nep-isf New Economics Papers
on Islamic Finance
Issue of 2022‒01‒17
nine papers chosen by

  1. The Impact of Islamic Portfolio on Risk and Return By Alim, Wajid; Ali, Amjad
  2. Penetapan Harga Menurut Yahya Bin Umar dan Relevansinya Terhadap Undang-Undang Penetapan Harga Di Indonesia By Mr, Jamaludin
  4. Why Do Firms Issue Green Bonds? By Julien Xavier Daubanes; Shema Frédéric Mitali; Jean-Charles Rochet
  5. Development Finance and Distributive Politics: Comparing Chinese and World Bank Finance in sub-Saharan Africa By Tang, Keyi
  6. 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
  7. What's left after right-wing extremism? The effects on political orientation By Pickard, Harry; Efthyvoulou, Georgios; Bove, Vincenzo
  8. Effects of Infrastructures on Environmental Quality Contingent on Trade Openness and Governance Dynamics in Africa By Tii N. Nchofoung; Simplice A. Asongu
  9. Convergence and Divergence in Emerging Donor Finance: A Comparative Analysis of Chinese and Indian Exim Banks in Ethiopia By Huang, Zhengli; Behuria, Pritish

  1. By: Alim, Wajid; Ali, Amjad
    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
  2. By: Mr, Jamaludin
    Abstract: The most perfect religion is Islam because it regulates all aspects of life, both in terms of worship and muamalat. Halal buying and selling based on the principle of mutual pleasure in accordance with the provisions of the Shari'a in order to achieve a sense of justice has been ordered in Islam. The method used in this research is qualitative by utilizing the legal perspective approach of Islamic Economics. From the results of the study: it was concluded that 1) Yahya bin Umar's thoughts forbade the government to intervene in determining prices. 2) Currently, the Indonesian government's economic policy is not yet ready to determine prices without government intervention, so that the government still needs its intervention in determining prices. 3) the relevance of the price may be intervened by the government in abnormal conditions. From this research, it is very important for the Indonesian government to implement Islamic sharia patterns in intervening in determining prices for the sake of achieving the common good and the welfare of the people.
    Keywords: Yahya bin Umar , Pricing, Consumer
    JEL: A1 B00 D5 H1
    Date: 2021–09–05
  3. By: Gunarso, Gatot Hadi
    Abstract: This study aims to analyze the thoughts of M. Abdul Mannan about the concept of price in Islamic economics. The prices offered by the secular market are not seen as guidelines for the welfare of society, especially in the context of Islamic economics where social care is so great that distribution is the key to productive activities. The competition implied in the market mechanism needs to be complemented by conscious control, supervision and cooperation. Supervision in price control is carried out by the government or a country. The results of the research of M. Abdul Mannan formulate that the concept of price is adjusted by the value of the product on demand and supply so as to realize healthy competition in covering the basic principles of justice in realizing satisfaction/surplus between the seller and the buyer. M. Abdul Mannan's thinking about prices aims to avoid monopoly prices and artificial prices that are based on speculation, smuggling and hoarding. Regulations on prices in Indonesia already exist and are relevant to M. Abdul Mannan's thoughts, but the lack of firm action in its application causes producers to commit violations in determining so that justice does not materialize, especially in determining prices.
    Keywords: Muhammad Abdul Mannan, Islamic Economics, Price Concepts, Price Regulations in Indonesia.
    JEL: A10 H0 N0 N1
    Date: 2021–08–13
  4. By: Julien Xavier Daubanes (University of Geneva); Shema Frédéric Mitali (Ecole Polytechnique Fédérale de Lausanne); Jean-Charles Rochet (Swiss Finance Institute; University of Geneva - Geneva Finance Research Institute (GFRI); University of Zurich - Swiss Banking Institute (ISB))
    Abstract: Green bonds allow firms to commit to climate-friendly projects. Equity investors react positively to their announcement. Based on prior empirical studies, we suggest that green bond commitments help managers signal the profitability of their green projects and that they do so because they are sensitive to their rm's stock price. We present a signaling model in which firms undertake green projects not only because of carbon penalties but, additionally, because of managerial incentives, predicting that the role of the former is augmented by the latter. We test this prediction by exploiting both cross-industry differences in the stock-price sensitivity of managers' pay and in stock share turnover, and cross-country variations in effective carbon prices. Our results not only support the role that our theory ascribes to managerial incentives, but also show that this role mainly depends on carbon pricing. Green bonds are not substitutes to carbon pricing. On the contrary, the latter is essential to the effectiveness of the former.
