Even though the modem financial theory of the Capital Asset Pricing Model (CAPM) developed by Sharpe (1964), Lintner (1965) and Mossin (1966) implies that variation in the pure risks that a firm assumes does not affect the firm`s value, some studies like Mayers and Smith (1990); Yamori (1999), Hoyt and Khang (2000); Zou et. al. (2003); Daniel and Paul (2003) and Zou and Adam (2006) suggest that insurance helps managers to alleviate business risks such as bankruptcy following a major accidental loss. The general takaful industry in Malaysia has recorded progressive growth, particularly over the last six years. Demand for general takaful products has continuously risen, as reflected in the improvement in contributions (premiums) of general takaful. Besides that, the conventional insurance industry also continued to register positive growth in 2005, buoyed by stronger growth in the general insurance sector. In addition, over 50 percent of total premiums were from the business corporation for takaful and conventional insurance in Malaysia. Hence, there appears to be a conflict in the implications of the CAPM and the actual behaviour of corporations in their takaful and conventional insurance demand in Malaysia. Moreover, although numerous theoretical and empirical articles investigate corporate demand for conventional insurance, empirical tests of the theories have never been conducted for Islamic insurance which is known as takaful. The main contribution of this study is that it is the first attempt to empirically investigate the determinants of corporate demand for takaful and also conventional insurance for property or assetbased risk exposures of non-financial corporations using data from the main board of public listed companies at Bursa Malaysia. Besides that, the unique data of this study i.e. pooled data of corporate demand for conventional insurance and takaful is performed to show the overall perspective of the corporate demand for insurance in Malaysia. Factors like underinvestment and leverage, growth opportunities, expected bankruptcy costs, tax considerations, managerial ownership, company size and regulatory environment have been examined in this study to identify the determinants of corporate demand for Islamic and conventional insurance in Malaysia. The data covers a five-year period from year 2002 - 2006. Three models of panel data estimation were employed, namely GLS with non-effects, GLS with fixed effects and GLS with random effects. The findings are robust to alternative specifications of the model i.e. GLS with the fixed effects model that help us to control for unobservable heterogeneity. The findings show that leverage, expected bankruptcy costs, tax considerations, company size, and managerial ownership play an important role in determining the corporate demand for conventional insurance and takaful in Malaysia. These findings are also parallel with the findings of the pooled data of the corporate demand for conventional insurance and takaful to represent the overall perspective of the corporate demand model for insurance in Malaysia. This study gives some important implications for various groups like the insurers and takaful operators, the shareholders and creditors as well as the regulators in reflecting with the financial exposition factors that determine the corporate demand for Islamic and conventional insurance in Malaysia.

This research investigates the impact of lending structure and the other bank specific variables on the six types of risk exposure: insolvency risk, market risk, interest rate risk, exchange rate risk, total risk, and unsystematic risk. The insolvency risk exposure is based on the Zrisk index developed by Hannan and Hanweck (1988) while the other five risk exposures are estimated based on the three-factor Capital Asset Pricing Model (CAPM). For each risk exposure, four lending structure measures are analysed namely, the real estate lending, the specialization index, the short run lending stability, and the medium term lending stability. Further, a comparative analysis of the risk behaviour between the Islamic and conventional banks is made. In addition, the effect of bank consolidation program and financial crisis period is incorporated. Using Generalised Least Square (GLS) panel regression techniques, three different data sets are analysed individually for the period of 1994 to 2006. Out of the three GLS models (the none effect, the fixed effect and random effect), the best model is selected based on the Likelihood Ratio (LR) and Hausman test. In general, the findings in this study show that real estate lending is positively related to the insolvency risk exposure of the conventional banks, but negatively related to the Islamic banks. Meanwhile, the lending structure variables to some extent affect the market, interest rate and unsystematic risk exposures. Also, this study finds that each risk exposure has different determinants. Hence, the policy makers, practitioners, and investors should react accordingly in the decision making process

