Emerald | International Journal of Islamic and Middle Eastern Finance and Management | Table of Contents

Islamic Insurance (Takaful): Demand and Supply in the UK

literatinetwork@emeraldinsight.com (Tahani Coolen-Maturi) — Fri, 14 Jun 2013 00:00:00 +0100

Abstract

Purpose - Takaful is the Shariah compliant alternative to conventional insurance. Unlike conventional insurance, takaful insurance avoids prohibited concepts according to Islamic law, such as interest (Riba), gambling (Maysir) and uncertainty (Gharar). While there is a rapid growth in the takaful industry worldwide, it is in its early stages in the UK. In the UK there are only two takaful providers, one of which is struggling to raise capital and remain in business. In this paper the main objective is to examine empirically whether there is a real demand for takaful products among Muslims in the UK. Design/methodology/approach - The data for this study were collected through a self-administered questionnaire where the non-probability sampling technique was employed. The target population for this study is the whole Muslim community in the UK. And since our target population is large and widely geographically distributed, an online survey is the best option for this study because it is cost effective and can reach many Muslims across the country. Findings - This paper examined whether there is a real demand for takaful insurance among Muslims in the UK. The study showed that respondents are likely to buy car, health and home insurance if they will offer the same cover as conventional insurance and with competitive prices. The paper also showed that there is quite a lack of awareness about takaful insurance and its main principles among Muslim communities, for example, about half the respondents are not sure whether takaful insurance is in accordance with Islam. The majority of respondents agreed to use Arabic terms for the Islamic insurance to show they are Islamic products and to differentiate them from conventional alternatives. Originality/value - This paper examined whether there is a real demand for takaful insurance among Muslims in the UK. The paper also showed that there is quite a lack of awareness about takaful insurance and its main principles among Muslim communities, and whether obtaining takaful products through banking channels is the preferred option rather than from independent takaful institutions.

Performance evaluation of Islamic mutual funds relative to conventional funds: Empirical evidence from Saudi Arabia

literatinetwork@emeraldinsight.com (Dawood Ashraf) — Fri, 14 Jun 2013 00:00:00 +0100

Abstract

Purpose - This article reviews and extends previous research on the performance of Islamic mutual funds (IMFs) by evaluating the relative performance of IMFs and conventional funds during the global economic crisis in the context of the Saudi Arabian capital market.Design/methodology/approach - This paper compares the market timing and stock selection abilities of 159 mutual funds listed on the Saudi Arabian stock market from 2007 to 2011 by using the CAPM regression and Treynor and Mazuy (1966) models. This paper addresses the benchmark problem from which most prior IMFs studies suffered by using appropriate regional benchmarks. As a robustness check, coefficients of IMFs and conventional funds are compared by using the differences in mean and standard deviation analysis obtained from the standard CAPM model on individual funds. Findings - The empirical results show evidence of better performance of IMFs relative to conventional funds during periods of economic crisis. In addition, although there is no evidence of relative superiority in market timing ability, managers of IMFs appear to have better stock selection ability during times of economic crisis.Research limitations/implications - The combination of superior stock selection ability of IMFs and the negative market timing ability of conventional funds suggest that IMFs offer better hedging opportunities for investors during periods of economic downturn.Practical implications - The findings of this paper suggests that IMFs can provide hedging benefits during adverse economic conditions - an issue of great importance due to the current and forecast insecurity surrounding the global capital markets. By holding a portion of their investment portfolio in IMFs investors can experience a higher degree of confidence in terms of investment security, growth and returns. Similarly, managers of conventional funds can improve risk adjusted performance by following similar screening criteria as IMFs during economic slowdowns.Originality/value - This paper represents the first comprehensive study on the comparative performance of Islamic and conventional mutual funds during the current financial crisis by including all fund managers listed on the Saudi Arabian stock market. This paper extends the knowledge of the emerging literature of Islamic finance and mutual fund performance.

