International Journal of Islamic and Middle Eastern Finance and Management

Complementing community, business and microenterprise by the Islamic epistemological methodology: A case study of Indonesia : Table of Contents

Masudul Alam Choudhury, Sofyan S. Harahap — Sun Jun 07 14:15:03 BST 2009

Abstract:
Purpose – The purpose of this paper is to address the following question: how do we derive a systemic understanding of community, business and microenterprise linkages in the light of the cardinal episteme of Islamic belief, Tawhid? Design/methodology/approach – The worldview of unity of the divine laws termed in the Qur'an as Tawhid (oneness of God or equivalently oneness of the divine laws and also unity of knowledge) is explained in the form of a general socioeconomic paradigm. This worldview is then used to address the complementary relationships between microenterprises and their embedded social environment comprising community and business. Findings – The participatory development interrelationships explained by means of circular causation between the variables representing community, business and microenterprise comprise a specific example of application of the Islamic episteme of unity of knowledge to entities that exist in embedded learning systems. Such learning systems are governed by the episteme of unity of knowledge as explicated by the Qur'an and the Sunnah (Prophetic guidance). These together form the foundation of every Islamic methodological inquiry and application. Examples of microenterprises are Pasar Pagi (morning markets) and Pasar Malam (night markets) in Indonesia. Other comparative examples are given. Originality/value – This paper shows how participatory development and sustainability-by learning paradigms arise uniquely from the epistemic foundations of unity of knowledge (Tawhid). The productive transformation of microenterprise groupings through their complementary relationships with community and business is shown to invoke the Tawhidi epistemic worldview. The result of such complementary social embedding is expected to result in enhanced organization and productivity of microenterprises. The paper offers policy prescriptions for such participatory development change.

The determinants of Islamic banks' efficiency changes: Empirical evidence from the MENA and Asian banking sectors : Table of Contents

Fadzlan Sufian, Mohamad Akbar Noor Mohamad Noor — Sun Jun 07 14:15:03 BST 2009

Abstract:
Purpose – The purpose of this paper is to provide a comparative analysis on the performance of the Islamic banking sector in 16 MENA (Middle East and north Africa) and Asian countries. Design/methodology/approach – A two-stage procedure is followed to examine the efficiency of Islamic banking sectors in 16 MENA and Asian countries. First, data envelopment analysis (DEA) is used to estimate the technical, pure technical, and scale efficiency for each bank in the sample. Following previous research, an annual frontier specific to each year is constructed, as it is more flexible and thus more appropriate than estimating a single multiyear frontier for the banks in the sample. It has been pointed out that the principal advantage of having panel data is the ability to observe each bank more than once over a period of time. Nevertheless, the issue is also critical in a continuously changing business environment because the technology of a bank that is most efficient in one period may not be the most efficient in another. To an extent, this relieves also the problems related to the lack of random error in DEA by allowing an efficient bank in one period to be inefficient in another, assuming that the errors owing to luck or data problems are not consistent over time. In the second stage regression, Tobit regression is used to determine the impact of internal and external factors on Islamic banks' efficiency. Findings – The results suggest that the MENA Islamic banks have exhibited higher mean technical efficiency relative to their Asian Islamic bank counterparts. The empirical findings suggest that during the period of study, pure technical inefficiency outweighs scale inefficiency in both the MENA and Asian countries banking sectors. Banks from the MENA region were found to be the global leaders by dominating the efficiency frontier during the period of study. Positive relationship was found between bank efficiency and loans intensity, size, capitalization, and profitability. The empirical results show that technically more efficient banks are those that have smaller market share and low non-performing loans ratio. A multivariate analysis based on the Tobit model reinforces these findings. Originality/value – The paper aims to fill a demanding gap in the literature by providing the latest empirical evidence on the determinants of the performance of Islamic banks in 16 MENA and Asian countries.

Islamic finance: regulatory framework – challenges lying ahead : Table of Contents

Christos Alexakis, Alexandros Tsikouras — Sun Jun 07 14:15:03 BST 2009

Abstract:
Purpose – The purpose of this paper is to provide an overview of the regulatory framework and key regulatory institutions and industry associations in Islamic finance today and highlight areas that merit increased attention. Design/methodology/approach – A wide range of bibliography was reviewed, with particular focus on the standards published by the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions. Regulatory topics of particular interest in the Islamic financial world are reviewed. An overview of the main Islamic regulatory institutions is provided. The paper ends with a set of hypotheses requiring further research. Findings – The paper finds that the growth of the Islamic finance sector may be impacted by the: increased involvement in Islamic finance by Western regulators, as well as credit rating agencies; existence of sound accounting procedures; increased protection of stakeholders of Islamic Financial Institutions. Originality/value – This paper provides useful information on the current status of the regulatory framework in Islamic finance and highlights areas for further research for academics and professionals alike.

Islamic perspectives on leadership: a model : Table of Contents

Abbas J. Ali — Sun Jun 07 14:15:03 BST 2009

Abstract:
Purpose – The purpose of this research is to address the notion of leadership in Muslim countries. It seeks to develop a model for understanding leadership in Islamic culture and discusses the factors which give rise to two types of leadership: the prophetic and caliphate. Design/methodology/approach – The article briefly surveys the socio-economic and political forces which facilitate the emergence of certain leadership styles. The paper, then, suggests a model of leadership relevant to Islamic culture. Findings – Two types of leadership were identified. Furthermore, the paper addresses the conflict between idealism and realism and the rise of authoritarian leaders. Practical implications – This paper offers policymakers and researchers various avenues on how to address the issue of leadership in an Islamic culture and presents a theoretical model for understanding issues pertaining to leaders and leadership in Muslim societies. Specific propositions pertaining to the effect of culture and society on leadership are offered. Originality/value – The paper offers a genuine reflection on the nature of leadership. The issue of leadership and its linkage to culture has often been overlooked in the literature. In part, this is because most of the literature on leadership has been focused primarily on personality-based relationships and relationships between leaders and followers. In this paper, it is argued that culture shapes personality and gives meaning to contextual and relational aspects of leadership.

Implications of social responsibility investment for pension funds in Turkey : Table of Contents

Bryane Michael — Sun Jun 07 14:15:03 BST 2009

Abstract:
Purpose – This paper aims to present to capital market regulators (particularly in Turkey) with options for regulating the quickly expanding area of socially responsible investment (SRI). Design/methodology/approach – The paper takes a public economics perspective, focusing on the social risks concomitant with equity investment, and presents options based on an economic analysis of the various regulatory options available to capital market regulators. Findings – The paper finds that in the long run, the extent of national SRI-related regulation will probably depend on the extent to which the social, environmental, and other risks targeted by SRI represent social risks (which can be mitigated by regulation as opposed to other policy instruments). Practical implications – While Turkish private pension fund regulators should be mindful of wariness of other OECD member countries to regulate SRI, the particularity of the social risks faced by Turkish financial markets may militate for a unique national approach toward SRI regulation. Originality/value – This study represents one of the first attempts to address the issue of domestic SRI regulation and to present evidence-based conclusions in a policy oriented setting.