nep-isf New Economics Papers
on Islamic Finance
Issue of 2023‒06‒26
four papers chosen by
Ali Polat, Ankara Yıldırım Beyazıt Üniversitesi

  3. ON THE DEVELOPMENT OF THE ISLAMIC BENCHMARK RATE: AN INDONESIAN CASE By Jardine A. Husman; Ali Sakti; Dahnila Dahlan; Imam Wahyudi Indrawan; Zaäfri A. Husodo; Nur Dhani Hendranastiti; Muhammad Budi Prasetyo; Wahyu Jatmiko
  4. Global Livestock Trade and Infectious Diseases By Cosimo Beverelli; Rohit Ticku

  1. By: Ferry Syarifuddin (Bank Indonesia)
    Abstract: This study investigates the preferences of various Islamic Financing Instruments to promote green economy ransformation adopting ANPBOCR (Benefit, Opportunity, Cost, Risk) approach, with two groups of experts as the respondents, namely academicians and practitioners. The first finding shows, that ‘Benefit’ aspect is the most preferred, urgency to conduct green economy transformation. Among criteria in the benefit aspect, natural resource damage prevention and reduction are the primary issues which is in line with maqasid al-Syari’ah (objectives of Islamic law). Using standard formula, the second finding shows that Islamic Asset Management is the most preferred Islamic financial instrument to perform green economy transition. Meanwhile, the third finding shows that in the short-term, Islamic Asset Management is more preferred financial instrument. Whereas, Islamic corporate and investment banking is the most preferred and crucial for long-term when transforming economy to green.
    Keywords: Green Economy Transformation, Islamic Green Financing, ANP, BOCR
    JEL: Q56 Q58 G20
    Date: 2022
  2. By: Ferry Syarifuddin (Bank Indonesia)
    Abstract: This research aims to examine how uncertainty affects the banks stability of Islamic and conventional banks in OIC countries. Furthermore, this study investigates spillover effects of bank stability among OIC countries. A sample set of 201 banks from 16 OIC countries between 2013-2020 in yearly-basis data and spatial data panel econometrics methodology are used to accomplish these purposes. For robustness checks, spatial weighting comparison will be used, enriched with the marginal effect measurement and expert opinion questionnaires. Inverse distance will be used as the weighting of the main estimation, while trade volume and GDP are used for robustness checks. This study finds that that Islamic bank has more resiliency than conventional banks in term of stability in time of uncertainty. Meanwhile, there is strong evidence of spatial relationship of bank stability between host and neighboring OIC countries. The increment of uncertainty is significantly followed by the rising conventional bank stability, while on the contrary, Islamic bank doesn’t shows any significant instability. The same goes on spillover effect, the reduction of bank stability in host country is followed by the reduction of neighboring bank stability. These results are robust due to the consistent outcome throughout two different weighting matrices, marginal effect measurement, and expert opinion.
    Keywords: Uncertainty, Islamic bank, Bank stability, Bank performance, Spatial econometrics
    JEL: G01 G21 G32 R12
    Date: 2022
  3. By: Jardine A. Husman (Bank Indonesia); Ali Sakti (Bank Indonesia); Dahnila Dahlan (Bank Indonesia); Imam Wahyudi Indrawan (Bank Indonesia); Zaäfri A. Husodo (University of Indonesia); Nur Dhani Hendranastiti (University of Indonesia); Muhammad Budi Prasetyo (University of Indonesia); Wahyu Jatmiko (University of Indonesia)
    Abstract: Purpose — Central to the long-standing issue of Islamic finance is the lack of an established reference rate. This study proposes an alternative to the Islamic benchmark rate by linking it with the performance of underlying businesses. Design/methodology/approach — First, we derive the very definition of how a particular rate can be considered Islamic employing a thorough literature review. Second, this study then calculates the Cash Recovery Rate (CRR) and the Return on Invested Capital (ROIC) for each country listed on the Indonesia Stock Exchange. Third, we then analyse the statistical descriptive, correlation in terms of its value and graphical plot at both the univariate and multivariate levels. Findings — Our thorough literature review suggests that the classic CRR and the ROIC are theoretically consistent with the principles of pricing in Islamic finance. This is also empirically confirmed by employing the Indonesian data, where we observe a high correlation between CRR (ROIC) and short-term (long-term) economic macroeconomic indicators. Originality — To the best of our knowledge, this is the first study exploring the possibility of CRR and ROIC as Islamic benchmark pricing. Research limitations/implications — The spatial focus of this study is Indonesia. While the robustness check has incorporated the case of the US. Other countries may have different structures and institutions of the financial markets. Practical implications — The classic measures of firm performance CRR and ROIC prove useful to be alternatives to Islamic benchmarking both theoretically and empirically.
    Keywords: Asset Pricing, Cash Recovery Rate, Islamic Benchmark Rate, Real Business Return, Return on Invested Capital
    JEL: F11
    Date: 2022
  4. By: Cosimo Beverelli; Rohit Ticku
    Abstract: Large-scale movement of animals through trade can spread diseases to places where they arenot endemic. In this paper, we identify the causal effect of global livestock trade on the spread ofinfectious animal diseases through an exogenous increase in the demand for imported livestock. Theinstrumental variable approach exploits an increase in halal livestock imports in Muslim countriesduring Eid-al-Adha to determine the effect of livestock imports on related infections. Using a datasetthat covers 123 countries and five livestock categories in the months between 2004 and 2019, wefind an imports-to-infections elasticity of about 0.75. The relationship is stronger for countries that arelikely to import infected livestock from their partners. There is also evidence that infections spreadthrough interaction between imported livestock, some of which might be infected, and domesticlivestock. These results highlight transmission-through-trade from the origin to the destination.
    Keywords: International trade, Livestock diseases, Religious festivals, Eid-al-Adha
    Date: 2023–02

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