Quarterly Studies in Banking Management and Islamic Banking

Abstract This article aims to design a conceptual and indigenous framework for the restructuring of Islamic banking in deprived areas of Iran, focusing on achieving financial justice, promoting banking inclusion, and social empowerment. Regions such as Sistan and Baluchestan, Kohgiluyeh and Boyer Ahmad, Ilam, and parts of Khuzestan are clear examples of banking deprivation in Iran due to a combination of structural poverty, institutional distrust, and lack of financial infrastructure. The present study attempts to design a five-dimensional framework to present an Islamic, indigenous, and sustainable solution to address banking challenges in these regions. Despite the jurisprudential and justice-oriented foundations of the Islamic banking system, its performance in these areas has been ineffective due to the lack of adaptation of its structures and processes to the cultural and institutional characteristics of deprived areas. This study, relying on the principles of Islamic economic justice and using the guided content analysis method, presents a conceptual and indigenous framework for the restructuring of Islamic banking operations. Data were collected through 18 semi-structured interviews with experts in the fields of economic jurisprudence, Islamic banking, and regional development. The final conceptual framework is based on five complementary dimensions: local institution building, simplification of contracts and processes, training local human resources, social validation, and targeted policy support. These dimensions, in interaction with each other, pave the way for promoting financial inclusion, increasing social trust, and economic participation. The innovation of this framework lies in creating a systematic link between the principles of Islamic justice and the operational dimensions of banking. Despite its focus on localization, this framework is also applicable to similar Islamic societies. Inspired by the experience of Grameen Bank in Bangladesh in collective guarantee lending and Islamic microfinance programs facilitated by Islamic Relief Indonesia in local institutions, this framework provides a new framework for achieving financial justice in deprived areas.                                                                                                                                                                                 

Abstract The ability to identify and assess Sharia compliance risk is an important issue in providing a framework for Sharia compliance risk management. Emphasizing this issue, the emergence of Islamic banking in the world, and continuous efforts to develop standards have been prioritized in Islamic banking. In fact, as it will be explained in this study, there are many issues that need to be addressed regarding the compliance risk in our country’s banking industry. Sharia compliance risk is classified according to the levels of that risk, its constituent factors, and its strategic and tactical management. Sharia compliance risk management, similar to other forms of risk management, has a lifecycle. This study was conducted through a review of Islamic texts, supervisory regulations, and existing scientific papers concerning Sharia risk management. The purpose of this article is to examine the risk of Sharia compliance, to establish the basis of its definition, to describe its characteristics and implications, and to examine how it should be managed in the banking system, with the current situation of the country. Finally, in order risk to prevent the risk of non-compliance with legal and supervisory requirements in line with risk compliance management, the researchers present a systemic framework. For risk assessment, the risk management matrix (likelihood, effect, vulnerability) is applied.

Abstract Today, the tools and services provided in the Islamic framework have successfully encouraged economic firms to be active in this field. This can be due to the success of Islamic banking in competing with conventional banks in gaining their trust in the provision of services. In this study, to clarify this issue, the cost efficiency of banks has been measured and a comparison has been made between Islamic and conventional banks. The reason is that efficiency is an indicator that can provide an overview of activity results. Moreover, Islamic and conventional banks are both required to minimize the costs. To calculate the efficiency, the information of the banks of MENA region and STATA software was used for 188 banks from 2012 to 2016. Based on the results obtained, using the stochastic frontier analysis (SFA) method, it can be stated that Islamic banks in the region have been more efficient than conventional ones.

Abstract There are some fundamental differences between Islamic banking and conventional banking. These differences cover several areas including depositor's participation in investment, risk-sharing, interest rates, depositor's knowledge of the fate of deposit, and deposit insurance. These differences can be used to challenge the performance and efficiency of deposit insurance systems in the two aforementioned banking systems.
Thus, the present article is aimed at investigating the need for deposit insurance schemes in both conventional and Islamic banking systems. The investigation is carried out by analyzing the differences between the two banking systems and comparing them in terms of their deposit insurance schemes. The results show that deposit insurance is more necessary in usury based banking system compared to the Islamic banking system. In addition, based on our study the Iranian banking system is more similar to the usurious banking system than its Islamic counterpart. This was indicative of the necessity of having a deposit insurance system in the Iranian banking system.

Abstract The aim of this research is to focus on systemic risk by assessing the extent to which the distress caused by the main different financial sectors including banks, insurance and investment companies can be spread over the risk of financial system. For this purpose, a method of measuring changes in Conditional Value at Risk (CoVaR) based on the financial sectors return is used and its value is estimated using quantile regression. Also, two-sample Kolmogorov-Smirnov test was used to determine the impact of risk imposed by financial institutions to financial system and to achieve a ranking of financial sectors contributing to systemic risk. In this paper, 24 financial institutions listed in Tehran Stock Exchange during the time period of 2011-15 was selected. The results show that all 3 sectors contribute significantly to systemic risk in Iran during this time period and the investment companies have the highest share in creating systemic risk and then the banking and insurance sectors, respectively.

Abstract Banking system is of great importance in many countries. This system can provide effectiveness in the economy with the proper circulation of money and in the case of improper functioning, the activities of other economic sectors will face difficulties. Although banking without lucre has progresses in theoretical field, but competitiveness ability and its operational aspects is limited in transnational level. Many factors affect on this issue; lack of alignment with Islamic banking standards and operational rules of Basel Committee, political factors such as sanctions and contract compliance risk are challenges that have limited Iranian banking system in communication with other financial institutions and also has limited the improvement of indicators quality. This paper has conducted using a descriptive-analytical method and collecting library and documentary information, and studied the private banks performance of Islamic republic of Iran and Islamic banks of Persian Gulf region, based on CAMEL indexes. The results show that selected Islamic banks in terms of capital adequacy, credit risks, management quality index and liquidity index are in better situation compared to private banks in Iran.

