...RISK MANAGEMENT IN ISLAMIC BANKING AND FINANCE: THE ARAB FINANCE HOUSE EXAMPLE Bilal A. Fleifel A Thesis Submitted to the University of North Carolina Wilmington in Partial Fulfillment of the Requirements for the Degree of Master of Business Administration Cameron School of Business University of North Carolina Wilmington 2009 Approved By Advisory Committee Howard Rasheed Cetin Ciner William H. Sackley Chair Accepted By DN: cn=Robert D. Roer, o=UNCW, ou=Dean of the Graduate School & Research, email=roer@uncw. edu, c=US Date: 2010.01.21 15:02:51 -05'00' ________________________ Dean, Graduate School TABLE OF CONTENTS TABLE OF CONTENTS ..................................................................................................... ii ABSTRACT........................................................................................................................ vi ACKNOWLEDGMENTS .................................................................................................. vii DEDICATION .................................................................................................................. viii LIST OF TABLES .............................................................................................................. ix LIST OF FIGURES...............................................................................................................x GLOSSARY .............................
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...Archive Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey Erge¸ Etem Hakan and Arslan Bengul Gulumser c ¨ ¨¨ January 2011 Online at http://mpra.ub.uni-muenchen.de/29848/ MPRA Paper No. 29848, posted 4. April 2011 06:17 UTC Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey Etem Hakan Ergeça* and Bengül Gülümser Arslanb Abstract Identifying the impact of the interest rates upon Islamic banks is key to understand the contribution of such institutions to the financial stability, designing monetary policies and devising a proper risk management applicable to these institutions. This article analyzes and investigates the impact of interest rate shock upon the deposits and loans held by the conventional and Islamic banks with particular reference to the period between December 2005 and July 2009 based on Vector Error Correction (VEC) methodology. It is theoretically expected that the Islamic banks, relying on interest-free banking, shall not be affected by the interest rates; however, in concurrence with the previous studies, the article finds that the Islamic banks in Turkey are visibly influenced by interest rates. JEL classification: G21; E52 Keywords: Interest-free banking, monetary policy I. Introduction Islamic banks1 are defined as financial institutions that rely on the principle of Profit and Loss Sharing (PLS) with the entrepreneurial partners in their relevant banking activities (Nienhaus, 1983, p. 31)...
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...Administration & Economics (NCBA&E) Business Strategy Assignment: Detailed Analysis of Islamic Banking in Pakistan. Submitted By: Saad Alam 2151407 Submitted To: Sir Qayyum Qureshi | | | | | Type | Public Limited | Traded as | KSE: MEBL | Industry | Islamic Banking, Commercial Banking | Founded | 1997 | Headquarters | Karachi, Pakistan | Products | Murabaha, Ijarah, Diminishing Musharakah, VISA Debit Card, Saving Accounts, Consumer Banking etc. | Number of employees | 7,000 - 2014 | Slogan | The Premier Islamic Bank | Website | www.meezanbank.com | | PROFILE:Meezan Bank (Urdu میزان بینک) is the first and largest Islamic commercial Bank of Pakistan. The Bank is headquartered in Meezan House - Karachi, Pakistan. It has a network of over 490 branches in more than 100 cities of Pakistan. It commenced operations in 2002 when State Bank of Pakistan issued first-ever license for Islamic commercial banking. The Bank has a market share of 35% in Islamic banking industry of the country.JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, has rated the Bank’s short term rating at A1+ (A-One Plus), the highest standard in short term rating, and the long-term entity rating at AA (Double A) with “Stable” outlook, making it the only Islamic bank with AA credit rating in the Islamic banking industry of Pakistan. | | HISTORY:The founder of Pakistan, Quaid-e-Azam Mohammed Ali...
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...the symbol of Islamic banking in Malaysia and its vision to be “A Global Leader in Islamic Banking” illustrates the Bank’s status as the flag bearer of the country’s financial services industry (“the industry”). Bank Islam has been growing from strength to strength as evidenced by its financial performance and paid-up capital, which in turn, was instrumental in making the growth of its assets. Throughout the year, Bank Islam has been embarking on a number of expansion programmes with its involvement in, among others, notable transaction in Sukuk and Corporate Mandates. Living up to its pioneering spirit, the Bank has continued to provide innovative and enhanced products and services which has resulted in a growing number of customers seeing Islamic banking as a true alternative to conventional banking. This growing list of clienteles in addition to truly ground breaking and quality banking solutions have been recognised by the global industry which is reflected by the Bank's position as one of the top banks in the country. From the traditional financing, savings and investment types of products exclusively for individual customers during the early years of establishment, the range of Bank Islam’s Shariah-based financial products, services and business solutions has significantly expanded to cater to the fast-changing financial needs of customers from all categories including those related to micro financing, wealth management, capital market...
