Role of Islamic Finance in Modern Economy

A special issue of Economies (ISSN 2227-7099).

Deadline for manuscript submissions: 30 June 2024 | Viewed by 6763

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Guest Editor
School of Accounting, Economics and Finance, Faculty of Business and Law, University of Portsmouth, Richmond Building, Portland Street, Portsmouth PO1 3DE, UK
Interests: corporate governance; corporate finance; Islamic accounting and economics and finance; accounting and economics and finance; market efficiency; financial markets

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Berlin School of Business and Innovation, Karl Marx Street, 97-99, 12043 Berlin, Germany
Interests: corporate governance; financial accounting; finance; sustainable finance; financial inclusion; banking; financial economics; firm sustainability (ESG); panel data econometrics

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Guest Editor
Bangor Business School, Bangor University, Hen Goleg, College Rd, Bangor LL57 2DG, UK
Interests: corporate narrative reporting; international financial reporting standards (IFRS); Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI); extensible business reporting language (XBRL); market-based accounting research; auditing; corporate governance; earnings management; corporate investment efficiency; corporate finance; Islamic accounting and finance
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Dear Colleagues,

Traditional finance has introduced efficiency and sustainability along with its profit maximisation approach. However, Islamic finance is also a need of the modern era. The reason for this is that Islam has become the world’s fastest-growing religion in the 21st century.

After many financial meltdowns, the world has realised the importance of fairness, trustfulness, and transparency and has given equal attention to all indirect owners, which is also the basis of Islamic finance. Islamic finance prohibits exploitation of any factor of production and emphasises an equal distribution of wealth among all stakeholders without compromising the rule of equity and fairness. However, with the passage of time, scholarly research has highlighted the role of Islamic finance and its instruments in introducing prosperity for the masses and accountability for stakeholders. On one side, there is a need to observe the role of interest-free finance in reducing the cost of doing business and mobility of financial resources. Along with it, the role of interest-free finance is also needed to re-explore reducing the share of the shadow economy and improving economic growth by introducing efficiencies to the supply side and consumption side of economy. Similarly, there is also a need to address the issues of how the Islamic mode of finance can be made simpler for the better mobility of resource globally. Although the concept of socially responsible investment seems more relevant, working on Islamic finance while complying with Sharia principles can also pay a vital role in introducing fairer practices in business firms across the globe while helping to reduce the shadow economy and improving resource mobilisation.

Dr. Mamdouh Abdulaziz Saleh Al-Faryan
Dr. Zahid Irshad Younas
Prof. Dr. Khaled Hussainey
Guest Editors

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Keywords

  • islamic finance
  • sustainability
  • shadow economy
  • resource mobilisation

Published Papers (2 papers)

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Research

19 pages, 3382 KiB  
Article
Dynamic Dependency between the Shariah and Traditional Stock Markets: Diversification Opportunities during the COVID-19 and Global Financial Crisis (GFC) Periods
by Mosab I. Tabash, Mohammad Sahabuddin, Fatima Muhammad Abdulkarim, Basem Hamouri and Dang Khoa Tran
Economies 2023, 11(5), 149; https://doi.org/10.3390/economies11050149 - 17 May 2023
Cited by 1 | Viewed by 1764
Abstract
The aim of the present research is to highlight whether there exist any diversification opportunities from investing in developed and developing countries’ Shariah-compliant and non-Shariah-compliant stock markets during global financial crisis (GFC) and the COVID-19 pandemic periods. For this purpose, we employ daily [...] Read more.
The aim of the present research is to highlight whether there exist any diversification opportunities from investing in developed and developing countries’ Shariah-compliant and non-Shariah-compliant stock markets during global financial crisis (GFC) and the COVID-19 pandemic periods. For this purpose, we employ daily data for both Shariah and non-Shariah indices from 29 October 2007 to 31 December 2021. The study uses multivariate GARCH-DCC and wavelet approaches to examine if there exist diversification opportunities in the selected markets. Evidence from this study shows that although the developing markets’ stock returns experience high volatility of a similar degree, the conventional indices of Malaysia have the highest volatility among them. This shows that Shariah indices have less exposure to risk and higher possibilities of diversification compared to their conventional counterparts. Regarding developed markets, the Japanese conventional index and the U.S. Shariah indices are more volatile compared to other indices in the market. Moreover, the results of the wavelet power spectrum show significant and higher volatility during the COVID-19 pandemic rather than the GFC. Similarly, the Chinese conventional market experienced minimum variance during the GFC and COVID-19 pandemic period. On the other hand, the results of wavelet-coherence transform indicate that the Japanese Shariah-based market offered better portfolio opportunities for U.S. traders during the GFC and the COVID-19 pandemic periods. Hence, opportunities for investment in this selected market are basically close to zero. Therefore, investors should carefully choose which stocks they can include in their investment portfolio. Full article
(This article belongs to the Special Issue Role of Islamic Finance in Modern Economy)
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13 pages, 310 KiB  
Article
Islamic Financial Stability Factors: An Econometric Evidence
by Fadoua Joudar, Zouheir Msatfa, Olaya Metwalli, Maha Mouabid and Brahim Dinar
Economies 2023, 11(3), 79; https://doi.org/10.3390/economies11030079 - 2 Mar 2023
Cited by 1 | Viewed by 3991
Abstract
This study empirically examines the internal and external factors of Islamic banks’ financial stability during the time frame from 2006 to 2017 in the Middle Eastern and North African (MENA) region. The stability of Islamic banks was determined by the Z-score, which is [...] Read more.
This study empirically examines the internal and external factors of Islamic banks’ financial stability during the time frame from 2006 to 2017 in the Middle Eastern and North African (MENA) region. The stability of Islamic banks was determined by the Z-score, which is one of the most well-known financial stability indicators. Using multiple regression analysis, it is shown that capital adequacy ratio and liquidity positively impact the Z-score of Islamic banks, whilst size, governance and level of concentration have a negative impact. This study recommends raising the capital and the liquidity level of Islamic banks as it helps to promote the financial stability of Islamic banks. Full article
(This article belongs to the Special Issue Role of Islamic Finance in Modern Economy)
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