Published by De Gruyter Oldenbourg

De Gruyter Studies in Islamic Economics, Finance and Business

Edited by: Abbas Mirakhor and Idris Samawi Hamid

ISSN: 2567-2533

e-ISSN 2567-2568

Overview
Volumes

The volumes of this series are devoted to research in Islamic theory and practice that will subserve the rapidly expanding Islamic finance industry. Given the huge potential impact of Islamic economics and Islamic finance upon Muslim, and even global, business practice, there is a broad field of opportunity to cater to the growing need of products and solutions for the Islamic business domain. This series aims to present the many theoretical and practical dimensions of Islamic economics and Islamic finance to academics as well as to professionals.

Edited by Abbas Mirakhor, Retired Professor of Economics and Finance and Idris Samawi Hamid, Professor of Philosophy, Colorado State University, USA.

Author / Editor information

About the Series Editors

Prof. Dr. Abbas Mirakhor is the first holder of the INCIEF Chair in Islamic Finance. Professor Mirakhor received his Ph.D. in Economics from Kansas State University in 1969. After teaching at various universities in the USA and in Iran, he joined the staff of the Research Department of the IMF in 1984. He spent 24 years with the IMF, serving as both the organization’s Executive Director and the Dean of the Executive Board, retiring in 2008. He has published many books, papers and research articles on a wide range of areas including Islamic Economics and Finance. In 1997, the President of Pakistan conferred him the "Quaid-e Azam" star for service to Pakistan. In 2003, he received the Islamic Development Bank Annual Prize for Research in Islamic Economics. Later in 2005, Dr. Abbas was conferred the "Order of Companion of Volta" by the President of Ghana, for his service to Ghana.

Professor Dr. Idris Samawi Hamid: After completing a Masters degree in Physics, Idris Samawi Hamid received his Ph.D. in philosophy in 1998 from University at Buffalo, SUNY. Since 2001 he has been based at Colorado State University, Fort Collins; in 2014 he was promoted to (Full) Professor. His specialties include Islamic Philosophy, Metaphysics, Islamic Economics, and Philosophy of Logic. He is an authority on the work of the philosopher-scientist Shaykh Aḥmad al-Aḥsāʾī (d. 1826 CE).

Supplementary Materials

Publication Ethics Statement

Topics

Book 2021

Towards a Sustainable Fiscal Position for Malaysia

A Proposal for Reform

Azura Othman

Volume 11 in this series

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The financial crisis of the last decade has brought to the fore many discourses on the stability of the financial system under the current interest rate regime and whether issuing more debts, that create further divergence between the financial and real sector of the economy, is a sustainable solution to the ensuing debt crisis that followed. Invigorating
economic development may need more than just achieving mere growth in GDP numbers and other mainstream macroeconomic key performance indices. Social equity, environmental conservation, inclusive development, and equitable income distribution are concepts that are increasingly given more weight in the measurement of economic development. The onset of the pandemic of the current decade has further emphasized the importance of these considerations as well as the concept of sharing of risks and return.

This book analyses the past and current fiscal situation in Malaysia and identifies areas of improvements in the current tax system and public sector financing in generating the required revenue and financing government expenditure. The alternative fiscal framework proposed in this book covers a tax structure that features a simple and fairer tax system that is based on the ability to pay and public financing which is free of interest and provides opportunity for broader participation of the public.

As Malaysia has a comprehensive framework as well as firm regulatory and government support for Islamic finance, the fiscal reform builds on an important feature of risk sharing Islamic finance that brings the real and financial sectors of the economy close together. The fiscal policy reform recommended in this book seeks to address the public debt burden, expand fiscal space, increase financial inclusion, reduce income and wealth disparities, increase employment and income for the growing population and ultimately improve social solidarity especially for a pluralistic country such as Malaysia.