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...Is Islamic Finance A Solution to the Financial Crisis? | Is Islamic Finance A Solution to the Financial Crisis? Lecturer Ms Tahira Jaffery Prepared by Mohammed Haider Hassan Mohammad Javed Najwat Rehman Mehdi Maloof December 30, 2009 Contents THE GLOBAL FINANCIAL MELTDOWN AND ITS IMPACT ON PAKISTANS ISLAMIC BANKING SECTOR 4 The Root of All Cause: What Caused the Financial Crisis? 4 THE ISLAMIC BANKING MECHANISM 7 Roles of Different Players 7 Modes of finance 9 CONVENTIONAL AND ISLAMIC BANKS AMID THE CRISIS IN PAKISTAN 14 Differences Between Islamic and Conventional Banks 14 GROWTH OF ISLAMIC BANKING INSTITUTIONS 18 Prevailing Trends in the Past Year 19 ISLAMIC BANKINGS CAPACITY TO WITHSTAND RECESSIONARY PRESSURES 21 CHALLENGES AND OPPORTUNITIES 24 Problems With Islamic Finance 24 Opportunities 28 Bibliography 30 THE GLOBAL FINANCIAL MELTDOWN AND ITS IMPACT ON PAKISTANS ISLAMIC BANKING SECTOR The Global Financial Crisis took the world by storm in late 2007 and has since then has created all sorts of nuisances around the world. Economists consider it to be the worst financial crisis ever since the Great Depression of the 1930s. The crisis caused losses worth trillions of U.S dollars throughout the world resulting in the failure of businesses, decline in consumer wealth, government deficits, and an overall decline in economic activity. The Root of All...
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...1. Introduction History of Islamic Business Transaction Without a doubt, the history of Islamic Banking is quite interesting. Since the medieval era (1,000 – 1,500 AD), businesspeople in the Middle East engaged in financial transactions. At this time though, these transactions used the same financial principles as the Europeans. Early History of Islamic Banking Since the Arabs of the Ottoman Empire traded extensively with people in Spain, they also developed certain no-interest financial systems that worked on a profit and loss sharing method. These systems, in turn, financed trade and other business affairs. When the Middle Eastern and Asia began to be more important trading partners for various European companies, the Europeans opened banks in these countries – with many of these banks based on the interest-bearing financial system. As the trading relationship with the Europeans continued to play an important role, these types of financial institutions began to be more prominent outside of Europe. However, even when local trading business owners used these commercial banks, they often only transferred money between accounts. Both borrowing and depositing money was limited as the local population wanted to refrain from partaking in interest-bearing transactions. Further, certain co-operative institutions based on the original profit and loss sharing model still existed, but only in certain locations. As economic demands increased, avoiding banks was not an option...
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...CHAPTER 1 INTRODUCTION 1.1 The Introductory Paragraph Islamic banking refers to a system of banking that complies with Islamic law also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transaction are based on an underlying business activity or asset. The Islamic banking system has gained momentum worldwide. There are now 16 Islamic banks and financial institution operating in Malaysia. The popularity of the Islamic banking system is not limited to the Islamic bank only. The conventional system also interested in Islamic banking system For instance, CIMB has established CIMB Islamic bank that operates in accordance with Islamic Shari’ah principles. Islamic banks faced with strong competition not only from Islamic bank but also from conventional banks. The Islamic banking system is different from the conventional banking system but have some similarities between the two. For example, an Islamic bank conduct s its activities in accordance with the Islamic Shari’ah principle that strictly prohibit any payment or receipt of interest. However, the Islamic bank can offer product and service which are similarity by conventional bank. When Islamic banks or conventional banks offered any new product or service, the successful depends on the customer satisfaction level towards that product or service. In this competition, they must have to give extremely high...
