The examination of the topic of market risk management in Islamic finance is a complex endeavour. At a basic level, the subject matter, being multifarious in a manner that mixes religion and economics, requires the conjoining of religious faith with scientific objectivity in order to ascertain the truth contained in the scripture as it pertains to the Mua’amalat (dealings between individuals) matter of entering into financial contracts with others to manage market risk exposures. Moreover, the complexity is compounded due to the need to disentangle the ambiguity that has beset the discourse on the topic due to historically being mostly legal-centric with a focus on debating the contractual elements rather than attempting to comprehensively address the myriad issues that relate to market risk management in contemporary contexts. These issues, for the most part, revolve around the reliance on market risk transfer as a strategy and derivative contracts, with monetary underlying variables, as tools to implement that strategy. Thus, the journey of investigating the rationale, permissibility, and usage of derivative hedging instruments for market risk management in Islamic finance is, essentially, an undertaking that seeks to engage in a wide-ranging and multi-layered examination of the subject matter as well as the exploration of new areas of relative significance. This, in turn, and subsequent to the analysis of data generated from documentary sources and forty-one interviews which were collected from numerous sources within four locations, led to the elaboration of the contention that market risk management through derivative instruments for legitimate hedging purposes should not be prohibited in the Shari’a, albeit with certain conditions that limit unproductive behaviour. The basis for the aforementioned contention is built on the fact that market risk management has undergone a paradigm shift in how exposures are identified and measured as well as in the emergence of innovative tools which can result in a better ability to address the opportunities and challenges facing institutions that provide value to society (i.e., the real sector). Moreover, there is little substantive evidence that proves that the utilization of derivative instruments for hedging purposes leads its users to partaking in transactions that circumvent the prohibition of Riba (usury), Gharar (excessive uncertainty), and Maysir (gambling). In effect, the derivative instruments used for the management of market risks are not only disassociated from usurious debt transactions, they are also transacted in the financial markets in a manner that is transparent to all the parties involved. Along the same lines, the prohibition of Maysir, which is apparently an overarching concern, should be conceptualized with the focus on the proscription of the act of gambling, not necessarily the instruments (e.g., derivatives) and/or any particular framework (e.g., zero-sum arrangements). Ultimately, one should be cognizant of the fact that the true intentions of Islamic jurisprudence in Mua’amalat (as a manifestation of divine guidance) always centre on human well-being. Accordingly, the religious prohibitions are, in essence, within the realm of acts that adversely affect human well-being. This is a constant theme that is present throughout the thesis; and is one that exists at the heart of a wider aspiration of its adoption to a greater extent than is currently present in the Islamic finance discourse.

La finance islamique a enregistré une croissance à deux chiffres en termes de volume et d’expansion malgré un contexte marqué par la crise mondiale de 2008, d’où l’intérêt qu’elle suscite. Cette industrie a réalisé cette croissance sur un modèle de financement qui respecte des principes éthiques, ces derniers ont été à l’origine de sa résilience et de sa pérennité pendant la crise, ils ont constitué un socle étanche vis-à-vis des risques financiers conventionnels.Cependant, la finance islamique n’est pas une industrie sans risques. Tel est l’objet de la présente thèse à travers la présentation des risques inhérents à l’activité financière islamique notamment les risques communs que l’on retrouve également dans la finance conventionnelle et les risques spécifiques liés à la structure du bilan des institutions financières islamiques. Grâce à l'analyse des contrats de la finance islamique et des risques associés, cette thèse met en évidence les faiblesses de la finance islamique.Cette faiblesse est confirmée à travers les révélations apportées par cette thèse sur l’origine des résultats des banques islamiques en Malaisie. Un exemple concret prouve que les résultats positifs réalisés par les banques entre 2001 et 2011 seraient liés à la combinaison de deux facteurs à savoir la structure du bilan (majoritairement composé au niveau de l’actif de financement accordé à marges fixes et au niveau du passif de dettes à marges variables) et la tendance à la baisse des taux d’intérêt. Ainsi, dans un environnement de taux d'intérêt élevé, comme par exemple lors de la crise financière asiatique de 1997, ces banques devraient enregistrer une baisse de leurs résultats. / Islamic finance has been registering double-digit growth in volume and scope, even in the face of the 2008 worldwide crisis, attracting significant attention. This industry has achieved this growth on a model of finance that complies with ethical principles which constituted its strength during the crisis and which allow them to avoid conventional finance risks.However, the unique features of Islamic finance do not insulate it from risk. The discussions in this thesis will focus on the types of risks Islamic financial institutions face in common with conventional financial institutions and also the new and unique risks that Islamic financial institutions face as a result of their unique asset and liability structures. Through the analysis of Islamic finance contracts and inherent risks, this thesis highlights the weakness of Islamic finance.In this thesis, we also analyzed the gains made by Islamic banks in Malaysia from 2001 to 2011 and we demonstrated that this gain is due to the combination of two parameters inter alia the structure of balance sheet (which includes predominantly fixed rate financing in the asset side and variable rate resources in the liability side) and the low interest-rate environment. Indeed, in high interest-rate environment, like in the Asian financing crisis in 1997, these banks could record a drop in its results.