    Keywords: Green bonds; Green finance; Climate policy; Carbon pricing; Managerial incentives; Short-termism
    JEL: D53 H23 G14 Q54
    Date: 2021–12
  5. By: Tang, Keyi
    Abstract: When development finance becomes available to weak states, which parts of the state will receive the windfall gains? Development finance does not always reach the people who need it the most, both within and across countries. In this research, Keyi Tang examines how donors' preferences and recipient countries' regime types affect the subnational distribution of development finance. By combining a large-N analysis of Chinese and World Bank's loans and grants to 48 African countries between 2000-2012 and small-N case studies of a hybrid regime, Zambia, and an autocratic regime, Ethiopia, Keyi finds that domestic politics play a bigger role than donors' conditionality in development finance allocation. The more democratic a regime is, the more likely co-ethnic regions of the incumbent leader are to receive finance from both China and the World Bank. Democracy may not always help prevent clientelism but may actually facilitate it under weak institutions.
    Date: 2021
  6. 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
  7. By: Pickard, Harry (Newcastle University Business School); Efthyvoulou, Georgios (University of Sheffield); Bove, Vincenzo (Department of Politics and International Studies and CAGE (Competitive Advantage in the Global Economy))
    Abstract: Does radical right political violence favour or hinder public support for right-wing stances? Numerous existing studies have demonstrated that Islamic terrorism provokes a conservative shift, increases nationalism and induces negative sentiments towards immigration. However, little is known about the consequences of far-right terrorism, despite its incidence in Western societies. We leverage four waves of the British Election Study (BES) and use a quasi-experimental design to analyse individual political orientations shortly before and after terrorist attacks. We find that respondents distance themselves from the ideology associated with the perpetrator and shift away from ideological positions at the right end of the political spectrum. Furthermore, respondents are less likely to report nationalistic attitudes and immigration skepticism, core tenets of extremist right-wing political ideologies. Our findings suggest that the characteristics of the perpetrators and their driving goals are crucial factors shaping the impact of terrorism on public sentiments
    Keywords: Far-right extremism ; terrorist attacks ; political opinion ; political ideology ; quasi-experimental design.
    Date: 2021
  8. By: Tii N. Nchofoung (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The objective of this study is to evaluate: (i) the effects of infrastructures on CO2 emission and (ii) how trade openness and governance contribute to mitigating these effects. The results from the system GMM methodology for 36 African countries between the 2003-2019 period show that infrastructural development exacerbates CO2 emission in Africa. This result is robust across different types of infrastructural development indexes. When the indirect effect regressions are carried out by interacting governance and trade openness with the different infrastructural development variables, the following results are obtained. Firstly, infrastructural development interacts with governance producing a positive net effect, up to a governance threshold estimate of 0.532 when the positive net effect is nullified. Secondly, infrastructures interact with trade openness producing a negative net effect up to a trade openness threshold of 78.066914 (% of GDP) when the negative net effect is nullified. Positive and negative synergy effects are also apparent. Practical policy implications are discussed based on the results obtained.
    Keywords: Infrastructures, CO2, trade openness, governance, Africa, System GMM
    JEL: N67 N77 C23 Q56
    Date: 2021–01
  9. By: Huang, Zhengli; Behuria, Pritish
    Abstract: Zhengli Huang and Pritish Behuria examine projects financed by Indian and Chinese Exim Banks to analyze how the development financing of two 'emerging' donors – India and China – has evolved in Ethiopia. In India and China, Exim Banks work both as export credit agencies and other traditional development finance organizations, thereby blurring the boundary between development assistance and economic cooperation. The authors selected Ethiopia as it is a strategic partner for both countries, and existing literature has shown that the Ethiopian government is an outlier on the continent in employing its diplomatic relations to support strategic developmental goals.
    Date: 2021

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