Islamic Financial Institutions and Products in the Global Financial System: Key Issues in Risk Management and Challenges Ahead

‘Fatwa Repositioning’: The Hidden Struggle for Shari’a Compliance Within Islamic Financial Institutions

“…As discussed earlier, the risk-sharing conception is inherent in the Islamic finance system which exposes IFIs to additional risks and challenges. These challenges are intensified when the different Islamic modes of financing are combined to develop new products nature (Sundararajan and Errico, 2002 Despite the proximity of these two financial instruments to the Islamic economic system, one can hardly find institutions offering them. This is probably due to risk-averse nature of the banking institutions and lack of trust and honesty in the general.…”

“…The price and quality are negotiated at the time of agreement and the full payment is made (Usmani, 2002b, Usmani, 1998, Iqbal and Mirakhor, 1987, Sundararajan and Errico, 2002. Salam is used to finance agricultural products while Istisna is suitable for manufacturing commodities.…”

“…However, loss sharing is strictly based on the ratio of investment. One important aspect of Musharakah is that the money should be materialized into real assets having intrinsic utility (Usmani, 2002b (Sundararajan and Errico, 2002).…”

Bank-level stability factors and consumer confidence – A comparative study of Islamic and conventional banks’ product mix

“…However, Sharia is also reinforced by Sunnah which is the tradition of the of the prophet.. Dusk (2008) Conventional banks evolved over several centauries while only over the last thirty years, Islamic banks were purposely established to operate within the Sharia code of conduct (Iqbal and Molyneux, 2005), while some banks were converted from conventional banks to Islamic ones. For example, in Iran and Sudan, all conventional banks were made to Islamic banks following a change in political regime that enacted legislation to change them (Sundararajan and Errico 2002). In other countries which are characterized with large Muslim populations like Malaysia, Bahrain, Pakistan, Saudi Arabia, and Egypt allowed a parallel existence of Islamic banking along side conventional banks (Hassan 2003) In contrast, conventional banks operate mainly on the basis of a business model that 'banks like other firms are to maximize shareholders value'.…”

The impact of Islamic banking on the cost efficiency and productivity change of Malaysian commercial banks

“…Moreover, the development of Islamic banking in Malaysia has not been in isolation as some form of Islamic financial services is now available in at least 70 countries (Husain 2005). However, while Sudan and Iran have entirely converted to Islamic financial systems (Sundararajan and Errico 2002), it is more common for countries with large Muslim populations to operate Islamic banking systems alongside conventional banking systems, as is now the case in Malaysia, Bahrain, Pakistan, Saudi Arabia, and Egypt .…”