Istanbul Medeniyet University, Istanbul, Turkey); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)
    Abstract: In this paper, we explore whether economic uncertainty differently affects the default risk of Islamic and conventional banks. Using a sample of 568 banks from 20 countries between 2009 and 2018, we take advantage of the World Uncertainty Index (WUI) proposed by Ahir et al. (2018) to conduct a study based on a comparable measure across countries. Our findings indicate that, while economic uncertainty increases the default risk of conventional banks, Islamic banks' default risk is not affected. To shed light on why economic uncertainty differently influences the default risk of Islamic and conventional banks, we explore the influence of religiosity, institutional factors and bank-level heterogeneity. We observe that Islamic banks' default risk is immune to uncertainty in all types of countries but that such a difference with conventional banks mainly holds for banks with higher non-interest income and larger size, and for banks which are publicly traded. Moreover, our findings show that conventional banks suffer more from uncertainty in terms of stability in countries with higher religiosity. Our results are robust to alternative estimation techniques to deal with endogeneity and to alternative variable measurements.
    Keywords: Islamic Banks,Conventional Banks,Economic Uncertainty,Bank Stability,World Uncertainty Index
    Date: 2020–10–12
  2. By: Mamoon, Dawood
    Abstract: N iterations of Prisoner’s dilemma would determine outcomes that favor humanity at large towards material welfare at a universal scale through scientific innovation but the motivation comes through examples of leadership within human societies that have opted for kindness, cooperation and collective welfare. The paper tries to unlock one of the most pressing questions in human history whether bringing peace to this polarized world when there is no armed conflict among countries and within countries is possible. The paper suggests that transforming historic grievances into practiced competition between nations is possible by providing fair and level playing fields where populations have equal access to information and opportunities and thus would not be exploited but would contribute to their own welfare. It is very important for each country to work on international commitments like SDGs to finally have a world bereft of violent conflict. The paper explains the path from income centric measures of human emancipation like in case of poverty line towards more sustainable and inclusive definitions of development that include qualitative definitions of progress like quality health and education representing capability approach by Amartya Sen while not excluding good governance practices adopted by the government. There is a difference between Capitalism that defines progress through monetary outcomes and Islamic economics that harness and define human emancipation on wider definitions of progress including values like trust, ethics, culture, and rights. In this context the article explains to its audience why Pakistani Prime Minister Imran Khan refers to the golden era of Islamic caliphate of Umer Bin Khatab who put the foundations of an economic system where human welfare was practiced through universal application of human progress based on economic, social, cultural and ethical emancipation. The paper explains that according to Islamic values monetary asset ownership that is a contract between the government and the people should have application for ethical dispensation and strong welfare purpose rather than driving greed in guise of incentive.
    Keywords: Peace, SDGs, Neo Classical Economics, Islamic Economics, Feminist Studies, Poverty, Welfare Economics
    JEL: N3 P1 P51
    Date: 2020–10
  3. By: Sascha O. Becker (University, University of Warwick; CAGE; CEPR, CESifo, IZA, and ROA); Jared Rubin (Rubin: Chapman University); Ludger Woessmann (University of Munich and ifo Institute; CESifo, IZA, and CAGE)
    Abstract: This chapter surveys the recent social science literature on religion in economic history, covering both socioeconomic causes and consequences of religion. Following the rapidly growing literature, it focuses on the three main monotheisms—Judaism, Christianity, and Islam—and on the period up to WWII. Works on Judaism address Jewish occupational specialization, human capital, emancipation, and the causes and consequences of Jewish persecution. One set of papers on Christianity studies the role of the Catholic Church in European economic history since the medieval period. Taking advantage of newly digitized data and advanced econometric techniques, the voluminous literature on the Protestant Reformation studies its socioeconomic causes as well as its consequences for human capital, secularization, political change, technology diffusion, and social outcomes. Works on missionaries show that early access to Christian missions still has political, educational, and economic consequences in present-day Africa, Asia, and Latin America. Much of the economics of Islam focuses on the role that Islam and Islamic institutions played in political-economy outcomes and in the “long divergence” between the Middle East and Western Europe. Finally, cross-country analyses seek to understand the broader determinants of religious practice and its various effects across the world. We highlight three general insights that emerge from this literature. First, the monotheistic character of the Abrahamic religions facilitated a close historical interconnection of religion with political power and conflict. Second, human capital often played a leading role in the interconnection between religion and economic history. Third, many socioeconomic factors matter in the historical development of religions.
    Keywords: JEL Classification:
    Date: 2020
  4. By: ALJARHI, Shadia
    Abstract: Pessimists would rather declare the Islamic finance industry as clinically dead. Such dim expectation would become a reality when the industry will completely switch to selling present for future money through contrived sale contracts. The writings are plenty on the wall. We need to listen and respond seriously. Calling for the reform of the industry could be the last attempt to save it. Rusni Hassan’s paper (2020) provides a good perspective of the current problem, albeit a little dispassionate. This comment provides a brief explanation of the theoretical rationale and the macroeconomic benefits of Islamic finance. It diagnoses the problem of Islamic finance as that of convergence. In addition, a few modest proposals are presented to mitigate the problem.