The doctrine of Corporate Social Responsibility (CSR) has emerged and developed rapidly as a field of study. It is a framework for the role of business in society, setting standards of behaviour to which a company must subscribe to impact society in a positive and a productive manner at the same time as abiding by values which exclude profit seeking at any cost. The emergence of ethical investment, social enterprise, business ethics, environmental practices, a human rights approach to recruitment and employment conditions, and investment in the community are examples of such impacts. This research examines the Islamic perspectives of CSR, and argues that, CSR is not a subject alien to Islam, as it is deeply inscribed in Shari'ah. In particular, the thesis has showed the relevance of CSR as a globally accepted practice to Islamic banks. The Islamic banking system has an in-built dimension that promotes social responsibility, as it resides within a financial trajectory underpinned by the forces of Shari'ah injunctions. These Shari'ah injunctions interweave Islamic financial transactions with genuine concern for ethically and socially responsible activities at the same time as prohibiting involvement in illegal activities or those which are detrimental to social and environmental well-being. To further investigate whether the stakeholders of Islamic banks truly subscribe to the idea of CSR, this study provides empirical evidence based on a survey which was conducted on seven stakeholder groups (customers, depositors, local communities, managers, employees, regulators and Shari'ah advisors) of Islamic banks in Malaysia. The findings of this study reveal that stakeholders of Islamic banks in Malaysia have generally positive views of CSR. One of the most important reflections of their positive attitude is that CSR factors are evidenced as one of the important criteria in their banking selection decisions. Overall the study provides a clear justification and indication from a theoretical point of view and empirical evidence from stakeholder perspectives about the relevance and significance of CSR to Islamic banks in Malaysia.

The interpretive, exploratory research reached conclusions from historical secondary data regarding financing models, namely interest-based and non-interest-based methods of financing with respect to the concept of sustainable consumption. The purpose of the research was to demonstrate that the way we manage our finances has an effect on the concept of sustainable consumption and its goals. The outcome of the research showed us that there is a definite linkage between the variables, especially in light of general systems theory, and concludes that the interest-based financing model is negatively aligned to the goal of sustainable consumption. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / Unrestricted

The main objective of this research is to examine whether the current practices of Islamic banking and financial activities in Saudi Arabia are compatible with the principles of Shariah. This examination includes the current uses of sukuk (Islamic bonds), the models of takaful (Islamic insurance) and accepted risk transfer mechanisms in Islamic structured finance (Islamic derivatives). The second purpose is to investigate the basic laws of banking and financial activities in Saudi Arabia and examine whether they are compatible with Shariah principles. The final aim is to suggest solutions to the absence of regulatory and supervisory systems of Islamic finance in Saudi Arabia by proposing a legislative and regulatory framework for Islamic banking and finance in Saudi Arabia. The research findings show that there are no specific laws and regulations governing Islamic banking and financial activities in Saudi Arabia. In addition, there is no independent central Shariah board to regulate and supervise Islamic banking and financial activities in Saudi Arabia, nor are there are any specialised commercial courts to look into banking issues. The research finds that there are some articles in the law of supervision of cooperative insurance companies in Saudi Arabia, and its implementing regulations, which do not comply with Shariah, and in addition, there is some incompatibility between the law and its implementing regulations. The final finding is that the issuance of sukuk and Islamic financial derivatives in Saudi Arabia are not consistent with Shariah requirements, due to the absence of regulatory policies and supervisory harmonisation, while Islamic insurance needs to amend some articles of the law of supervision of cooperative insurance companies in Saudi Arabia, and its implementing regulations, in order to comply with Shariah and also to avoid incompatibility between them.