This study aims at proposing ways to rectify the utilization of Islamic Sukuk through Islamic Banks so that its goals can be focused on direct investment in various production sectors to achieve economical growth and development. Through this context, the concepts of Islamic Sukuk, its economical importance, Shari' ah restraints as well as the types of these restraints, the risks involved, and the remedies for risk treatments, have all been studied and analyzed. The other part of the study is concerned with the application of Islamic Sukuk in various production sectors that can contribute towards the achievement of economical growth. In this study, a review was carried out on the most important contemporary experiences resulting from the adoption of Islamic Sukuk in the Islamic countries with emphasis on the Malaysian experience as case study. The study revealed the following conclusions: The market for Islamic Sukuk is promising since Islamic Financial Institutions are increasingly looking for investments that comply with Islamic Shari'ah regulations. Investments through Islamic Sukuk are considered as a new trend. Therefore, there is a need to revise and modify the structure of these $ukiik in order to make it Shari' ah compliant. There are varieties of ways for implementing Islamic Sukuk to acquire the required financial resources. These include: Sukuk for ljarah, Murdarabah, Musharakah, Salam, and Istithna '. Most of Islamic Sukuk is currently being implemented in the housing sector, followed by financial services sector, then by the energy and services sectors. This raises the need for rectifying the application of Islamic Sukuk so that it can be steered towards direct investment in production sectors and thus achieving the desired economical growth. Islamic Banks are still indecisive on whether or not to be the main issuers of the Sukuk. This will negatively impact their role as contributors for the achievement of economical development.

This study investigates the role of Shariah Advisory Council in Islamic financial institutions, focusing on two cases, namely the Kuwait Finance House branch in Malaysia and Bank Islam Malaysia Berhad. A comparative critical analytical study has been conducted on the activities of these two banks. The study has also examined the achievements and development of the Islamic financial products in Malaysia, which have given Islamic banks the competitive edge in the financial industry. Furthermore, the study has investigated comparatively the performances of the two banks, their instruments and some of the modes of transactions they use, highlighting the views of contemporary scholars and Shari' ah rulings on these instruments. Some of these views necessitate a review of some of these applications to make them Shari'ah compliant. Accordingly, the study has pointed out that in spite of the shortcomings in some of these applications, this does not in any way undermine the abilities of the two banks and the efforts of the scholars offering Shariah Advisory in these two banks. The study has adopted a comparative operational method to examine the two banks and their products profoundly. The study concludes that the experiences of the Kuwait Finance House branch and Bank Islam Malaysia Berhad, despite some of the shortcomings, are generally successful and can be good examples for overcoming the present global financial crisis.

The Nigerian Banking and Other Financial Institutions Decree (BOFID No.25) of 1991 has been amended to permit banking transactions based on Profit and Loss Sharing (PLS) arrangement, but yet there is no single Islamic Bank in Nigeria. All efforts by both the regulators and the bankers to establish Islamic Banking system in Nigeria have become unrealizable because of certain unclear factors. This study was conducted to critically analyze the viability of Islamic banking system in Nigeria taking Lagos State as a case study. In making the study, dimensions of viability that includes Market, Economic, Financial, Business, Political and Social viability and their components such as interest, desire, awareness, attitude, perception, preferences, acceptance, business, social and political inclinations were investigated using three sets of questionnaires that were directed to five groups of respondents namely, potential individual customers, business entities, government agencies, professionals in the banking sector and regulators of the Nigerian banking industry. The data gathered for this research were sufficient and adequate for the analyses conducted. Using descriptive statistics, parametric and other non-parametric statistical techniques, it was found that religious sentiments, wrong perceptions and poor public awareness were the key factors that hindered the establishment of Islamic Banking. Other factors such as acceptance to participate, interest to bank, competence and attitude of the regulators and services providers, and economic instability also affect the overall viability of Islamic Banking system. This study gives some implications for some issues like taxation, regulatory framework and the two approaches in establishing Islamic Banking systems; i.e. full pledge and window schemes to be adopted in Nigeria.

