Islamic financial services industry: Aspirations and achievements

Hanif, Muhammad; Ayub, Muhammad

doi:10.1111/beer.12406

Cited by 5 publications

(14 citation statements)

References 30 publications

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“…At the level of application of the desired system, there emerged two approaches: i) developing an entirely different structure and framework than the existing financial system; and ii) to work within the existing system to achieve the dual objective of Sharī'ah compliance and profitability comparable to the existing businesses (Hanif and Ayub, 2021). As the latter approach was easy and suited more for business and profitability, it was adopted across the world.…”

Section: The Research Gapmentioning

confidence: 99%

“…The objectives behind the move for introducing Islamic banking and finance included poverty alleviation, ethical investing, promotion of social values, corporate social responsibility; environmental protection, financial stability, risk-reward sharing, and access to finance (Obaidullah, 2005, Sairally, 2007, Asutay, 2012, Saged et al, 2017and Hanif and Ayub, 2021. Hanif and Ayub (2021 have discussed in detail the following objective of Islamic finance: i) Shariah compliance in form as also substance; ii) Financial stability; iii) Equitable distribution of wealth; iv) Financial inclusion leading to social inclusion, and v) Social responsibilities.…”

Section: Objectives Of Islamic Banking and Finance And Their Realizationmentioning

confidence: 99%

“…Ribā is prohibited in all Abrahamic religions-Judaism, Christianity and Islam (Hanif and Ayub, 2021). This also is the requirement of the natural law and ethics (Ayub, 2020, JIBM, 10 (01), 1-11).…”

Section: Introductionmentioning

confidence: 99%

“…Credit for national level movements for Islamisation of economy goes to such movements to an extent for overwhelming acceptance and positivity in sentiments about Islamic financial system among Muslim customers. (Hanif and Ayub, 2021).…”

Section: Introductionmentioning

confidence: 99%

“…However, the system as evolved over the years could not be helpful in realizing the objectives. Hanif and Ayub (2021) have identified the dichotomy in theory and practice and thus failure in achieving the objectives in respect of trade modes like murabaha and tawarruq; use of tawarruq on deposits side, and even in case of the shirkah based contracts like the running musharaka, and other wa'ad based contracts for Forex markets. They have raised certain questions on the current PLS based practices.…”

Section: Introductionmentioning

confidence: 99%

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The Challenges and Potential of Economy-Wide Islamic Finance - The Case of Pakistan

Ayub

2022

AQUJIE

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Efforts for transforming the interest based to interest free financial system at national levels were made in the early 1980s in Pakistan, Iran and Sudan. In Pakistan, a gigantic move for Islamization of economy culminating into a system based generally on ‘bai‘al‘inah and sale and purchase of debt instruments. That system was declared un-Islamic by the country’s Shariah Court. As from 2002, the government switched to the dual system of conventional and Islamic banking, leaving other areas of finance, almost unattended. Since then, Islamic banking in Pakistan evolved in faith-sensitive market in terms of deposits, assets, financing and profitability. Of course, this growth was coupled with an increasing identity gap as Islamic banks replicated almost all products that conventional banks used under lesser regulatory requirements, particularly on deposits side. At global level as well, focus during last three decades had been at promoting Islamic banking operating parallel with the conventional banking. A little research has been conducted on the possibility, potential and implication of economy-wide introduction of Islamic finance, also including the money creation and monetary policy. This qualitative paper is aimed at discussing the potential of expanding the scope of Islamic banking and finance to the economy-wide operations / at national levels in the backdrop of the Judgment of the Federal Shariat Court, Pakistan (April 28, 2022). It presents an evaluation of the progress made in terms of achieving the objectives of introducing Islamic finance, taking Pakistan as a case study. It then suggests some major policy and regulatory steps and strategy to be implemented if the objective of transformation of the system is to be achieved. The suggested strategy can be used for other OIC member countries, with some changes specific to every economy, particularly the countries that have gained sufficient experience and have visible presence of Islamic banking and finance.

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Section: The Research Gapmentioning

confidence: 99%

Section: Objectives Of Islamic Banking and Finance And Their Realizationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Challenges and Potential of Economy-Wide Islamic Finance - The Case of Pakistan

Ayub

2022

AQUJIE

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Islamic finance and economic growth: Global evidence

Hanif,

Chaker,

Sabah

2024

Digest Mid East Studies

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We document the contribution of Islamic finance development to economic growth by studying a global sample of countries engaged in providing Islamic financial services. Fifteen countries are included in the sample based on significant Islamic banking share in total domestic banking assets. Results are documented through the application of the Panel regression (EGLS) method for the period 2001–2020. Findings suggest a positive contribution of the Islamic Financial Services Industry (IFSI) to economic growth in sample countries in multiple regression settings. Additionally, a range of control variables, including domestic credit to the private sector, inflation, and trade openness, contribute significantly to economic growth. We recommend the creation of a conducive environment for the promotion of IFSI on account of the built‐in stability feature and positive contribution to economic growth. We also recommend overall development in the financial sector of selected economies, including credit availability to the private sector and trade openness. Our study helps in understanding the dynamics of economic growth in economies with a dual banking system (conventional & Islamic). This article contributes to the literature by studying a larger sample of countries engaged in the practice of Islamic finance and considering the significance of the market share of assets under IFSI.

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Objective Performance Evaluation of The Islamic Banking Services Industry: Evidence from Pakistan

Hanif,

Farooqi

2024

Preprint

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Purpose — The study documents the performance of the Islamic banking services industry (IBSI) in light of the Islamic finance objectives, notably financial stability, equitable distribution of wealth, and social responsibility.Design/Methodology/Approach — After drawing the performance evaluation framework based on the objectives, the research conducts a balance sheet analysis of the IBSI in Pakistan for 32 quarters (2013Q4–2021Q3). The analysis examines sources and uses of funds by looking at the application of financial contracts and sectoral distribution of financing. Objectively classified data trends are reported through graphs.Findings — Findings suggest that the domestic IBSI has shown progress in achieving primary and intermediate objectives, including commercial performance, contribution to equitable wealth distribution, and financial stability. However, the industry’s in-practice business models lack any significant contribution to the social sector, which represents a more advanced objective.Originality/Value — The contributions to the literature include development of a performance evaluation framework based on Islamic finance objectives, and documentation of findings on the IBSI’s achievements in Pakistan.Research Implications — The study recommends that regulators develop a legal framework for business models of the IBSI. It also recommends that managers of domestic Islamic banks include the social sector as well as agricultural and rural areas in financing and investment portfolios.

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Islamic financial services industry: Aspirations and achievements

Cited by 5 publications

References 30 publications

The Challenges and Potential of Economy-Wide Islamic Finance - The Case of Pakistan

The Challenges and Potential of Economy-Wide Islamic Finance - The Case of Pakistan

Islamic finance and economic growth: Global evidence

Objective Performance Evaluation of The Islamic Banking Services Industry: Evidence from Pakistan

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