Islamic Investment Financing and Commercial Banks Facilities: Mediation Effect of the Islamic Bank Size

Purpose: This research is to identify the most important challenges for the local investment commissions and to develop solutions and proposals to encourage local and foreign investment in local governments in Iraq (the Iraqi provinces are irregular in the region). Theoretical Framework: This research suggests a conceptual framework for the local investment commissions in order to solve their problems, the most important of which was to identify the most critical challenges which are facing the Baghdad Investment Commission BIC and how to overcome them. Design/The methodology approach: Research involved a mixed-methods approach through two stages. During the first stage, the researcher gathered quantitative data from all investment projects that obtained Baghdad investment commission BIC from 2015 to 2021 were 168 projects. The second stage gathered qualitative data to explore the survey results more deeply by conducting individual interviews with a sub-sample of 12, 6 interviewees are from BIC and 6 interviewees are from investment organisations. Findings: The research showed several important results represented by legal and administrative challenges. Also, weak incentives and guarantees provided by The National Investment Low NIL No13 of 2006 and its amendments in 2010. The practical and social implications: This research will enable the local investment commissions how to deal with their challenges and then improve their provided services for both investors (foreign and local), particularly in Baghdad province, Iraq. The originality of research: This article provided a significant topic for businessmen and governments on international and local levels, also there is no previous research that has thoroughly searched the reality of local investment in Iraq and prospects for its development.

Section: Investment Challenges In Local Governmentsmentioning

confidence: 99%

The Reality of Local Investment in Iraq and Prospects for its Development: a Case Study in the Baghdad Investment Commission

Al-Mahdi¹,

Fisal²

2023

“…The Islamic banking philosophy states that money cannot create value or added value unless it is combined with other factors such as the work and expertise of other parties in actual economic transactions. The philosophy is to lend money to generate cash (Altameemi & Al-Slehat, 2022).…”

Section: Introductionmentioning

confidence: 99%

Exploring Moral Hazard and Adverse Selection in Profit Sharing Contract

Salman¹

2023

Purpose: The aim of this study is to review relevant articles on the problem of adverse selection and moral hazard in profit-sharing contracts in Islamic Banks. Adverse selection and moral hazard problems are problems that occur in profit-sharing contracts, so they impact the low porti on of this contract financing compared to margin-based and fee-based contracts. Theoretical framework: The profit sharing contract in an Islamic bank has two potential problems, namely adverse selection and moral hazard that arise due to asymmetric information. Asymmetric information can occur due to limited information owned by Islamic banks as owners of funds (shahibul maal) regarding the business to be run by customers (mudharib). This asymmetric information mainly causes the agency problem. If an agent is negligent in making decisions with negative consequences and does not want to take responsibility for his actions, this can be classified as a moral hazard. Moral hazard can be in the form of self-interest, side effects, fraud, opportunism, and the behaviour of agents who commit willful mistakes, negligence and breach of contract. Meanwhile, adverse selection arises when the principal cannot observe the agent's characteristics because of asymmetric information before the contract is signed. Design/methodology/approach: The study uses a qualitative approach by reviewing previous articles relevant to the discussion. The study is aligned with the practices that occur in profit-sharing contracts. Furthermore, discussions are deepened through forum group discussions with experts and practitioners in Islamic banks. Findings: The results show that the conflicts in profit-sharing contracts include principal-agent conflicts and principal-principal conflicts due to adverse selection and moral hazards. The study results reveal that signalling and screening measures can be applied to overcome adverse selection problems while monitoring actions and switching to debt contracts can overcome moral hazard problems. Research, Practical & Social implication: The study has implications for Islamic banks to draw up a clear and complete profit-sharing contract with the mudharib to reduce the moral hazard committed by the mudharib. In this case, Islamic banks can also ask the mudharib to submit comprehensive financial reports regarding their financial performance. Islamic banks must also pay attention to signalling and screening efforts to prevent adverse selection. Originality/value: The value of the study provides a new literacy regarding the potential for agency conflict in the form of moral hazard and adverse selection that will be faced by Islamic banks when applying profit-sharing contracts with other parties as managers (mudharib).

“…One of the debates is the "application of Hiyal". The application has been amplified with the emergence of new products like Sukuk and other market gap fillers (Altameemi, 2022). Due to robust liquidity, low-interest rates, and certain issuers returning to the market, Sukuk issuance volumes grew 5% in the first half of 2021 (20% counting primary issuances alone) (Mohamed & Damak, 2020).…”

Section: Introductionmentioning

confidence: 99%

Hiyal (Legal Stratagems) in Islamic Finance: Systematic Literature Review

Rafique¹,

Abdullah²,

Balwi³

et al. 2023

Purpose: The aim of this study is to systematically review the existing literature on the application of Hiyal (legal stratagems) in Islamic finance. The article visualizes the linkages between different authentic works done on the topic and how the topic has evolved through the decades. Theoretical framework: The article visualizes the linkages between different authentic works done on the topic and how the topic has evolved through the decades. Design/methodology/approach: A systematic literature review of published peer-reviewed articles on Hiyal(legal stratagems) was conducted. A comprehensive search strategy was applied to retrieved 35 articles from 25 leading journals published between 1997 and 2021. Findings: The research found that the existing knowledge on the topic especially of the current century is more focused on Riba (usury) stratagems to circumvent the prohibitions of the conventional capitalist financial system. It is because the discussion popped up as a reaction to the modern Islamic financial system, especially from traditional scholars. Malaysia and a few western countries have contributed the most to the topic. Research, Practical & Social implications: This review provides a significant contribution to Islamic finance literature by identifying the related discussions in the area and pointing the gap that need to be further explored. Originality/value: It is concluded that the literature on the topic ‘the application of Hiyal(legal stratagem in Islamic financial law” is less in numbers and not well-integrated, as the topic is still in the growing stage.