Principles of autonomy and strict compliance are two fundamental principles in letter of credit (LC). They indicate that LC is separate from underlying sale contract and payment for the goods only upon compliance of documents. The autonomous nature of LC which embodied in the UCP 600 however comes to an end in the existence of fraud, which is treated as the most controversial exception compared to other exceptions. In practice, it is always perceived that the Conventional concept envisaged by these principles as well as fraud exception can be applied in pari materia to Islamic LC transaction. Thus, this study primarily aims to discuss critically the application of these principles in Conventional legal perspective and undertakes to highlight differences and similarities between their application in Conventional and Shari’ah perspectives. In addition, this study evaluates also a level of understanding of Malaysian customers on the application of these principles in Conventional and Islamic LC. This study adopted legal and qualitative method as main research method supplemented by quantitative methods to establish how far these two principles applied in LC transactions in Malaysia. For legal method, relevant local cases are analysed and English and US cases are also mainly referred to. For qualitative method, interviews are conducted with bankers, trainers, academicians, Shari’ah advisors as well as other relevant parties. For quantitative method, samples of 102 LC customers in Klang Valley were selected on random sampling basis. This study identified significant differences and similarities in the application of principles of autonomy, strict compliance and fraud exception between Conventional and Shari’ah perspectives. The differences are however not obvious as far as the practices of Malaysian Conventional and Islamic banks are concerned. Simultaneously, it demonstrated that the level of understanding among LC customers on the application of these principles is significantly low and ignorance of the provisions of the UCP. This study concluded by highlighting the issues that warrant further investigations and proposed practical suggestions to the problems. Other then filling up the gap in local literature on legal and Shari’ah issues of autonomy and strict compliance as well as fraud exception especially with respect to Conventional and Islamic LC, this study enhanced the suggestions to the application of those principles in LC transaction which is in harmony with Shari’ah principles. Having analysed the existence of all peculiar characteristics of LC in every disputable angle, this study serves as a holistic understanding to those dealing actively in international trade involving LC payment mechanism such as traders, bankers as well as judiciary and Shari’ah advisors. In addition, the adoption of mixed research methods in data collection distinguished this study from other research which focuses solely on legal or qualitative methods.

The development of Islamic banks in Malaysia is increasingly challenging with more banks offering products and services based on Islamic principles. Hence, this study explores customers’ perception pertaining to corporate image and their adoption of Islamic banking, besides their attitudinal and behavioural loyalty towards their most preferred Islamic bank in Malaysia. Resource based theory, as well as institutional theory was exploited as the theoretical foundation for developing the conceptual model. Accordingly, data was collected firstly, through an exploratory study, by interviewing customers, Shar??ah supervisors, practitioners and lecturers of Islamic banking. Next, ‘self-administered questionnaires were distributed among 600 customers of Islamic banks in Kuala Lumpur through convenience sampling, specifically in selected Islamic banks, shopping malls and stations of public transportation. Analysis of data was then conducted using descriptive, exploratory and confirmatory factor analysis. Subsequently, structural equation modelling with 308 respondents was then conducted to test the hypothesized relationships among the constructs, as postulated in the model. Ten hypothesis links are supported, while eleven are rejected. Results indicate that firstly, corporate image of Islamic banks are determined by institutional image and performative image. Performative image constitutes items including friendliness, reliability, honesty, security, achievement-orientation, leading-orientation, up-to-date and excitement. In consequence, institutional image is represented by god-consciousness, which encompasses being Islamic, humbleness, fairness and trustworthiness. Surprisingly, corporate social responsibility is verified insignificant. Nevertheless, performative image is found to be more important than institutional image by the customers of Islamic banks. Secondly, corporate image has an impact on organizational legitimacy, as well as customers’ adoption of Islamic banking. Thirdly, and most importantly, organizational legitimacy mediates the relationship between corporate image, attitudinal and behavioural loyalty, while it signifies as a partial mediator between corporate image and customers’ adoption of Islamic banking. Fourth, attitudinal loyalty is found to have no effect on behavioural loyalty. Finally, only gender serves as a moderator in this study. It is hoped that this study would facilitate the development of corporate image in Islamic banks, especially in facing strong competition from the foreign banks.

Preserving financial stability is integral in developing financial institutions that are robust, resilient, effective and competitive. As such, this study examined factors that would affect the financial performance of the general takaful and conventional insurance companies in Malaysia. The main contribution of this study is that it is the first attempt to empirically investigate the determinants of the financial performance of general takaful and conventional insurance companies in Malaysia using a panel data set consisting of firm-specific data and economic data. In addition, this study pooled the data of the general takaful and conventional insurance companies to determine the overall perspective of the determinants of financial performance of the insurance industry in Malaysia. Two financial performance measures, which are investment yield and combined ratio, are used to capture the different aspects of the general takaful and conventional insurance operations in Malaysia. In analysing the determinants of the financial performance of the general takaful companies, the study examined the profit rate levels, equity returns of Shariah-compliant investments, size of company, retakaful dependence, solvency margin, liquidity, and contribution growth. In the case of conventional insurance, the factors examined in this study are interest rate levels, equity returns, size of company, reinsurance dependence, solvency margin, liquidity, and premium growth. The data covered a four-year period from January 2004 to October 2007. Three models of panel data estimation were employed, which are generalized least squares with non effects, generalized least squares with fixed effects and generalized least squares with random effects. These models were estimated for both performance measures. Based on the empirical results, this study found that size of company, retakaful dependence and solvency margin are statistically significant determinants of the investment performance of takaful companies. For conventional insurance, all factors are statistically significant determinants of investment performance, except for equity returns. In terms of underwriting performance, which is represented by the combined ratio, this study found that profit rate levels, equity returns, size of company, solvency margin and liquidity are significant determinants for the takaful sector. The findings for conventional insurance indicate that all factors are statistically significant determinants of the underwriting performance, with the exception of liquidity. The findings for the pooled data of the general takaful and conventional insurance companies are mostly consistent with the findings of the takaful and conventional insurance sectors.

