This paper aims to investigate the effects of eliminating Riba in foreign currency transactions. Riba or interest arises when foreign currencies are bought and sold at different…
Abstract
Purpose
This paper aims to investigate the effects of eliminating Riba in foreign currency transactions. Riba or interest arises when foreign currencies are bought and sold at different rates. From the Islamic perspective, the difference between the buying and selling rates of foreign exchange will constitute Riba. Also, this paper examines the effects of eliminating such Riba on major macroeconomic variables.
Design/methodology/approach
This study is based on the hadith which imply that if buying and selling rates of currencies or foreign exchanges are same, i.e. if one sells BD1 = Dh10 and Dh10 = BD1 on spot, there will be no Riba. This can be guaranteed if the Islamic banking system introduces the technology, often known as FinTech interest-free foreign exchange bank machines (IFfexBM), which will automatically dispense BD10 for Dh100 and vice-versa, both locally and globally, and it will have tremendous positive effects in the economy. Furthermore, the effects of introducing FinTech for eliminating Riba will be analyzed on economic and international trade activities by using aggregate expenditure (AE) and aggregate output model within the tenets of Islamic principles.
Findings
If Islamic banks (IBs) can introduce FinTech global network system where any client can buy or sell foreign currency at the same rate without any markup, it will increase the market share for IBs by increasing the number of customers and number of branches, and it will increase the inflow of funds and volumes of transactions, especially in international trade, global financial transactions and cross-border shopping. Such an increase in transactions will increase AE and AE will continuously shift up. Such an upward shift will have positive effects on equilibrium output, employment and prosperity.
Originality/value
This is, perhaps, one of the latest attempts to eliminate Riba from foreign exchange transactions by introducing FinTech IFfexBM in each and every locality. Such elimination of Riba will not only reduce the cost of cross-border transactions but it will also reduce cost in international trade and financial transactions among nations, and therefore, it will have expansionary effects on equilibrium output, employment and global prosperity.
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Hassan M. Selim, Riyad Eid and Gomaa Agag
The adoption of smart classroom is increasing in higher education around the world. Yet, factors affecting smart classroom adoption have not been sufficiently explored. Based on…
Abstract
Purpose
The adoption of smart classroom is increasing in higher education around the world. Yet, factors affecting smart classroom adoption have not been sufficiently explored. Based on the innovation diffusion theory and external pressures, the present study developed a model to investigate the main drivers of smart classroom adoption.
Design/methodology/approach
SEM-AMOS was used to analyse the data collected from a sample of 1,208 educators.
Findings
The findings revealed that innovation diffusion theory and external pressures provide an appropriate model for understanding smart classroom adoption.
Practical implications
The findings offer important implications for higher education institutions, IT managers, and are likely to stimulate further research in the area of smart classrooms.
Originality/value
To the best of the authors' knowledge, this is the first study that used innovation diffusion theory external pressures to understanding smart classroom adoption.
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This paper aims to explore Istisna’a as a tool of monetary policy (MP) and examines its effectiveness in achieving full employment income and price stability.
Abstract
Purpose
This paper aims to explore Istisna’a as a tool of monetary policy (MP) and examines its effectiveness in achieving full employment income and price stability.
Design/methodology/approach
This paper uses Istisna’a as a tool of MP and examines its effects on key macroeconomic variables on purely theoretical ground. The effectiveness and the impact of Istisna’a-based MP is examined by using aggregate output and aggregate expenditure model, embedded with Islamic economic principles, including zakat function.
Findings
Istisna’a-based MP immediately creates well paid jobs, positively contributes and expands the size of the manufacturing sector, increases capital per person employed, labor productivity and thus increases output, employment and promotes industrialization. Increase in the size of manufacturing sector will not only increase manufactured value-added exports but also cut high valued manufactured imports and thus increases positive trade balance and eventually reduces trade deficits. Increase in labor productivity will improve the standard of living, and eventually the economy will yield sustainable high growth rates, full employment and prosperity.
Originality/value
This is probably one of the first attempt to systematically develop the Istisna’a-based MP with detailed MP transmission mechanism. This new contribution in the field of Islamic MP will unveil the horizon of sustainable economic growth, creation of well paid jobs, expansion of manufacturing sector, rapid industrialization and the increase in capital per person employed across the economy, and eventually Istisna’a-based MP will be one of the most effective tool of MP for transforming an economy into a relatively higher and sophisticated stages which will eventually promote sustainable development.