Sport and Emerging Capital Markets: Market Reaction to the 2022 World Cup Announcement

literatinetwork@emeraldinsight.com (bana mousa Abuzayed) — Wed, 24 Apr 2013 00:00:00 +0100

Abstract

Purpose - Purpose – The purpose of this paper is to examine how the announcement of Mega Sport event of 2022 World Cup affecting the stock market return and volatility for the hosting country (Qatar) and other economically related countries (United Arab of Emirates, Bahrain, Kuwait, Saudi Arabia and Oman). Design/methodology/approach - Design/methodology/approach – The paper includes empirical analysis in which data from Qatar Stock Market as well as a sample of economically connected markets are collected for the period of 2010 and 2011 and analyzed to examine if Mega Sport events influence stock market return and volatility. Two testing methodologies are used in this study, event study as well as GARCH and EGARCH models. Additionally, sector effect is considered to examine if Mega events can affect sectors’ returns in different levels. Findings - Findings – The study found evidence of abnormal market return in the hosting country; in particular, the Service sector is the most affected sector. However, it failed to find any evidence of abnormal return for the rest of selected Gulf Cooperation Council (GCC) countries. On the other hand no significant volatility effects were found. Originality/value - Originality/value – This paper’s originality lies in suggesting that policy makers in small economies expect to host Mega events need to work more seriously to promote investments and attract funds from investors and consumers to be able to reap the benefits out of these events which should exceed the pay associated with improving infrastructure of less developed markets. Given that Qatar, as well as most of the GCC countries, is planning to diversify their future income, sport may improve the country’s reputation and attract external investments to the country.

Performance Indicators of Banks in a Total Isalamic Banking System: The Case of Sudan

literatinetwork@emeraldinsight.com (Abuzar MA Eljelly, Ahmed Elobeed) — Wed, 24 Apr 2013 00:00:00 +0100

Abstract

Purpose - This paper aims at extracting the common performance traits of banks operating in a whole Islamic banking system in Sudan. Sudan is among the few economies in which a whole Islamic banking system is in place. Design/methodology/approach - Nine banks representing the most active and large banks are used as a sample for this analysis. The study applied factor analysis to a large set of financial ratios that are commonly used in financial analysis of banks.Findings - The study found that six factors are able to explain most of the variation of the financial ratios used in the study. These factors ranked according to the percentage of variation explained are: Liquidity risk, Coverage, Efficiency (utilization), Profitability, Capital adequacy, and Control. The study also tested for the stability of these factors over time and found that both the extracted factors and their loadings are stable over time. Research limitations/implications - This study provides reduced set of indicators of performance of Islamic banks that operate in a total Islamic banking system that may be beneficial to a large group of stakeholders and parties that have interest in Islamic banking. Originality/value - This study provides an opportunity to interested researchers in the area of Islamic banks about an important aspect of a total Islamic banking system, such as Sudan.

Analysis of Islamic bank’s financing and economic growth: A panel cointegration approach

literatinetwork@emeraldinsight.com (yazdan gudarzi farahani, Masood Dastan) — Fri, 14 Jun 2013 00:00:00 +0100

Abstract

Purpose - This paper uses empirical evidence to examine the role of Islamic banks’ financing on economic performance of selected countries (Malaysia, Indonesia, Bahrain, UAE, Saudi Arabia, Egypt, Kuwait, Qatar and Yemen).Design/methodology/approach - Using quarterly data (2000:1-2010:4), this paper utilizes the Panel cointegration approach models, frameworkFindings - The results generally signify that in the long run, Islamic banks’ financing is positive and significantly correlated with economic growth and capital accumulation in these countries. The results obtained from Granger causality test reveals a positive and statistically significant relationship between economic growth and Islamic bank’s financing in the short run and in the long run. It also comes out that the long run relationship is stronger than the short run relationship. Originality/value - This paper uses empirical evidence to show the effect of Islamic banks’ financing on economic growth of selected Islamic countries. To the best of the authors’ knowledge, most of studies in this field has applied the bound testing approach of cointegration, error correction models (ECMs), Auto Regressive Distributed lag (ARDL) and Vector Autoregressive Model (VAR) which coefficients obtained by these models cannot be deemed as a general finding applicable for other countries. The superiority of our article is in applying FMOLS model that has stable and consistent coefficients and is also a dynamic model.