DOI:: https://doi.org/10.1515/9783110591187
ISBN:: 9783110591187
ISBN:: 9783110588026
ISBN:: 9783110587791
Subject:: Asian and Pacific Studies
Subject:: Southeast Asia
Subject:: Business and Economics
Subject:: Political Economics
Subject:: Economic Theory, Systems and Structures
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2021

Risk-Sharing Finance

An Islamic Jurisprudence (Fiqh) Perspective

Saad Bakkali, Abbas Mirakhor

Volume 10 in this series

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The contemporary finance deals mainly with multilateral and multi-counterparty transactions. Islamic Jurisprudence (Fiqh) has yet to develop its conceptualization of this modality of financing. Thus far, it has become a norm for large financing projects to rely on a complex structure of interconnected bilateral contracts that in totality becomes opaque, complex and costly. An unfortunate result of the unavailability of an efficient Fiqhi model applicable to modern multilateral and multi-counterparty contracts has been the fact that the present Islamic finance has been forced to replicate conventional risk-transfer (interest rate based) debt contracts thus drawing severe criticisms of duplicating conventional finance.

In 2012, a gathering of some of the Muslim world’s most prominent experts in Jurisprudence (Fuqaha) and economists issued the Kuala Lumpur Declaration (Fatwa) in which they identified risk sharing as the essence of Islamic finance. The Declaration opened the door for a new Fiqh approach to take the lead in developing the jurisprudence of multilateral and multi-counterparty transactions. This Declaration (Fatwa) provides a prime motivation to search for a comprehensive model of risk sharing that can serve as an archetypal contract encompassing all potential contemporary financial transactions. From the perspective of Islamic Jurisprudence (Fiqh), the technicalities of the concept of risk sharing in contemporary finance have yet to be defined in Islamic literature.

This book attempts to clarify and shed light on these technicalities from the perspective of Fiqh. It is a comprehensive study that relies on the fundamental Islamic sources to establish a theoretical and practical perspective of Fiqh encompassing risk-sharing Islamic finance as envisioned in the Kuala Lumpur Declaration of 2012. This new paradigm should lead to a more efficient approach to multilateral and multi-counterparty Islamic contracts which, here-to-fore has been lacking in the current configuration of Islamic finance.

DOI:: https://doi.org/10.1515/9783110593433
ISBN:: 9783110593433
ISBN:: 9783110590555
ISBN:: 9783110590463
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2021

Capital Structure and Shari’ah Compliance of non-Financial Firms

Ramazan Yildirim

Volume 9 in this series

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In the present financial world, various niche markets play an increasingly important role. One of the fastest-growing niches is, without a doubt, Islamic finance. Indeed, sustainable finance needs constantly evolving innovations, and this book offers valuable insights into Islamic capital structure and Shari’ah equity screening enriching academic discourse.

"In recent years, we have witnessed the emergence of a new generation of academics and professionals specializing in various aspects of Islamic finance as knowledge and practice. This has brought about a new dynamism and also further sophistication. This book is one of such contributions, as it develops knowledge which is then transformed into practice whereby practical impact is also achieved. Being an academic book, it provokes readers’ thoughts, offering a critique of the implications of the currently applied Shari’ah screenings methodologies. As a transformative practical piece, by developing an innovative screening ratio, in this book, Dr. Yildirim extends his focus on the risk-sharing based financing hierarchy, covers thoughts and the underlying philosophy, and proposes an Islamic version of a pecking order hierarchy. This framework can be considered the foundation for developing an Islamic capital structure theory. This book will benefit academics, professionals, investors, as well as policymakers working in the Islamic finance industry and would like to explore more." (Professor Dr. Mehmet Asutay, Durham University Business School, UK)

"This book offers, for the first time after the inception of Shari’ah screening methodologies, a groundbreaking new stock screening solution that is comprehensible, practical, and foremost entirely derived from the primary sources of Islam (Qur’an and Sunnah). Congratulations to Dr. Ramazan for his outstanding contribution to Islamic finance and capital markets." (Associate Professor Dr. Ahcene Lahsasna)

"This excellent book is a must-have for all corporate finance students/researchers interested in the theoretical aspect of capital structure and the religious discussion of Shari’ah equity screening. This book should become a companion to those involved in a quantitative research environment and aim to conduct a comparative analysis; an ideal resource for everyone, from Shari’ah scholars to Islamic finance practitioners and beginners to experts." (Professor Dr. M. Kabir Hassan, University of New Orleans, USA)