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Zaheer Anwer, Ahmed Sabit, M. Kabir Hassan and Andrea Paltrinieri
This study akims to investigate the effectiveness of expansionary monetary policy for Islamic capital markets by studying the impact of decrease in policy rates on seven Islamic…
Abstract
Purpose
This study akims to investigate the effectiveness of expansionary monetary policy for Islamic capital markets by studying the impact of decrease in policy rates on seven Islamic equity indices for the period 1996–2019. The transmission mechanism may be different for sampled indices, as they are exposed to Shariah screening that discards certain business sectors and puts limit on debt in capital structure.
Design/methodology/approach
This study uses Markov Switching dynamic regression approach of Hamilton (1988).
Findings
The results show little effectiveness of expansionary monetary policy in both Bear and Bull states, for most of the sample indices.
Originality/value
To the best of the authors’ knowledge, no study has made use of dynamic models to assess the association between monetary policy rate and Islamic index prices. Similarly, the authors found no work exploring the effectiveness of expansionary monetary policy actions in different regime for Islamic Indices. This investigation is important in unraveling whether, in the presence of limitations on selection of business activity and choice of capital structure, monetary policy can change the market sentiment, or it will be ineffective. The present study fills this gap.
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Hassan M. Selim, Reda M.S. Abdel Aal and Araby I. Mahdi
This paper introduces a modified single linkage clustering heuristic (MOD‐SC). The proposed MOD‐SLC objective is to test the application of Baroni‐Urban and Buser (BUB) similarity…
Abstract
This paper introduces a modified single linkage clustering heuristic (MOD‐SC). The proposed MOD‐SLC objective is to test the application of Baroni‐Urban and Buser (BUB) similarity coefficient to the manufacturing cell formation (MCF) problem instead of Jaccard’s similarity coefficient. The MOD‐SLC has been compared and evaluated against three cluster formation‐based heuristics for MCF. The three heuristics are: the single linkage clustering, enhanced rank order clustering, and direct clustering algorithm. The MCF methods considered in this comparative and evaluative study belong to the cluster formation approach of solving the MCF problem. The comparison and evaluation are performed using four published performance measures. A total of 25 published and ten hypothetical and randomly generated problem data sets are used in the proposed evaluative study. Results analysis is carried out to test and validate the proposed BUB based MOD‐SLC. Finally the pros and cons of each method are stated and discussed.
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Mohamad Mehdi Mojahedi Moakhar, Mahmoud Esavi, Amir Khademalizadeh and Fathollah Tari
The purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic…
Abstract
Purpose
The purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic paradigm, including the Quran, Sunnah, jurisprudence and Islamic philosophy thinking, to illustrate the origins of the Islamic approach to monetary systems. The money interest rate and its studies are explained, and the role of money and credit in the production function is considered. Then, it is shown that money maintains the demand for money in the overlapping generation model, as well as the consumption behavior of households. It is followed by an explanation of general Pareto optimality and the role of the money interest rate in inefficiency and nonoptimality for households and firms. Finally, Section 4 concludes the paper.
Design/methodology/approach
This paper studies the effects of money issuance and bank creation on Pareto optimality. In explaining the origins of the Islamic approach to monetary systems, the literature review, it focuses on western economics’ literature and Islamic economics paradigms such as the Quran, sunnah, jurisprudence and Islamic philosophy thinking. In modeling section, the authors show how banks’ fractional reserve credit is profitable. The authors also examine how the introduction of the money interest rate can change the Pareto optimality. In this regard, the comparison between two situations, namely, financing by the stock of money and borrowing in the credit market, indicates that welfare is reduced by the creation system and is inefficient (or nonoptimal). The result is that no money and no credits are created. The provision of this system compensates money by increasing the real money supply or deflation. To ensure Pareto optimality, it has been proven in the field of microfoundation that there should be no fixed money contracts and no money interest rates. It is necessary that the interest rate on consumption credit is zero or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector.
Findings
As a result, the authors proved mathematically that the money interest rate must be zero to ensure productivity and Pareto optimality. On the other hand, the introduction of money or credit through loanable money leads to inefficiency, both in production and households and in the general equilibrium. The inflation generated by the credit system stimulates the change in the price level and perpetuates this inefficiency. Thus, if the authors want to return to the optimality condition, the interest rate on consumption credit must be zero or Qarz-al-Hasna is breached. However, the behavior of the fractional banking system and the credit mechanism teaches us that the money interest rate is an integral part of credit and loanable funds. Thus, the elimination of the money interest rate from the banking system without bank creation is implausible. Finally, to ensure Pareto optimality, it has been mathematically proven in the field of microfoundation that there should be no fixed money contracts and no money interest rate. It is necessary that the interest rate on consumption credit is zero, or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector. The result is that no money and credit are created. The provision of this system compensates money by increasing the real money supply or deflation.