As new comers to the market, Islamic Banks (IBs) are facing a trade-off. They can either employ high capital ratios which increase the soundness and safety of the bank and lowers the required return (risk) by investors, or depend on deposits and Islamic bonds which are considered cheaper sources of funds due to their tax deductibility. IBs’ management must carefully decide upon the appropriate mix of debt and equity, namely, capital structure, in order to maximize the value of the bank. This study examines the effect of capital structure on IBs’ performance in an attempt to provide guidance to managers in the issue of raising capital. The study also examines whether regulatory capital requirements are the first-order determinants of IBs’ capital decisions. Furthermore, the study calculates the optimal capital structure for the sample IBs and uses it as guidance for capital structure decisions. Using a sample of 85 IBs covering 19 banking systems, the study uses a Two-Stage Least Squares (2SLS) method to examine the performance determinants of IBs’ in order to control for the reverse causality from performance to capital structure and uses the Ordinary Least Squares (OLS) method to examine the determinants of IBs’ capital structure. After controlling for macroeconomic environment, financial market structure and taxation, results indicate that IBs’ performance (profitability) measures respond positively to increases in equity (capital ratio). The result is consistent with the signaling theory which predicts that banks expected to have better performance credibly transmit this information through higher capital. As for the reverse causation from performance to capital structure, results indicate that more profitable IBs employ higher leverage. This is consistent with the efficiency-risk hypothesis which predicts that more profitable firms choose lower equity ratios (higher leverage). Risk is found to be an insignificant factor in determining leverage, which indicates that minimum capital requirements are not first-order determinants of IBs’ capital structure and that standard determinants of capital structure can explain variation in IBs’ book capital. Results of optimal capital structure finds that the capital-asset ratio has an increasing effect on IBs’ profitability. The optimal capital ratio is found to be 37.41%. At capital ratios below 37.41% equity is expensive and has a negative effect on return on equity (ROE) due to the higher required return by investors. Beyond 37.41% equity starts to have a positive effect on ROE and becomes a cheap source of financing. As a general guide, IBs should have minimum capital ratios of 37.41% to be viewed as safe and sound by investors and to lower the cost of issuing additional equity.

This study assesses the impact of Islamic microfinancing on clients’ income and poverty status with reference to the clients’ spirituality and religiosity. To achieve these objectives, this study collected information from 400 micro entrepreneurs, in which 360 of them were clients of Islamic Microfinance Institutions (Islamic MFIs) in Jakarta, Indonesia. The rests of them were micro entrepreneurs who shared similar characteristics with the clients who were used as control group for comparison of the impact. This study used the Multiple and Logistic Regressions to prove the hypotheses. Overall, this study found that Islamic microfinancing, as reflected by length of having Islamic microfinancing and size of financing, is able to generate positive impact on clients’ income and poverty status. However, the impact cannot be obtained in the short-term, and is only significant if the poverty status is measured by using local poverty standards; the country’s formal poverty standards issued by Government Agency. The impact is relatively minimum if poverty status is measured by using international poverty standards such as extreme and moderate poverty standards, or earning US$1 and US$2 per capita per day as adopted by the World Bank and other international organizations. This study also found that the cost of financing provides no significant impact on clients’ income and poverty status. Moreover, having a better economic condition is the reason why clients who obtain Mudharabah and Musharakah financing live a better life compared to those who receive Murabahah financing. Another significant finding is clients who have higher spirituality level in general are found to be wealthier than those who have lower spirituality level. Religiosity level is also found as having a significant influence on clients’ income and poverty status. These findings indicate that both spirituality and religiosity should be used by the Islamic MFIs in capacity building that they provide to their clients. For this purpose, the Islamic MFIs can enhance clients’ knowledge on Islamic teachings particularly in terms of aqidah, ibadah, akhlaq and muammalah, and enlighten them why these matters are not only important for the akhirah, but also for the dunya purposes, including for the improvement of their business performance. With strong aqidah and proper ibadah, they will have higher spirituality level which may enhance their passion and patience. Furthermore, with proper ibadah, good akhlaq and knowledge on muammalah, they will have higher religiosity level which may improve good characteristics that are important for their business such as discipline, hard work and human relationship management.