Libya is a predominately Muslim country where Islamic finance has not yet been established. However, given the current extensive program of financial reform in Libya and the rapid growth and appeal of Islamic finance in comparable economies, there is growing pressure for a system of Islamic finance to be provided. There is then a pressing need for research into the prospects for Islamic finance from a consumer and provider perceptive to inform this debate and thereby meet the needs of policymakers, financial service providers and prospective users. Accordingly, this study of Libyan attitudes towards Islamic methods of finance, the first study attempted in the Libyan context and one of few studies globally, applies a model derived from the Theory of Reasoned Action to analyse attitudes towards Islamic finance. The particular focus is to understand how the Theory of Reasoned Action can be used for predicting and understanding attitudes towards the potential use of Islamic methods of finance by Libyan retail consumers, business firms and banks. Four main research questions are posed to address this objective. First, does awareness of Islamic methods of finance influence attitudes towards the use of Islamic finance? Second, do socioeconomic, demographic and other factors influence attitudes towards Islamic finance? Third, what are the principal motivating factors towards the potential use of Islamic finance? Finally, is religion the major influence on the likelihood of engaging in Islamic finance? Three surveys of 385 retail consumers, 296 business firms and 134 bank managers in Libya are conducted in 2007/08 to achieve this objective. Descriptive analysis and multivariate statistical analysis (including factor analysis, discriminant analysis and binary logistic regressions) are used to analyse the data. The principal findings are that awareness of Islamic methods of finance and socioeconomic, demographic and business characteristics are key determinants of the likelihood of the use of Islamic finance. Further, religion plays a key, though not the only, role in influencing these attitudes. The thesis findings are of key importance in informing future financial industry practice and financial policy formation in Libya.

Islamic finance is entering into a new pattern. It is deemed that Islamic finance should take initiative to meet the increasing needs of microfinance with aim of alleviating poverty and to help the poor people in their distress. Concept of Islamic Microfinance is being used to fulfill the demands of microfinance in the developing countries. Different models of Islamic finance are proposed to be used in microfinance activities to help the poor people for betterment of their personal life and to initiate the small business for the overall growth of the economy. But profit and loss sharing (Mudarabah) model is being criticized due to high risk involvement. Due to high risk factor, proper monitoring is deemed necessary for the smooth running of the contract. Our current research tends to investigate the underlying risk attached with Profit and Loss sharing project. As per theory of Profit and loss sharing financing all the risk is to be borne by the investor of the capital i.e. microfinance institution. But monitoring itself is not risk free and can result in expenses that would surpass the original price of the sanctioned loan. In the long run and at very end, we are hopeful that our research findings would play an important role to overcome the issue of monitoring in profit and loss sharing loans in microfinance. / Islamisk finansiering går in i ett nytt mönster. Det anses att islamisk finansiering bör ta initiativ för att möta de ökande behoven av mikrofinansiering med syfte att minska fattigdomen och att hjälpa fattiga människor i deras nöd. Begreppet islamiska Mikrofinans används för att uppfylla kraven från mikrofinansiering i utvecklingsländerna. Olika modeller för islamisk finansiering föreslås att användas i mikrofinansieringsverksamhet att hjälpa de fattiga för förkovran i deras personliga liv och att inleda ett litet företag för den totala tillväxten i ekonomin. Men vinst och förlust delning (Mudarabah) modell är att bli kritiserad på grund av hög risk engagemang. På grund av hög riskfaktor är korrekt övervakning anses nödvändigt för att fungera väl i kontraktet. Vår nuvarande forskning tenderar att undersöka den underliggande risken fäst med Resultaträkning dela projekt. Per teori av vinst och förlust dela finansieringen alla risker skall bäras av investeraren av kapitalet, dvs mikrofinansiering institution. Men övervakningen i sig inte är riskfritt och kan resultera i kostnader som skulle överträffa det ursprungliga priset på sanktionerade lånet. I det långa loppet och på slutet, vi hoppas att våra forskningsresultat kommer att spela en viktig roll för att lösa frågan om övervakning i resultaträkningen dela lån mikrofinansiering.

Thesis (MBA)--Stellenbosch University, 2014. / This research study critically reviewed the performance of a Shariah-compliant index compared with that of the UK FTSE 100 between 2003 and 2014. Two broad indices were constructed based on business evaluation techniques, one using market capitalisation and the other total assets as a means to value a company. Shariah-compliant equity screening combines a financial ratio screen as well as business activity screening, which excludes a company’s involvement in any unlawful activities in the eyes of Islamic law. The sample period was further broken into three sub-periods, namely the bull period (2003-2007), the financial crisis period (2008-2009), and the post-crisis period (2009-2014), reflecting the various stages of the business cycle. A comparison of the risk-adjusted returns shows that the Shariah-compliant index, using market capitalisation as the means for valuing a company, delivers superior returns at lower risk levels than the FTSE100 over the sample period. Although the Shariah-compliant indices underperform to the FTSE100 during the bull market period, both of the Shariah compliant indices outperform the FTSE 100 during the era of the financial crisis. This can be explained by the fact that Shariah screening excludes companies that are highly leveraged and therefore it remains buffered from an economic crisis. In general, this research contends that the application of a faith-based-screen does not have an adverse effect on returns.