Abstract The experience of implementing no-interest banking rules in 3 decades in Iran shows that existing banking system has been faced with a lot of challenges in different areas. In order to fulfill the Islamic banking rules and regulations properly and to force all the banks to follow this system practically, first these challenges and difficulties should be identified and categorized and then they should be resolved. To achieve this goal, some of the factors that should be identified are human and management factors. In this research, we have used field study and literature review to collect the data. Using survey and Delphi technique, the human and management factors are identified and categorized. Then, the share of these elements in practical infidelity of banks to Islamic banking system was identified. Statistical calculations were done using SPSS software. Cronbach's alpha was above 0.7 so the reliability of the questionnaire was acceptable. However, construct validity was not calculated due to the low number of samples, research methodology, and raising the level of expertise. For statistical inference about the population, sample mean and parametric one sample T-test was used. To determine the impact of variables and components variances described and varimax rotation was used.
The findings of this research show that human and management factors and also the problems of Iran banking system pattern are the major reasons for practical infidelity of the banks while management factor has the higher portion. At the end, some reformatory suggestions are proposed.

Abstract Islamic banking has been formed on the basis of delegation and participation in the profits and losses and puts a great emphasis on the real economy and investment in these sectors. So, for the development of this concept in our country, we first need to know what understanding of this concept by experts and bank managers there exists. Therefore, in this article the amount of the bank's managers and experts of Islamic banking functions is studied. This study is an applied research and descriptive survey with a statistical population of 158 experts and experienced senior bank managers of Bank Refah in Tehran province. The results showed that the perceptions of samples of all Islamic banking functions except for the use of marketing techniques are at a high level. Also, based on Friedman ranking test it became clear that among the Islamic banking functions, Question 10 (maximizing the interests of shareholders and standard of living and welfare of society) has the highest and Question 7 (the application of appropriate marketing programs tailored to islamic banking services) has the least important rank.

Abstract Islamic banks and financial institutions are faced with many constraints especially in relation to inter-banking transactions with other banks as well as conventional banks. Attaining the money-market instruments which are in accordance with Shari’ah (the religious law) are both limited and diverse in different Islamic countries. Meanwhile, the central bank's short-term financing instruments are often not compatible with the principles and rules of Shari’ah. Hence, with respect to the Islamic banks and financial institutions, the liquidity management by the central bank is still in its infancy and there are still some concerns over the idea whether the money in an Islamic perspective can fulfill its main duty, that is the coordination between the monetary section and the real section through controlling the money supply. Given the importance of this issue, steps have been taken in recent years to expand monetary policy tools in Islamic countries. Emphasizing the experience of countries such as Malaysia, Sudan, Indonesia, and Bahrain, this paper presents and reviews the structure and properties of the tools used by Islamic banks and financial institutions as well as by other banks in order to manage liquidity on the interbank market. Further, the central bank's tools for open market operations and government financial fulfillment in the interbank market are analyzed and finally the tools of the central banks and governments to grant credit facilities as the final lender are discussed.

Abstract Currently, Islamic banking is a well-developed and well-formed industry, and there are different experiences of its application across the world. In this article, we made an attempt to draw a comparison between Islamic banking system and its process in Iran with some other Islamic countries like Turkey, Saudi Arabia, Pakistan, Bahrain, Indonesia, and Malaysia. The research method is descriptive-analytical; key performance indexes during 2003-2008 were extracted from IBI (Islamic Banking Intelligence) system, for the aforementioned comparison. In addition to affirming the variety of performances of Islamic banking in these countries, the results clearly indicate the efficiency and correspondence of the procedure of the application of different indexes of Islamic banking like different contracts with Islamic Sharia in these countries.

Abstract Significant developments in Islamic banking over the last decades have attracted many financial researchers. Saudi Arabia has the highest amount of assets based on Islamic laws after Iran. Examining Islamic banking in Saudi Arabia in the present study indicates that in despite of the fact that there are no specific laws and frameworks for Islamic banking in that country and the initial resistance of Saudi Arabian Monetary Agency (SAMA) against developing of Islamic banking system, people’s need for this type of banking as well as banks’ innovations in providing services based on the Islamic Sharia in using some contracts like Morabaha, have lead to an increase in the share of this type of banking up to half of all that of the overall banking system of Saudi Arabia. However, lack of inspection on the part of SAMA and formation of various self-regulated religious coalitions in Islamic institutes have led to some controversies about the accordance of the products and services with the Islamic Sharia, thereby posing obstacles for development of Saudi Islamic banks especially outside the country. Yet, the existence of the two systems of banking, i.e. Islamic and conventional, and the competition between them especially in providing services based on the Sharia for covering its increasing demands, have made promising perspectives for Islamic banking system in that country.

Abstract Having great potentials in the field of Islamic banking and Islamic financial markets, Malaysia is one of the prominent centers, and over the past years Malay banks have been able to play an important role in attracting Muslims and even non-Muslims’ liquidity utilizing new methods of Islamic banking. Iran, as a country which has operationalized the non-interest banking system in 1984, also enjoys a set of comprehensive laws in this respect. However, the country has not yet been able to succeed much in Islamic banking unlike Malaysia in spite of its potentials and infrastructures. Therefore, the present paper attempts to fully examine methods of allocation and mobilization of resources in Malay Islamic banking system so as to identify the gaps in the way contracts are executed in Iran’s banking system. The  paper first explicates the Malay Islamic banking system and then examines methods of allocation and mobilization of resources with respect to different types of contracts which can be used in combination with other type to guarantee abiding by Islamic jurisprudence. All the information in this research are based on literature reviews of documents produced by the Malaysia’s Central Bank.