Diversity in the regulation of Islamic Financial Institutions

El-Hawary, Dahlia; Grais, Wafik; Iqbal, Zamir

doi:10.1016/j.qref.2006.08.010

Cited by 119 publications

(67 citation statements)

References 6 publications

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“…Islamic banks expanded to more than 50 countries and even beyond Muslim countries. Hassoune and Volland (2004) reported that “the growth rate of Islamic banking services outpaced that of conventional banking during the past decade, making it one of the most dynamic areas in international finance.” In 2004, Islamic banks controlled approximately $250 billion in assets and they are expected to grow at an annual rate of 10 per cent to 15 per cent (El‐Hawary, Grais and Iqbal, 2007). This study focuses on the Gulf Cooperation Council (GCC) region where the growth rate has been outstanding in comparison with other parts of the world (Hassoune and Volland, 2004; Grais and Pellegrini, 2006a).…”

Section: Introductionmentioning

confidence: 99%

Islamic Financial Institutions and Corporate Governance: New Insights for Agency Theory

Safieddine

2009

Corporate Governance

250

233

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Manuscript Type: EmpiricalResearch Question/Issue: This paper takes a theory building approach to highlighting variations of agency theory in the unique and complex context of Islamic banks, mainly stemming from the need to comply with Sharia and the separation of cash flow and control rights for a category of investors. Research Findings/Results: The paper provides insights that agency structures in the context of Islamic banking might give rise to trade-offs between Sharia compliance and mechanisms protecting investors' rights. Alternative models of idiosyncratic governance might be effective in balancing the two cornerstones of the agency dynamic. In practice, the paper finds that most of the surveyed Islamic banks appear to recognize the value of governance and institute some basic mechanisms. Nonetheless, some governance flaws relating to audit, control, and transparency are observed, a situation further exacerbated by the fact that investment account holders are not represented on the board, and are not granted control or monitoring rights. This leads to a discussion on the tradeoff between the costs and benefits of such a practice. Theoretical Implications: This study contributes to the agency theory literature by providing theoretical propositions highlighting challenges to this theory whereby mechanisms with the purpose of mitigating agency problems might lead to a divergence from Islamic principles of Sharia. Practical Implications: The paper motivates Islamic banks to improve governance practices currently in place. It alerts policy makers to the need to tailor the regulations to safeguard the interests of all investors without violating the principles of Sharia.

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Section: Introductionmentioning

confidence: 99%

Islamic Financial Institutions and Corporate Governance: New Insights for Agency Theory

Safieddine

2009

Corporate Governance

250

233

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“…The function of sharia scholars is to assist IFIs in approving products and to ensuring sharia compliancy of financial products during their lifecycle (DeLorenzo 2007). Beyond this, it is noteworthy that the regulators either in bank level or country level as in central banks play a role in determining the scope of authority to SSBs, in addition to legal framework in which the country based on (El-Hawary et al 2007). Thus, the better the regulatory framework, the better SSBs can be, which aimed to be explored in this paper.…”

Section: Sharia Governancementioning

confidence: 99%

Evaluating Qatar Central Bank’s Governance on Islamic Banks in Qatar

Alsayed

2017

SHS Web Conf.

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This paper aims to evaluate the governance of Qatar Central bank (QCB) on Islamic banks (IBs). Related-data will be taken from secondary sources. It is expected that QCB efficiently governs IBs in a way fulfills its unique nature. However, evidence suggests a number of issues in QCB governance towards IBs when looking at various dimensions. In Islamic Financial product dimension, QCB has no clear indications for enforcing its tawaruq-related regulations. This results on the extreme usage of tawaruq by IBs. In the social dimension, while it is suggested by early Islamic economists promoting equity products, such products are very slightly used by IBs in Qatar. The absence of QCB's regulations to promote such social aspects has led to the concentration of debt-based products. In terms of Sharia governance (SG) dimension, a number of issues have been raised such as the absence of cross-boarding regulations and the proper definition for the qualifications of sharia scholars. It is recommended, thus, to enforce tawaruq regulations properly, to create social-oriented regulations, to fix CG related issues discussed in this paper, and to unify Islamic financial contracts among IBs.

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“…Similarly Karim (2001) emphasized the need of Islamic banking accounting standard harmonization with AAOIFI principles, moreover he also argue that, regulator should enforce firewalls between commercial and investment banking services offered by Islamic banks. According to El-Hawary, Grais and Iqbal (2007), various Institutions have been established notably AAOIFI, IIRA, IFSB, and LMC, but there role is limited due to divergence of theory and practice in IF and lake of risk management tool, idiosyncratic business conduct, shaped by SSB and legal traditions and interpretations of Shariah by different schools of thought (sects).…”

Section: Regulatory and Supervisory Issuesmentioning

confidence: 99%