Global financial crisis had many causes but failures in risk management were a contributory factor (Mitchell, 2010). Significant concerns have been raised on the practice of risk management as a core function of Islamic banks as financial intermediaries, due to the unique nature of the risks that are not well understood. The objectives of this study are, first, to examine the nature of risk management practices in Islamic banks; second, to explain the level of efficiency of Islamic banks and its determinants; and third, to examine the effect of risk management practice on efficiency and financial performance of Islamic banks. Both primary and secondary data were used to achieve these objectives. A self-developed questionnaire was used to measure risk management practices, while data envelopment analysis (DEA) approach was used to measure technical efficiency, and financial performance was measured by using profitability ratios. The samples are gathered from 72 domestic and international Islamic banks domiciled within and outside Malaysia for the period 2006 to 2009. The results illustrated that Islamic banks were doing well in areas of operational risk/ Shariah non-compliance risk management. Nonetheless, they were deficient in the management of both liquidity risks and rate of return risk/displaced commercial risks. The study explains that the main source of technical inefficiency is the scale inefficiency. The economic condition of a particular country is found to be the main determinant of an Islamic bank`s technical efficiency. The study also found that there is a positive effect of risk management practices on pure technical efficiency and financial performance of Islamic banks. Hence, risk management practice is an important but not the sole determinants of efficiency and financial performance. The study provides significant contribution on integrating the theory of financial intermediation where risk management acts as the core function of Islamic banks as financial intermediary to improve their efficiency and financial performance. Finally, the study provides policy implications for central banks and the Islamic Financial Services Board by explaining the current progress of risk management practices undertaken by Islamic banks, the level of efficiency and its common determinants during the study period.

One of the main facilities offered by Islamic banks in Malaysia is trade finance. Operational practices of Islamic trade finance (ITF) in Islamic banks differ from one another. These practices raised some questions or issues among bankers, Shari`ah advisors and experts in ITF. Thus, this research aims to highlight the Sharf`ah issues on the operation of ITF facilities in Islamic banks. The ITF facilities must conform to the laws and regulations imposed by Bank Negara Malaysia (BNM) and are bound to follow rules and standards of the International Chamber of Commerce (ICC) for trade finance transactions. Therefore, this research also investigates the Sharf`ah issues in relation to these governing rules and regulations. This research adopts the qualitative method as the main research methodology. Shari`ah issues on the operation and governing rules of ITF are gained from semi-structured interviews conducted with bankers who directly involved with the operation of ITF, Shari`ah officers, Shari`ah advisors and experts of ITF and international trade in Malaysia. From the interviews, this research discovers many Shari`ah issues related to ITF facilities and the ICC rules such as the issue of converting the contract of letter of credit (LC) wakalah to LC murababahah, the issue of charging fees for bank guarantee which is using kafalah contract and the issue of the element of interest in the ICC rules. This research analyzes those issues by determining whether they are in line with Shari`ah principles. Generally, many of ITF facilities are Sharf`ah compliant except for a few facilities which need to be amended. Hence, some possible solutions to resolve the Shari`ah issues are proposed to BNM, Islamic banks and other related authorities.