    Keywords: Islamic economics, Islamic finance, Interest rate, Monetary theory, Real and nominal transactions, Islamic finance regulation.
    JEL: E42 E43 G00 G20 G21 Z12
    Date: 2020–07
  5. By: Lim, Siok Jin
    Abstract: The goal of this study is to analyse the co-movements and the portfolio diversification between the Islamic index of U.S. and its top trading partners, namely Canada, China, Mexico, Japan and Germany, using Morgan Stanley Capital International (MSCI) daily returns data from January 2013 to August 2020. We employed three main techniques: multivariate-GARCH-DCC, CWT and MODWT to analyse whether these markets have any diversification opportunities. Our findings reveal that, first, we observed that the U.S. Islamic index and its trading partners showed increased integration after U.S. implemented its first China-specific tariffs in 2018 and were closely integrated during the Covid-19 pandemic in 2020. Second, CWT results show that investors would gain diversification benefits in China and Mexico under specific investment horizons. Third, the results of MODWT shows Japan Islamic index provide short term diversification opportunity and Mexico Islamic index for longer term investments.
    Keywords: Islamic stocks; trade war; Covid-19; portfolio diversification; MGARCH-DCC; Wavelets
    JEL: C58 E44 G15
    Date: 2020–10–01
  6. By: Arum Indrasari (Justika Citra Apriliana Rosi Author-2-Name: Economic and Business Faculty, Muhammadiyah Yogyakarta University, Indonesia Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This paper aims to examine the association of total quality management (TQM), management accounting system, Islamic leadership style, organizational commitment, and managerial performance. Methodology/Technique - The authors use distributed and collected examination methods employing a purposive sampling techniques. The subject of this study was managers or someone who holds structural position at Islamic based private universities in Yogyakarta with a total number of respondents of 104. The data was obtained from questionnaires. The analytical method used was simple regression analysis and moderated regression analysis. Finding - The results show that that Total Quality Management (TQM) has a positive significant effect on Managerial Performance. Thereafter, the results of the moderated regression analysis, the Performance Measurement System, Reward System, Islamic Leadership Style, and Organizational Commitment are the moderating variable that moderate or strengthen the relationship between Total Quality Management (TQM) towards Managerial Performance. Originality/value - Previous studies have focussed mainly on Islamic based private universities in Yogyakarta. This study examines the effect of management accounting system, Islamic leadership style, and organizational commitment on the association of total quality management and managerial performance, which has been rarely examined in previous studies.
    Keywords: Islamic Leadership Style; Organizational Commitment; Performance Measurement System; Rewards System; Total Quality Management.
    JEL: M41 M49
    Date: 2020–09–30
  7. By: Barkas, Panagiotis; Honeck, Dale; Rubio, Ester
    Abstract: In this paper, we investigate tourism-related policy approaches that WTO member countries adopted in the early weeks of the COVID-19 crisis. We highlight the need for stakeholders to coordinate their responses in order to mitigate the negative crisis effects and better prepare the sector for the future. In doing so, we explore the economic impact of potential tourism scenarios, underlining both the demand and supply side effects of the crisis. By compiling and organising information from a range of sources based on information available at the time, the paper provides a systematic approach to map and analyse tourism-related policies for 59 WTO Members across all continents. Our findings confirm that: (i) almost 90% of the countries analysed focused their tourism policy responses on economic stimulus measures to mitigate the negative impacts of COVID-19 and facilitate a strong recovery; (ii) more than half of the examined countries have taken financial measures to support the sector through loans, tax deferrals etc.; (iii) less than a third of the analysed countries enacted social and employment measures.
    Keywords: travel,tourism,services trade,COVID-19,economic policy,monitoring,economic impact
    JEL: F13 L83 O14
    Date: 2020
  8. By: Vincenzo Alfano; Salvatore Ercolano; Gaetano Vecchione
    Abstract: By changing many aspects of everyday life, the COVID-19 pandemic and the social distance policies implemented to face it have affected the behaviour of many people, all over the world. Has the pandemic also affected people approach toward the divine? Previous evidences suggest that the prayer search over the Internet rose during the pandemic and that people tend to mainly rely on intrinsic religiosity rather than extrinsic to cope with adversity. In this contribution, by the means of a set of panel random effect estimators, we compare the change in religious attendance in Italian regions before and during the pandemic. Our results suggest that there is an increase in religiosity during the Covid-19 pandemic. Our findings are robust to several specifications of the model and to different estimators. This suggest that people derive more comfort from extrinsic religious activities during hard times, characterized by uncertainty.
    Keywords: COVID-19, coronavirus, religious attending, mass, mass streaming
    JEL: Z12 N34 I12
    Date: 2020

This nep-isf issue is ©2020 by Mohamed Mohamed Tolba Said. 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.