DOI:: https://doi.org/10.1515/9783110713664
ISBN:: 9783110713664
ISBN:: 9783110713503
ISBN:: 9783110713718
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Business Management
Subject:: Industries
Subject:: Banks, Financial Service Provider, Insurers
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter

Book 2021

Portfolio Decisions for Faith-Based Investors

The Case of Shariah-Compliant and Ethical Equities

Zaheer Anwer

Volume 8 in this series

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This book examines the idiosyncratic risk, risk-return trade off and payout decisions for faith-based investors including Islamic Shariah compliant and ethical investors, who may be paying a cost for their belief system in the form of under-diversification of portfolios and additional monitoring costs owing to their unique risk profile.

There is a growing number of investors who are motivated by social, environmental, and ethical considerations in their investment decisions. They apply a set of investment screens to include or exclude assets based on ecological, social, corporate governance or ethical criteria. This socially responsible investment (SRI), ethical investment or sustainable investment style is prevalent since religious or ethical values matter to investors even if the risk-adjusted returns are lower than those of conventional investments. The author addresses these issues for Islamic and socially responsible portfolios in detail by using proprietary data of Dow Jones Indices from the United States. The findings are a unique and valuable addition to the existing corporate finance, portfolio management and Islamic finance literature.

DOI:: https://doi.org/10.1515/9783110612189
ISBN:: 9783110612189
ISBN:: 9783110611854
ISBN:: 9783110612745
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter

Book 2021

An Alternative Approach to Liquidity Risk Management of Islamic Banks

Muhammed Habib Dolgun, Abbas Mirakhor

Volume 7 in this series

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Despite noticeable growth in Islamic banking and finance literature in recent years, very few published books in this area deal with supervisory and regulatory issues in Islamic banking – theoretically or empirically – and none with the critical issue of risks involved in liquidity management of Islamic banks. This unique book is the first of its kind in dealing with challenges these financial institutions face in the absence of interest rate mechanism and debt-based financial instruments. The book examines critically issues involve in managing the risk of liquidity management for these types of institutions, including those stemming from Basel requirements. It then offers an alternative regulatory framework more appropriately suited for such banks without compromising safety and security. The book's unique features and innovative dimensions diagnostically differentiate between Islamic banks and conventional banks as related to liquidity management risks. It proposes a risk-sharing regulatory framework that, once implemented, would mitigate risks posed by balance-sheet mismatches. The book aims to assist regulators, supervisors, Islamic finance practitioners, academicians and other relevant stakeholders.

DOI:: https://doi.org/10.1515/9783110582901
ISBN:: 9783110582901
ISBN:: 9783110580150
ISBN:: 9783110579994
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Business Management
Subject:: Industries
Subject:: Banks, Financial Service Provider, Insurers
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2021

Shariah Investment Agreement

The Legal Tool for Risk-Sharing in Islamic Finance

Syed Adam Alhabshi, Abbas Mirakhor, Haji Mohd. Na’im Haji Mokhtar, Syed Othman Alhabshi

Volume 6 in this series

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Risk-sharing investment is currently the buzz word in Islamic finance. However, there is an incongruence in applying multilayered and opaque Tijarah contracts for investment purposes. This has contributed to the divergence between Shariah and Common Law and caused tremendous problems and systemic legal risks to Islamic finance.

The authors of Shariah Investment Agreement introduce a legal tool in the form of a Shariah Investment Agreement carefully drafted to ensure that it is Shariah-compliant and can be applied in Common Law jurisdictions as well, so as to allow for the execution of risk-sharing investment in Islamic finance. It details the building blocks and key considerations that must be noted when drafting such agreements so the investor and investee will know what to expect when entering into such a contract.

Proper implementation of the Shariah Investment Agreement will pave a clear route to a harmonious convergence between Shariah and Common Law and lead to Islamic finance developing further to become a stronger, unstoppable force in the finance industry.

