nep-isf New Economics Papers
on Islamic Finance
Issue of 2022‒01‒10
five papers chosen by

  1. The Impact of Islamic Portfolio on Risk and Return By Alim, Wajid; Ali, Amjad; Farid, Maryiam
  2. Is it really a win win situation: Henna (Lawsonia inermis L.) farming for rural sustainability and economic security in arid zone By Singh, Dheeraj; Chaudhary, M.K.; Kumar, Chandan; Kudi, B.R.; Dudi, Aishwarya
  3. Investor-driven corporate finance: Evidence from insurance markets By Kubitza, Christian
  4. Asset-based microfinance for Microenterprises: Evidence from Pakistan By Faisal Bari; Kashif Malik; Muhammad Meki; Simon Quinn
  5. Bank regulation, lending and patenting: Evidence from the EBA capital exercise By Krzyzanowski, Jan; Walz, Uwe

  1. By: Alim, Wajid; Ali, Amjad; Farid, Maryiam
    Abstract: The purpose of this study is to investigate the comparative impact of conventional and Islamic bonds over returns. It provides useful insights to investors to diversify investment by lowering the risk to the optimum level. This study examines the impact of the conventional and Islamic portfolios on returns through simple OLS regression, suggesting that Sukuk returns are positive and significant. Simultaneously, conventional bonds show a negative trend, but in the long run, the returns are significant. It indicates that the market is volatile due to macroeconomic factors that can reduce risks through portfolio diversification. Thus, this research suggests that investment can be secured by taking a rational portfolio decision that confirms robustness. Therefore, it is a good opportunity for the investors to get high margins over the investment tenure.
    Keywords: Financial Instruments, Portfolio Diversification, Islamic Finance, Sukuk, Conventional Bonds
    JEL: M0 M4
    Date: 2021–11–10
  2. By: Singh, Dheeraj; Chaudhary, M.K.; Kumar, Chandan; Kudi, B.R.; Dudi, Aishwarya
    Abstract: Henna (Lawsonia inermis L.), is a perennial shrub dominating the agro-ecosystem of Pali district of Rajasthan, India, which is priced for its leaves which have natural dying properties. From ancient times, Henna has been employed as a cosmetic dye for hair, skin and nails and it has acquired a particular significance in Islamic culture. It is dryland shrub which can tolerate extreme dry and high temperature conditions and survives well on problematic soils with high pH and saline water where other crops cannot be grown. The development of Henna cultivation and processing in Pali, Rajasthan, is a blend of indigenous knowledge and people's innovations. Presently Henna cultivation in the region is under 40,000 hectares which is the largest area under this crop at single location and it is purely rainfed with no use of fertilizers or pesticides. In this crop generally, no fertilizers and plant protection measures are used and a single leaf cutting is taken every year under the rainfed conditions and two cuttings where water is available. Under rainfed conditions for a dense planting the dried leaf yield in the first year is about 250 kg ha-1 while over the second, third and fourth years the yield normally ranges from 500 to 2,500 kg ha-1. The crop starts generating returns from its second year onwards, which continues for 20 years while incurring only maintenance costs in the form of hoeing, weeding and harvesting. By following these measures, on average they produce 15-20 quintal dry Henna leaves ha-1 from their barren fields. The financial analysis indicated that Henna farming due to its high quality at Pali is a profitable and attractive option for farmers livelihoods. Sustainable income from Henna benefits the farmers of the district as it can tolerate high salinity, drought and incidences of pest and diseases.
    Keywords: Crop Production/Industries, Production Economics
    Date: 2021–09–21
  3. By: Kubitza, Christian
    Abstract: This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers' demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small subset of firms for identification, I show that these increases in bond demand raise bond prices and lower firms' funding costs. In response, firms issue more bonds, especially when their bond underwriters are well connected with investors. Firms use the proceeds to raise investment rather than equity payouts. The results emphasize the significant impact of investor demand on firms' financing and investment activities.
    Keywords: Corporate Finance,Corporate Bonds,Insurance,Real Effects
    Date: 2021
  4. By: Faisal Bari; Kashif Malik; Muhammad Meki; Simon Quinn
    Abstract: We conduct a field experiment offering graduated microcredit clients the opportu-nity to finance a business asset worth four times their previous borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero-interest loan. We find large, significant and persistent effects from asset finance con¬tracts: treated microenterprise owners run larger businesses and enjoy higher profits; consequently, household consumption increases, particularly on food and children’s education. A dynamic structural model with non-convex capital adjustment costs ra¬tionalises our results; this highlights the potential for welfare improvements through large capital injections that are financially sustainable for microfinance institutions.
    Date: 2021
  5. By: Krzyzanowski, Jan; Walz, Uwe
    Abstract: We analyze the impact of decreases in available lending resources on quantitative and qualitative dimensions of firms' patenting activities. We thereby make use of the European Banking Authority's capital exercise to carve out the causal effect of bank lending on firm innovation. In order to do so we combine various datasets to derive information on firms' financials, their patenting behaviors, as well as their relationships with their lenders. Building on this selfgenerated dataset, we provide support for the "less finance, less innovation" view. At the same time, we show that lower available financial resources for firms lead to improvement in the qualitative dimensions of their patents. Hence, we carve out a "less finance, less but better innovation" pattern.
    Keywords: financing,bank lending,patents
    JEL: D22 G30 G31 G38 N24 O31 O34
    Date: 2021

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