This paper aims to critically analyze the opinions of Islamic economists about the global financial crisis to examine: their views on the causes of the crisis, the juristic and…
Abstract
Purpose
This paper aims to critically analyze the opinions of Islamic economists about the global financial crisis to examine: their views on the causes of the crisis, the juristic and economic assessment they make of these causes and the lessons learned and the way forward.
Design/methodology/approach
The paper critically reviews selected writings of prominent Islamic economics on the recent financial crisis.
Findings
Most of the authors reviewed acknowledged the technical mistakes put forth by many conventional analysts as causes of the crisis. However, they have showed that the adoption of the principles of Islamic finance would have prevented most of those mistakes. The way forward, therefore, for both Islamic and conventional finance is, inter alia, greater reliance on risk sharing to inject more discipline in the system; the establishment of a strong and comprehensive regulatory body to safeguard the resilience of the system; and the integration of Zakat, Awqaf and other voluntary institutions into the financial system to cater for the financial needs of the poor.
Practical implications
The importance of integrating the voluntary institutions into the financial system is to make it more inclusive and more equitable.
Originality/value
This paper is the most comprehensive literature review on Islamic finance and the global financial crisis.
Details
Keywords
The paper aims to compare the return on Mudhārabah deposits (ROMD) to the return on equity (ROE) in Islamic banks.
Abstract
Purpose
The paper aims to compare the return on Mudhārabah deposits (ROMD) to the return on equity (ROE) in Islamic banks.
Design/methodology/approach
The summary statistics of the ROMD and the ROE is used to make a comparison between them with a sample of nine Islamic banks, from seven countries, over the last five years. Regression analysis is also undertaken to unveil the variables affecting the behaviour of ROMD and ROE at Kuwait Finance House.
Findings
The results show that the ROE tend to be at least two times higher than the ROMD. In most of the investigated cases the ROMD are more correlated to the corresponding conventional interest rate than to ROE. The regression analysis suggests that the return on assets affects more significantly the ROE than the ROMD.
Originality/value
The originality of the paper resides in the size of the sample and in the design and the findings.