The world economy is still suffering from the severe global financial crisis that caused the failure of several banks. This has encouraged economists worldwide to consider alternative financial solutions and attention has been focused on Islamic banking and finance as an alternative model. Hence, this study examines the efficiency level of Islamic banks during the financial crisis specifically in Middle Eastern and Asian countries from 2007 to 2010. Moreover, bank-specific and risk factors were examined to understand the determinants of efficiency. The efficiency of Islamic banks is measured using data envelopment analysis by adopting the intermediation approach. The financial information is extracted from BankScope database for a four year period (2007)(2008)(2009)(2010) which includes 79 Islamic banks across a number of countries. The study also critically analyses pure technical efficiency and scale efficiency of the Islamic banks in Middle Eastern and Asian countries and estimates their return to scale. The findings explain that Islamic banks were able to sustain operations through the crisis. However, the study also shows that the majority of these Islamic banks were scale inefficient. Most of the scale inefficient banks were operating at decreasing returns to scale. This study also found that both profitability and capitalisation were the main determinants of Islamic banking efficiency. Hence, the findings of this study have policy implications and make a contribution to policy-making by providing empirical evidence on the performance of the Islamic banks and their efficiency levels.

The literature related to the financial management acknowledges the significant role that political risk play to determine the financial market development. Further, financial system development (banking and financial markets) competes to provide long-term financing, and this competition might be positive or negative for each other. The aim of this paper is to propose a conceptual model/framework for investigating the role of political risk and financial market on Sukuk market development in Gulf Cooperation Council (GCC). GCC economies depend heavily on oil revenues which makes them subject to oil prices fluctuations. Therefore, GCC’s governments should diversify their economies by looking for Sukuk as an alternative source of financing, to cover their budget deficit, when the price of oil decreases, and reduce their reliance on oil, because Sukuk has advantages compared to the conventional bond particularly in terms of less information asymmetry. The prior studies have mostly focused on firms' characteristics determinants of Sukuk issuances but gave a little consideration to the role of country' characteristics on Sukuk market development. This paper proposes a framework to explain the political risk and financial markets determinants of Sukuk market development with a focus on the GCC countries that have the largest region in terms of the Islamic financial assets. It is anticipated that the outcome will support policymakers to improve the current state of Sukuk market.

Purpose -This paper aims to provide a critical review of the literature on the rate of return risk faced by Islamic banks. Design/methodology/approach -Through a thorough review of the literature, this paper presents the discussion among scholars regarding the rate of return risk in Islamic banks. Findings -One of the major issues highlighted is the sensitivity of Islamic banks to the changes in the conventional interest rate due to the fact that many Islamic banking products are benchmarked against the conventional interest rate. Moreover, the limited techniques and instruments available to mitigate the rate of return risk also need serious attention by the regulators.Research limitations/implications -The study relies solely on the literature and highlights important issues in the area but does not provide any empirical evidence of the importance of rate of return risk to Islamic banks as it is beyond the scope of the paper. Practical implications -There are several issues that should be taken into consideration. First, the dearth of empirical research on the identification of the rate of return risk in Islamic banking highlights the need to develop appropriate methodology to enrich the study on the rate of return risk. Second, more focus is needed to determine the impact of rate of return risk on the financial stability and the performance of Islamic banks. Originality/value -This paper highlights several important issues relating to the rate of return risk in Islamic banks that are not widely discussed among researchers. In particular, this paper emphasizes the need to identify, handle and mitigate such risks to ensure the stability of Islamic banks. Therefore, this paper identifies a gap that needs further exploration so as to contribute towards enriching the existing literature in this area.

Purpose This paper aims to present a conceptual model on service quality of zakat institutions that are responsible for collecting, managing and distributing zakat in Malaysia. Zakat is an Islamic religious “tax” charged on the rich and well-to-do members of the community for distribution to the poor and the needy as well as other beneficiaries based on certain established criteria according to the Qur’an. The main aim of zakat is to protect the socio-economic welfare of the poor and the needy. Design/methodology/approach The paper reviews and synthesizes the relevant literature on service quality. The paper then proposed a conceptual model to study the service quality of zakat institutions. Findings The paper identifies the appropriate methods to examine the extent of service quality of zakat institutions. Such evaluations are crucial for organizations like zakat institutions to function effectively to achieve the noble objectives of socio-economic justice through proper distribution of wealth. Originality/value This paper presents a conceptual model of service quality of zakat institutions which would be useful for further empirical research in this area. The findings are not only relevant and applicable to Malaysia but also to other Muslim countries.

The current decline in oil prices has had a negative impact on the banking industry across Gulf Cooperation Council (GCC) countries and Bahrain is no exception. Over the last three years, Bahrain has been going through significant liquidity pressure, leading to the shrinking of bank liquidity, thus inducing liquidity risk in Bahraini banks. Therefore, the aim of this paper is to identify the association between liquidity risk proxied by cash to total assets and specific determinants in Bahraini Islamic Banks (IBs) in order to better mitigate and manage this critical financial risk. Panel data analysis was used on a sample of seven Bahraini IBs, which represent the Bahraini Islamic banking sector over the period of 2007 to 2011. The econometric results illustrate that the liquidity risk ofBahraini IBs is dependent on idiosyncratic factors.We found that liquidity risk is positively related toreturn on average assets (ROAA). On the other hand, non-performing loans (NPLs) and capital adequacy ratio (CAR) affect liquidity risk negatively and significantly. Lastly, bank size and the financial crisis show a negative and insignificant association with liquidity risk. The main limitation of this study is the bank's specific factors, covering one country and IBs only. Therefore, it is recommended that future studies should expand the sample by considering IBs from other GCC countries and also include conventional banks and macroeconomic factors. Finally,since NPLs (credit risk) and CAR have a significant impact on liquidity risk, it is recommended that the relationship between liquidity risk and credit risk in Bahrain and in the GCC environment be further investigated. Future studies should also consider examining the impact of the two new ratios suggested by the Basel Committee on liquidity risk in the GCC banking industry.