The study aims at studying the direct and indirect investment procedures adopted by Islamic banks and tries to explore the yearly impact of each of these investments on Zakat. This is done so as to estimate the direct and indirect investments in the Islamic banks and measure their determinants through a given period and the extent of the direct effect on the legal Zakat income. A sample has been selected from Islamic banks to be a practical model in the study; the sample combines Jordan Islamic Bank for Financing and Investment, Faisal Islamic Bank of Egypt and Dubai Islamic Bank. Within this context, the first two chapters of the investigation introduce a theoretical framework that includes Islamic banking definition, origins, characteristics, objectives as well as investment definition, concept, Islamic and conventional implications. The third chapter discusses the investment methods and procedures adopted by the Islamic banks and the characteristics and concepts of each procedure. In Chapter Four, the researcher examines Zakat in terms of concept and economic and social roles, and then tries to identify the Zakat's duty position within Islamic banking (core of study). In Chapter Five, the practical and operational aspects of the study have been elaborated through testing the hypotheses and discovering the statistical correlations between the variables and the impact of each adopted investment type in the Islamic banks on Zakat every year through a fixed period of time. The investigation concludes with the findings where the most important is the importance of investments carried out by the Islamic banks in realizing the Islamic legal objectives through the development, spread, and use of capitals. Furthermore, the study shows the obvious and increasing development of direct and indirect investment bases and the multiplication of these investments to record levels during the study period, which made it a successful and positive developing model. Moreover, the indirect investment that the Islamic banks carry out contributes to the increasing rates greater than the direct investment (within the sample), which means that indirect investment has a larger and clearer impact on Zakat every year compared to direct investment.

This study aims at identifying the effect of disclosure on investors’ decisions in shares of Islamic banks in the Kingdom of Saudi Arabia through an analytical and field study, identifying characteristics of information available in the money market as well as determining the actual needs of investors for shares. The study adopted two approaches, the theoretical and practical. Through the use of the theoretical approach the study was able to identify the nature of disclosure, the influencing factors, their effect on financial crises, and the sources of information of investors. The current study utilized the practical approach, to identify the effect of disclosed information on investors’ decisions in the shares of four Islamic banks, namely Al Rajhi Bank, Bank Al Jazira, Bank Albilad, Al Inma’ Bank. The motives of investors’ decision as well as the comprehensibility and understandability of the information have been demonstrated. The study concludes that there is inadequacy of investment awareness of share dealers and their dissatisfaction toward disclosing financial reports of participating companies, and that ethics and conducts influence the adequacy and quality of share markets. The study recommends that disclosure of financial reports in Islamic banks is dully emphasized.

Nigeria is one of the leading economies in Africa with vast oil reserve and abundant human and material resources at disposal. Despite these resources, poverty among the populace is widely spread. The national commission in Nigeria in 2012 reported that more than 75 million are trapped by poverty. Several efforts have been put forward at various points in time by successive governments, private entrepreneurs and other development partners to overcome the menace of poverty among the populace. Recently, microfinance becomes another mechanism through which poverty is being challenged and the last decade had witnessed tremendous contribution of microfinance institutions in various parts of the world. The main purpose of the study is to assess the availability, awareness, acceptance as well as the socioeconomic impacts of microfinance programmes on poverty alleviation in Northern Nigeria. The study used 400 samples drawn from the Islamic and conventional microfinance clients through simple random sampling technique. Self developed questionnaire was used as instrument for data collection. The findings show that both conventional and Islamic instruments are available in the microfinance institutions for clients irrespective of gender, geographical location and types of business engaged by the client. Moreover, Islamic products are accepted among clients engaged in different types of businesses. The findings also revealed that both conventional and Islamic microfinance affect the socio-economic well-being of clients thereby reducing poverty. Implications of the study for microfinance institutions, policy regulators as well as recommendations have been provided in line with the major findings.