Originality/value
The capitalist theory of the definition of interest plays a decisive role in economic science. In this context, the authors are dealing with different vocabularies and terms for the interest rate. These different vocabularies have their origin in the different economic situations and especially determine the thinking of the schools. Because of the relationship between future and spot, the authors have to transform the variable “level” into the variable “interest rate” in the dynamic space. Finally, the exact explanations for the movement and evaluation of the economy are revealed by the correlation of the different interest rates.
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The design of a cellular manufacturing system requires that a machine population be partitioned into machine groups called manufacturing cells. A new graph partitioning heuristic…
Abstract
The design of a cellular manufacturing system requires that a machine population be partitioned into machine groups called manufacturing cells. A new graph partitioning heuristic is proposed to solve the manufacturing cell formation problem (MCFP). In the proposed heuristic, The MCFP is represented by a graph whose node set represents the machine cluster and edge set represents the machine‐pair association weights. A graph partitioning approach is used to form the manufacturing cells. This approach offers improved design flexibility by allowing a variety of design parameters to be controlled during cell formation. The effectiveness of the heuristic is demonstrated by comparing it to two MCFP published solution methods using several problems from the literature.
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M. Kabir Hassan and Mustafa Raza Rabbani
The purpose of this study is to investigate the role of Auditing and Accounting Organization for Islamic Financial Institution (AOIFI) governance disclosure on the performance of…
Abstract
Purpose
The purpose of this study is to investigate the role of Auditing and Accounting Organization for Islamic Financial Institution (AOIFI) governance disclosure on the performance of Islamic financial institutions (IFIs) through systematic literature review approach.
Design/methodology/approach
This study is based on the review of literature related to the AAOIFI accounting standards downloaded from Scopus database. This study includes review of 126 research articles, 10 review papers, 9 book chapters and 5 conference papers related to different roles played by AAOIFI in providing standards for accounting, auditing, governance and ethics for global IFIs.
Findings
The findings of this study suggest that AAOIFI has played a critical role in developing the accounting standards for the IFIs and contributed positively to the overall growth of the Islamic finance industry.
Practical implications
AAOIFI has played a critical role in issuing and development of accounting and auditing standards and has contributed positively to the financial performance of IFIs. Research gaps are identified, and there is a need to work on these gaps.
Originality/value
This study will contribute to the understanding the role of AAOIFI in issuing and development of accounting and governance standards and future research agenda based on a thorough review of literature.
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Abdulmajeed Muhammad Raji Aderemi and Muhammad Shahrul Ifwat Ishak
This paper aims to explore the viability of applying Qard Hasan as an Islamic crowdfunding financial instrument to finance micro-enterprises in Malaysia.
Abstract
Purpose
This paper aims to explore the viability of applying Qard Hasan as an Islamic crowdfunding financial instrument to finance micro-enterprises in Malaysia.
Design/methodology/approach
This is a qualitative study in which semi-structured interviews were conducted with several crowdfunding professionals concerning the application of Qard Hasan in Islamic crowdfunding. To realise the purpose of this study, the data is subjected to thematic analysis.
Findings
The finding reveals that though it is often argued that Qard Hasan is basically not a business-oriented instrument, a closer look at the framework reveals the uniqueness and flexibility of this instrument to be adopted as a viable financial instrument for crowdfunding in financing micro-enterprises in Malaysia. Although it is associated with various risks including default risk and the risk of attracting big funds. However, these risks can be managed and overcome by using FinTech mechanisms such as blockchain to carry out due diligence, monitor the project and ensure the repayment in installment.
Research limitations/implications
The findings of this study may not be suitable for generalisation to all crowdfunding practices as the semi-structured interview is concentrated predominantly in Malaysia. However, it still provides valuable contributions to the Islamic crowdfunding sector in Malaysia between theory and practice.
Practical implications
The Qard Hasan crowdfunding framework in this study can potentially be applied to help micro-entrepreneurs reach out to financial services within their means. This framework provides means to grow the micro-enterprise sector.
Social implications
Qard Hasan crowdfunding will effectively alleviate poverty by creating an avenue of opportunities for business enterprises and close the gap between the wealthy and the poor classes in society, which will eventually bring about more cooperation, more collaboration and cultivate a generous society.
Originality/value
In spite of the fact that Islamic crowdfunding is not a new topic in research, it lacks empirical studies, particularly qualitative analysis. As this study engages with experts in Shari’ah and crowdfunding regarding the potential application of Qard Hasan, it highlights a fresh discussion both in theory and practice.
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Md Akther Uddin, Abu Umar Faruq Ahmad and Fatima El Morabit