Islamic finance is rapidly gaining momentum around the world. Interpretations of Shari'ah, or Islamic law, state that investments must be free from elements of riba (interest), gharar (uncertainty), maysir (speculation) and haram (unethical) business activities. Islamic equity investing, therefore, utilizes a set of business activity screens and accounting-based screens to exclude firms considered non-permissible under Shari'ah. Despite increased academic interest, there is still much uncertainty surrounding the financial implications of these investment principles. This Ph.D. thesis, comprised of three empirical essays, aims to contribute to this debate. The first essay offers a comprehensive examination of Islamic equity index performance. The findings show that Islamic equity indices have exhibited abnormal returns on a global and developed market level, primarily due to their exclusion of stocks in the financial services sector. The second essay attempts to study the determinants of Islamic investments' financial performance, with a particular focus on the role of country-level factors. The third essay studies performance related issues associated with the accounting-based screening process. A significant proportion of these screens are documented to contribute positively to risk-adjusted performance, most notably in periods of financial market turmoil.

Saudi Arabia and Islam have had a very close relationship since the establishment of Saudi Arabia. Thus, Saudi Arabia chose Islam to govern all its laws. Since 1952, with the discovery of oil, the country has witnessed a huge development including the establishment of the Saudi Arabian Monetary Authority (SAMA) as a Central Bank. SAMA was expected to only allow financial activities that did not conflict with the teachings of Islamic law, as stated in its Charter. However, since its existence, SAMA has supervised and licensed conventional banks that charge Riba (interest or usury) and all the regulations made by SAMA have been designed to deal with conventional banks. Consequently, there is a difference between the law, Islamic law, and the practice. Over the years a dramatic improvement in Islamic finance has been realised. Many countries and international organisations that specialised in Islamic finance have set especial regulations that suit such finance. Nonetheless, Saudi Arabia as a regulatory body preferred not to join this trend and continued adopting and practising the same regulations that were made for conventional finance. This thesis seeks to develop the regulatory framework towards Islamic finance by sheding light on the legal challenges and difficulties that may encounter Islamic finance in Saudi Arabia, which may prevent the Kingdom of Saudi Arabia from being the leading country for developing Islamic finance. To help in identifying these challenges, an Islamic financial product Sukuk (Islamic bonds) is chosen to be a case study to show some of the challenges in practice. The thesis firstly discusses Islamic principles toward finance, then the legal environment of Saudi Arabia and how Islamic finance is practised in the Kingdom. It then introduces the new development in the legal environment in response to the Saudi Vision 2030 which can be a tool to help solving the obsricales that Saudi Arabia is encountering. Then the thesis discusses some challenges related to sharia boards in financial institutions, such as not having sharia governance as part of the corporate governance of financial institutions that market their products as being compliant with sharia law; in addition, the absence of a Central Sharia Board that should help in ensuring the conformity of financial products to sharia law. The thesis proposes that the regulators should develop and adopt especial regulations framework that could help the development of Islamic finance. The thesis defines Sukuk and shows how it differs from other financial instruments in conventional finance. Then, it identifies some of the challenges that face Sukuk and its development in the country. Moreover, it looks at a very recent development in the Saudi legal system, which is in response to the Saudi Vision 2030 and the recent interest that was shown by decision-makers, such as the Chairman of the CMA, the Minister of Commerce and Industry, the Deputy Minister for Internal Trade, and also both the Governor and Vice-Governor of the SAMA, in response to the Vision 2030 which could contribute to the development of Islamic finance. As far as the researcher is aware, hardly any studies have addressed this issue with respect to the new development that Saudi Arabia is currently witnessing in response to the Saudi Vision 2030 and the recent developments taking place in neighbouring countries which broadly share similar cultural and religious values. Finally, the thesis proposes some recommendations to develop Islamic finance including some guidelines for establishing a Central Sharia Board, and also, a sharia supervisory governance for Islamic financial institutions which should have a positive effect on Islamic finance in the country.