Zakat is one of the five pillars in Islam. It is an obligation of the Muslims to give a specific amount of their wealth to the beneficiaries with the main objective of the achievement of socioeconomic justice. Zakat institutions are trusted bodies that manage zakat in Muslim countries. In Malaysia, State Islamic Religious Councils (SIRCs) is responsible in managing and promoting zakat. It is of prime importance that these institutions are being governed and managed efficiently and effectively. Efficiency is defined as how well a system is performing, in generating the maximum desired output for given inputs. Governance is defined as the process of decisionmaking and the process by which decisions are implemented or not. The governance of the institution is important in ensuring good management including efficient collection and distribution of the zakat funds. This study examines the relationship between efficiency and governance of zakat institutions in Malaysia. First, the study analyzes the efficiency of fourteen zakat institutions in Malaysia from 2003 to 2007. Efficiency is measured by the Malmquist index, using a Data Envelopment Analysis (DEA) technique. The Malmquist productivity measures are decomposed into two components: efficiency change and technical change index. The results show that zakat institutions in Malaysia are found to be experiencing an improvement of TFP which mainly due to technical change compared to the efficiency change which reflects that improvement in technological progress has been a major contribution of efficiency. Secondly, Tobit Analysis is utilized to determine factors that influence the efficiency of zakat institutions in Malaysia. Board size, number of meeting, audit committee, number of branches, number of staff, zakat payment system used, existence of computerized zakat collection system, existence of website, decentralization system and corporatization are examined as the determinants of the efficiency. The results indicate that the use of zakat payment system and decentralization significantly and consistently improve efficiency of zakat institutions in Malaysia. Third, a governance index based on the United Nation Development Programme (UNDP)’s principles of good governance is developed in evaluating the practice of good governance principles of zakat institutions in Malaysia. This study demonstrates that efficiency scores and adoption of good governance principles are highly correlated. Overall, the findings of this study show the importance of ensuring efficiency of zakat institutions in Malaysia. Findings of this study highlight the urgency for the relevant authorities such as Development of Zakat, Waqaf and Hajj (JAWHAR), SIRCs and the government to initiate efficiency improvement measures of zakat institutions in Malaysia. However, the role of the government in supporting and facilitating the institutions is highly desired. Cooperation among related authorities and the stakeholders for the betterment of the institution of zakat will be important to ensure the achievement of noble objectives of socioeconomic justice is attainable.

In the formation of an international financial centre (IFC) literature, the government’s role is recognised as imperative in ensuring that several initiatives are implemented to achieve the objective as an IFC. Writers and researchers alike have adopted several approaches in gaining insights to this area of research varying from the historical, teleological and geographical to the functional perspectives. This exploratory study employed ideas and thoughts based on the functional perspective that has identified four functions of an IFC such as Payment and Settlement, International Financial Intermediation, Risk Management and Fund Management. These four functions were then measured together with four other functions to resemble an Islamic character of an IFC, namely, Shari’ah Advisory Supervision, Financial Regulation, Credit Worthiness Management and Human Capital Management. Empirical results of the data obtained from the survey of questionnaires on perception of senior executives and managers working in financial institutions in Malaysia and Singapore showed that the factor analysis has reduced the data from eight functions to only six reliable and valid functions. Data obtained from these six functions were used for hypotheses testing and statistically significant results of the hypothesis testing were then verified and affirmed with qualitative analysis from the investigation of documentary sources and secondary statistical data obtained from reliable and relevant bodies in Malaysia and Singapore. Most importantly, results of the data analysis have revealed two most significant research findings. The first finding suggests that the six functions reduced from the factor analysis were reliable and valid to be the underlying functions that an IIFC must provide. The second finding suggests that Malaysia was perceived by senior executives and managers to be more competitive than Singapore as the centre of Islamic finance. Therefore, these research findings can be used as an impetus for future research on the possibility of introducing a new International Islamic Financial Centres Index (IIFCI) that is highly tenable to attain the same status of credibility and reputation of the mainstream Global Financial Centres Index (GFCI).

The aim of this study is to investigate the management of credit risk in the financing operations of Islamic banks. It is one of the vital topics in the management of Islamic banks and critical to promoting their further development. The study proceeds from a central problem, embodied in answers to the questions of how Shari’ah compliant the framework by which Islamic banks manage risks, and how effective is it for financing operations. The study adopts a descriptive methodology in presenting the conceptual frameworks for both conventional and Islamic risk management, their major types, and the most important components of managing the risks entailed in the operations of conventional and Islamic banks. It also employs a methodology of analytic comparison by comparing and analyzing the standards and guidelines issued by international institutions concerned with the issue of managing credit risks, such as the Basel Committee, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board. The research has also employed field studies of credit risk management practices by interviewing a number of specialists in Islamic finance to investigate the most important aspects of credit risk management. The study arrived at a number of conclusions; the most important are: first, although the management of credit risk is not mentioned per se in the books of classical fiqh, it is not missing from the fiqh principles that classical scholars formulated or from their practical applications. Second, the management of credit risk in Islamic banks coincides with that of their conventional counterparts, the area of difference being limited to the area of Shariah risks, i.e., the risks associated with Shariah compliance. Third, the basic principles of credit risk management are consistent, in general, with Shariah principles in that it safeguards one of the five major objectives of the Shariah: the preservation of wealth.