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...Perceptions on Islamic Banking Acceptance Abstract This research was conducted to investigate bank employee perceptions on Islamic banking acceptance. The questionnaires were distributed to bank employee at Maybank Islamic Wangsa Maju (Islamic bank) and Maybank Setapak (Islamic window) Kuala Lumpur. Interestingly, few of the bank employees possessed a relevant academic background or relevant experience in banking on this career. The bank employee also claimed that they had very limited knowledge in this area prior to working with the banks; thus, the issue of the availability of well-trained and skilled employees must be addressed critically by the government, industry players and educationists for the sustainable growth of Islamic banking in Malaysia, and to meet the target set for the year 2011. Keywords: Bank Employees perceptions, Islamic Banking, Product & Service, Training & Experience 1.0 INTRODUCTION 1.1 Background of study In 1970, Islamic banking was almost unknown and considered to be wishful thinking. By the early years of the twenty-first century, however, Islamic banking the deniable truth has emerged, for it is growing at a steady pace. The size of the industry, which amounted to a few hundred thousand dollars in 1975, had reached billions of dollars by 2004. The value of Shari’ah-compliant accounts worldwide is estimated between US$200 billion and US$500 billion and is growing at an average annual rate of 10-15 per cent. It is predicted that Islamic banks...
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...About Al Baraka | | Al Baraka Islamic Bank B.S.C. (c) - Bahrain (AIB - Bahrain) established 1984 in Bahrain and up the years has pioneered the development of Islamic banking and finance. The Bank is registered with the Bahrain Ministry of Industry &, Commerce CR no. 14400 and is licensed by Central Bank of Bahrain (CBB) as an Islamic Retail Bank, with an authorized capital of US$ 600 Million, of which US$ 122 Million has been issued and fully paid.AIB - Bahrain is one of the Banking Units of Al Baraka Banking Group's (ABG). ABG is a Bahraini Joint Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading international Islamic banks. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Sharia'a. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.8 billion. The Group has a wide geographical presence in the form of subsidiary banking Units in 14 countries, which in turn provide their services through more than 400 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank - Bahrain, Al Baraka Bank Limited/ Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/ Sudan, Al Baraka Bank Ltd/ South Africa, Al Baraka Bank Lebanon/ Lebanon, Al Baraka Bank Tunisia/ Tunisia, Al Baraka Bank Egypt/ Egypt, Al Baraka...
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...team Part 2 changes in banking philosophy or principles Mision vision obj corporate strategy Part 3 changes in banking practices and practical application of islamic bank Implement islamic or not Trading activities Product Annual reports Donation Sponsorship Part 4 problem Effect Solution Financial statement PART ONE Board of Directors | | Mr. Salah Mohd I Al Jaidah Chairman | | Dr. Saleh Jameel Malaikah Deputy Chairman | | | | Dr. Fouad Hayel Saeed Director | | Mr. Shahzad Shahbaz Director | | | | Mr. Subrata Kumar Mitra Director | | Mr. Syed Maqbul Quader Director | | | | | | | | | Dato’ Dr Md Khir Bin Abdul Rahman Independent Non Executive Director | | Dato’ Noorazman Bin Abd Aziz Independent Non Executive Director | | | | Dato' Sri Dr. Muhammad Shafee Bin Muhammad Abdullah Independent Non Executive Director | | | | Management Team | | | Datuk Mohamed Azahari Kamil Chief Executive Officer | | | | | | Roslan Hj Shafiei Chief Operating Officer | | | Abdul Latif Bujang Masli Chief Financial Officer | | | | | | Sharifah Normah Acting Head, Risk Management | | | Azidy Bin Daud Treasurer | | | | | | Faris Yahya Head, Investment Banking | | | Zamri Shariff Head, Asset Management | | | | | | Mohd Fauzi Mohd Salleh Acting Head, Corporate Banking | | | Balasubramaniam...
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...Chapter 5 Financial System of Malaysia 5.1 Financial System Structure in Malaysia The Malaysian financial system is structured into two major categories, Financial Institutions and Financial Market. The Financial Institutions comprise Banking System and Non-bank Financial Intermediaries. The Financial Market in Malaysia comprises four major markets namely: Money & Foreign Exchange Market, Capital Market, Derivatives Market, and Offshore Market. Chart 1: The Financial System Structure in Malaysia Financial System Financial Institutions Banking System Non-Bank Financial 1. Bank Negara Malaysia Intermediaries 2. Banking Institutions 1. Provident and Pension • Commercial Banks Funds • Finance Companies 2. Insurance Companies • Merchant Banks (including Takaful) • Islamic Banks 3. Development Finance 3. Others Institutions 4. Savings Institutions Financial Market Money & Foreign Exchange Market 1. Money Market 2. Foreign Exchange Market Capital Market 1. Equity Market • Discount...