DOI:: https://doi.org/10.1515/9783110562750
ISBN:: 9783110562750
ISBN:: 9783110559743
ISBN:: 9783110559613
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2020

Handbook of Ethics of Islamic Economics and Finance

Abbas Mirakhor, Zamir Iqbal, Seyed Kazem Sadr

Volume 5 in this series

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Since the financial crisis of 2007/2008, a renewed discussion on the ethics and finance is being examined from different dimensions – finance for good society, responsible finance, ethical finance, financial crimes, and financial repression. The principal objective of this Handbook on Ethics of Islamic Economics and Finance is to provide a deeper understanding of the ethical underpinning of Islamic economics and finance.

The reader will notice that the Handbook reflects a diversity of views on the subject of economic and business ethics in Islam across the intellectual spectrum of Muslim thought over the globe. Handbook attempts to find answers to some questions concerning the definition and characteristics of the ethical system in Islam. What is its goal and how do its rules and practices ensure welfare for individuals and society? Are the moral principles universal and invariable or do they change and adapt with the social changes of communities and progress in science and technology? Is the present generation accountable for the welfare of future generations? Where is the boundary between law and ethics and who guarantees their adoption and implementation?

DOI:: https://doi.org/10.1515/9783110593419
ISBN:: 9783110593419
ISBN:: 9783110590548
ISBN:: 9783110590425
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Business Management
Subject:: Corporate Social Responsibility (CSR), Compliance Management, Business Ethics
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2020

Handbook of Analytical Studies in Islamic Finance and Economics

Zamir Iqbal, Tarik Akin, Nabil El Maghrebi, Abbas Mirakhor

Volume 4 in this series

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This handbook offers a unique and original collection of analytical studies in Islamic economics and finance, and constitutes a humble addition to the literature on new economic thinking and global finance. The growing risks stemming from higher debt, slower growth, and limited room for policy maneuver raise concerns about the ability and propensity of modern economies to find effective solutions to chronic problems. It is important to understand the structural roots of inherent imbalance, persistence-in-error patterns, policy and governance failures, as well as moral and ethical failures.

　　　　 Admittedly, finance and economics have their own failures, with abstract theory bearing little relation with the real economy, uncertainties and vicissitudes of economic life. Economic research has certainly become more empirical despite, or perhaps because of, the lack of guidance from theory. The analytics of Islamic economics and finance may not differ from standard frameworks, methods, and techniques used in conventional economics, but may offer new perspectives on the making of financial crises, nature of credit cycles, roots of financial system instability, and determinants of income disparities.

　　　 The focus is placed on the logical coherence of Islamic economics and finance, properties of Islamic capital markets, workings of Islamic banking, pricing of Islamic financial instruments, and limits of debt financing, fiscal stimulus and conventional monetary policies, inter alia. Readers with investment, regulatory, and academic interests will find the body of analytical evidence to span many areas of economic inquiry, refuting thereby the false argument that given its religious tenets, Islamic economics is intrinsically narrative, descriptive and not amenable to testable implications. Thus, the handbook may contribute toward a redefinition of a dismal science in search for an elusive balance between rationality, ethics and morality, and toward a remodeling of economies based on risk sharing and prosperity for all humanity

DOI:: https://doi.org/10.1515/9783110587920
ISBN:: 9783110587920
ISBN:: 9783110585179
ISBN:: 9783110585087
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Business Management
Subject:: Industries
Subject:: Banks, Financial Service Provider, Insurers
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2020

Crowdfunding with Enhanced Reputation Monitoring Mechanism (Fame)

Omid Torabi, Abbas Mirakhor

Volume 3 in this series

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Crowdfunding is increasingly becoming a method of mobilizing project finance ventures, particularly in a sharing economy. Moreover, the element of risk sharing which is found in equity crowdfunding makes up the essence of Islamic finance. However, as with any type of risk-sharing contract, Islamic crowdfunding faces the problem of lack of trust and information asymmetry. The author employs a game theory approach to Islamic crowdfunding as a means to tackle the issue of information asymmetry through a "reputation mechanism" which is touted as one of the latest means of solving information asymmetry in web-based social networks. The primary objective of the reputation mechanism is to enable more efficient transactions in communities where cooperation is compromised by post-contractual opportunism or information asymmetry.