This research highlights on the studies and analysis of the role of Islamic banking in pooling of funds and putting them into resourceful investment in Yemen. Hence today, they are an important instrument that can generate funds and its investment. The scope of application of Islamic economic first and foremost prohibits the component of Riba and the practice is based on the principle of “the amount of profit is based on the risk undertaken”. As for this reason, the scope of the research covers three main areas i.e. the Shar"‘ah perspective, the economic and financial perspective and practical perspective. The research is divided into six main chapters which are preceded by an introduction. The introductory part consists of background of the research, research problem and the research methodology. Chapter one deals with the theoretical perspective, definitions, rules, references and means of pulling funds. Chapter two focuses on the practical framework of savings in Yemen. And Chapter three is specified for the role of Islamic banks in Yemen in attracting savings. Chapter four deals with the role of Islamic banks in the investment of the funds. Chapter five highlights on the issues that influence the attraction of funds and its utilization and the last chapter looks into the future strategies for the pooling of funds and its utilization. The research adopts the descriptive research method, the comparative analytics of the financial ingredients and reports of the Islamic banks. Also the qualitative research method is adopted in the form of form of field studies, the sample of which is selected among the customers of Islamic banks in Yemen. A questionnaire was prepared which entails all the issues and variables related to the topic. The data is analysed obtained from the field studies using SPSS for accuracy. The theoretical perspective of the research concludes that; the Shar"‘ah encourages individuals to have savings, so also the state. It also found that investment is wajibon some not all of the Ummah, and that Islamic bank operate in such a way that they represent the rest of the Ummah. The research therefore, provides the most important basis, fundamental and regulations that are supposed to be abided by the Islamic banks in their investment activities. As for the practice, the research also concludes that, Yemeni Islamic banks have had a leading and remarkable role in the development of deposits when compared to the conventional banks in Yemen. And they have to certain extend been able to allocate the deposit funds into appropriate economic and financial ventures by means of some forms of investment mechanisms. Finally, the research laid out a guide of practical and applicable issues that may influence the Islamic banking sector in Yemen in its quest of attracting deposits and its investment. It also concludes by proposing future prospects that will serve the interest of the Islamic banks in their endeavor of development and success in attracting deposits and in their financial activities. The research also provides result of the study alongside recommendations.

This study seeks to evaluate the funding and investment policies to be found in four Yemeni Islamic banks, in order to expose their performance indicators in terms of Shari’ah principles, profitability. The thesis touches on economic and social indicators; while further analyzing the most significant factors affecting investment growth ranging from the period of 1996 to 2010. The study utilizes appropriate scientific methods for the analysis, as with the descriptive and quantitative statistical approaches. The descriptive results show that a large gap exists between the selected banks in terms of applicability of shariah principles, size, profitability, and their respective level of socio-economic contribution. Moreover, the results of the study indicate that, the Islamic banks contribute towards and hold a record-high growth rate of 34% in assets, deposits, and investments made to Yemeni banking system at the end of 2010, as opposed to the with average percentage of 1.5% in 1996. Furthermore, the findings of the study reveal that Yemeni Islamic banks possess features and characteristics of robust banking system securities, yet nevertheless faces liquidity risks due to the lack of financial investment instruments and the inadequate efficiency of the financial market. The results of this study also indicate that the Islamic banks have lessened their adoption of Murabaha products (credit-sales) with regards to their operational policy and rather tend towards other Islamic products and modes such as Mudaraba (speculation) and Ijara (leasing); Additionally, the commercial, financial and industrial sectors have acquired most of banks’ investments. On the other hand, the findings of the regression analysis show that there is statistically significant positive relationship between the volume of financing and investment in these banks on the one hand, and the respective size of the bank, as well as the rate of return on equity, investment deposits, and shareholders’ equity on the other. Moreover, inflation does share a negative relationship with the volume of financing and investment in these banks. Furthermore, the study effectively reveals that unlike external factors, internal factors have had a far greater impact on the investments of Islamic banks in Yemen. The results of this study therefore recommend and emphasize the need for Islamic banks to operate in collaboration with the central bank, and to further increase attentiveness and adherence to Islamic rulings through the establishment of supreme Shariah advisory Council and the adoption of common standards in order to strengthen public confidence in Islamic banking. The government should also stimulate investment in priority economic sectors and deliberately accelerate the establishment of financial markets due to their respective importance in the development of banking operations. Moreover, the state must aid the entirety of Islamic banks in managing their liquidity. Finally, the study recommends that Islamic banks raise their capital and grant more attention to investment deposits due to its importance for financing developmental projects