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...for the banks run in accordance with Islamic rules and regulation. First Islami Bank started the banking system that runs according to Islamic rules and regulations. Then some other Islamic banks also started business. Currently some banks even the foreign bank like H.S.B.C and Standard Chartered bank open their Islamic banking section. Theses banks are doing these because most of the people of our country are sensitive to their religion. Banks want to do business by utilizing their sentiment. Different factor can lead the customer towards Islamic banking like interest is prohibited in Islam. Another factor can be people want to deposit their money in those banks that do not give loan to those businesses that is not permitted in Islam. Banks having the provision of giving interest free loan to the needy people of the society which is called ‘Quard E Hasan’ in Islam can also lead the customer to those banks. Many religious programs telecasted in different channels become very popular in our country that may also influence the customers to switch. So in this study we will identify some factor that may responsible for customer switchover to Islamic banks and try to discover whether these factors really responsible for the customer switchover. 1.2 Problem statement: Now a day’s many non Islamic banks are opening Islamic banking section. It is an observed phenomenon that the banks are doing that because there is a huge market for Islamic banking in Bangladesh because the people of...
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...Islamic Banking and Finance: History Development Slide #1 Some Issues History Of IBF Development of IBF -Overview- 2. Islamic Banking and Finance: History and Development History and Development of IBF in Bahrain Full Fledged IB vs. IB windows • Word ‘bank’ comes from the word ‘banco’ - A table or a bench on which Italian money-changers used to display their monies and records and conduct their transactions History of Islamic Banking and Finance • Arabic financial and economic system preIslam – Trading based arrangements were common • Bay’ al-musawamah (bargaining) • Bay’ al-muzayadah (auctioning) • Bay’ al-amanah (trust sale) – Al-murabahah (resale with profit) – Al-tawliyyah (resale at cost) – Al-wadiah (resale at loss or below cost) History of IBAF- (2) – Barter trade was common – Al-sarf (money exchange) • Lack of standardization – for e.g., 10 grams of gold in coin form = 15 grams of gold in bracelet form – Institutionalization of riba – Widespread gharar and maysir – Monopoly, fraud and economic injustice was common History of IBAF- (3) • With the advent of Islam, – Eradication of riba institutions and practices – Eradication of gharar transactions – Institutionalization of fair and equitable markets • No monopoly, fraud • Standardization of money and commodity exchanges – Hadith on the six commodities – Islamization of many business organizations and institutions • Mudarabah, musyarakah, salam, muzara’ah (sharecropping or partnership...
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...toward a product or service is influenced by a match of the product or service user image with the customer’s self-concept . Islamic banking which started in 1983 in Malaysia, refers to a system of banking that complies with Islamic law which also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties and the assurance of fairness for all transactions based on an underlying business activity. It does not allow any transactions based on interest (riba), gambling (maisir) and speculative trading (gharar) at all cost. In terms of products and services, there are more than 40 Islamic financial products and services that may be offered by the banks using various Islamic concepts such as Mudharabah, Musyarakah, Murabahah, Al-Bai Bithaman Ajil, Al-Ijarah, Al-Takjiri, Qard Hasan, Al- Wakalah, Al-Kafalah and Wadiah. This study was stated the most perception of Islamic banking product among the Malaysian customer. As one of the important in service industry today, Islamic banking is no longer regarded only to fulfil the religious obligation of the Muslim. It is also how the Islamic banks want to market their products towards the non-Muslim community in Malaysia. 2.0 FACTORS INFLUENCING THE PERCEPTION OF ISLAMIC BANKING 2.1 Religion The religious value includes factors like Islamic bank is not involved in any regulations or acts against shariah that could spiritually burden customers, free from doubtful transaction...
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...TABLE OF CONTENTS PART 1: OVERVIEW ................................................................................................................. 1 1. Introduction............................................................................................................................ 1 2. Objectives .............................................................................................................................. 2 3. Scope of Application ............................................................................................................ 2 4. Legal Provision...................................................................................................................... 3 5. Effective Date & Compliance Deadline ............................................................................. 3 6. Approach................................................................................................................................ 4 PART 2: SHARIAH GOVERNANCE ARRANGEMENTS ................................................... 5 SECTION I: General Requirements of the Shariah Governance Framework ..............5 - 9 SECTION II: Oversight, Accountability & Responsibility............................................. 10 - 14 SECTION III: Independence............................................................................................ 15 - 16 SECTION IV: Competency ..................................................
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