The game theory approach in this study involves two different games: "without Fame" and "with Fame", and it is proposed that a "with Fame" crowdfunding game produces better results. The reputational mechanism in this research was also designed specifically to eliminate any potential moral hazards and minimize information asymmetry. In this study, "Fame" refers to the credibility of every individual within the crowdfunding system. Fame is a form of systematic, measurable and computable (implicit and explicit) reputation, which allows other members of the crowdfunding social network to better learn about the individual and their credibility.

DOI:: https://doi.org/10.1515/9783110582925
ISBN:: 9783110582925
ISBN:: 9783110580167
ISBN:: 9783110579987
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Business Management
Subject:: Management Accounting, Financial Controlling, Cost Calculation, Investment
Subject:: Industries
Subject:: Banks, Financial Service Provider, Insurers
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2020

Financialization of the economy and income inequality in selected OIC and OECD countries

The role of institutional factors

Fatima Muhammad Abdulkarim, Abbas Mirakhor, Baharom Abdul Hamid

Volume 2 in this series

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Income inequality is a serious problem confronting not only the developed world but also developing countries. Recently, financialization has been one of the culprits identified in literature as one of the cause of income inequality. This book offers the only detailed presentation of the how financialization aided the spread of income inequality in Organization of Islamic Cooperation, OIC countries. Finance has taking a center stage in the affairs of most developing economies, surpassing the real sector of the economy. The result is the creation of an indebted society in which people are comfortable with financing their financial needs through credit. This creates a debt laden society that is trapped in the cycle of debt.

This book represents a comprehensive and indispensable source for students, practitioners and the general public at large. It presents data which shows the buildup of debt and the rising income inequality in Muslim countries. It includes discussion of the rise in rentier income, financialization of everyday life, decline in physical capital accumulation and deregulation of the financial sector. The book therefore, proffers solutions on how Muslim countries can come out of the present economic problem facing them. The promotion and adoption of Islamic principles, which promotes risk sharing based contracts as against debt based transaction is the way to go. When financial contracts are based on the principles of risk sharing, any gains from economic activities get to be shared equitably. Hence, not only capital owners get to enjoy the benefit from the income derived from investments, but rather, all parties that partake in the contract.

Distinguished by its clarity and readability as it is written in a very easy to understand language, it is an important reference work for any concerned individual interested on the recent causes of income inequality in Muslim World.

DOI:: https://doi.org/10.1515/9783110600933
ISBN:: 9783110600933
ISBN:: 9783110599404
ISBN:: 9783110597691
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Political Economics
Subject:: Economic Policy
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg

Book 2019

Wealth Inequality, Asset Redistribution and Risk-Sharing Islamic Finance

Tarik Akin, Abbas Mirakhor

Volume 1 in this series

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Wealth inequality has been not only rising at unsustainable pace but also dissociated from income inequality because of the fact that wealth is increasing without concomitant increase in savings and productive capital. Compelling evidence indicates that capital gains and other economic rents are mainly responsible for wealth inequality and its divergence from income inequality. The main argument of the book is that interest-based debt contracts are one of the drivers of wealth inequality through creating disproportional economic rents for the asset-rich. The book also introduces the idea of risk-sharing asset-based redistribution, which is a novel and viable policy proposal, as an effective redistribution tool to address the wealth inequality problem. Furthermore, a large-scale stock-flow consistent macroeconomic model, which is step by step constructed in the book, sheds light on the formation of wealth inequality in a debt-based economy and on the prospective benefits of implementing risk-sharing asset-based redistribution policy tools compared to traditional redistribution policy options. The research presented in this book is novel in many respects and first of its kind in the Islamic economics and finance literature.

DOI:: https://doi.org/10.1515/9783110586664
ISBN:: 9783110586664
ISBN:: 9783110583885
ISBN:: 9783110583731
Subject:: Asian and Pacific Studies
Subject:: Western Asia
Subject:: The Arab world
Subject:: Business and Economics
Subject:: Business Management
Subject:: Industries
Subject:: Banks, Financial Service Provider, Insurers
Subject:: Finance
Subject:: Islamic and Middle Eastern Studies
Subject:: Business and Economy
Publisher:: De Gruyter Oldenbourg