Abdul Ghafar Ismail

Tax Rate and its Determinations: An Opinion from Ibn Khaldun

Tax is an alternative method for a country to obtain revenue for spending. But the issue arises when there are differences of opinion on the tax rate. Economists argue that to obtain higher tax revenue, it is necessary to lower the tax rate. In this paper, an analysis of tax rates is conducted by looking at the findings of Ibn Khaldun in his book Muqaddimah. This study also examines other hypotheses related to taxation. The findings show that the optimal rate of taxation can be determined. Keyword: optimal tax rate, tax revenue, Khaldunia, tax-spending hypothesis, fiscal

Market concentration of Malaysia's Islamic banking industry

The aim of this paper is to evaluate the nature and changes of market concentration in the Malaysia’s Islamic banking due to the restructuring of Islamic banking industry within the liberalization wave in the banking market. A total of 17 Islamic banks operating over the period of 2000-2010 had been considered. The structural approach framework was used to evaluate the nature and changes of market concentration in the Islamic banking industry in Malaysia. Under this approach, various market concentration indexes has been calculated from year to year basis as proposed by the industrial organizational field. Findings herein supported the structure-conduct-performance (SCP) paradigm where different concentration ratios have decreased over the study’s period where this is reflected in the greater degree of competition in the Malaysia’s Islamic banking industry. This study found an evidence that structural changes in the Islamic banking market has changed the market structure of the respective market from moderately concentrated to low concentrated market; whereby supporting the existence of competitive environment in the Malaysian Islamic banking market. Present study contributed to new knowledge in banking market concentration particularly for Islamic banking industry in the emerging economies such as Malaysia. Many past studies studying this issue had extensively examined the conventional banking system, but only several studies were on Islamic banking market. Hence, this study may enrich the existing literature on this issue, particularly for the Islamic banking industry. Policy recommendation from the findings; first, Malaysian Islamic banking industry needs a contestable market environment as to enable them to achieve better profit and efficient operation. Second, concentration ratios from this study can be used to identify the optimal number of banking firms in the Islamic banking industry.

Happiness in Economics as Understood Across Ism and Religion

The concept of happiness has been discussed long time ago by economists. Recently, it became the most related and important thing to be studied because of its impact in societies. Discussion about happiness basically interprets within two separate views. First, happiness related with economic variable, for instance, how money can create happiness. Second happiness is discussed within the context of religion. However, the discussion did not combine both contexts, economic variable and religion, to interpret happiness. Therefore, it is important to highlight the concept of happiness in a different way such as in this article. Different cultures will have their own perspective on the determination of happiness. From just “individual perspective” of happiness, they then formed an ism through involvement of a big society from the same culture. Some isms such as hedonism and materialism are synonyms in characterizing the concept of happiness in this modern world. At the same time, the isms are actually working with the economic and non-economic indicators as elements to strengthen the ism itself. On the other hand, the concept of happiness from the perspective of religion will also be a part of discussion in this article. Therefore, this article will reveal that the meaning of happiness is different in terms of religion and ism. So, to carry out both ism and religion simultaneously in shaping a more intrinsic value of happiness is not an easy task. Furthermore, religion is always associated with spiritual value that makes it hard for some people to practice religion and their isms at the same time. Thus, this article will propose that the right interpretation of isms based on their faith in religion can contribute to the concept of genuine happiness.

Profitability and persistency in the service industry: the case of QISMUT+3

ABSTRACT The aim of this study is to evaluate profitability determinants and profit persistency of Islamic and conventional banks operating in top nine Islamic Finance oriented-countries that are named as QISMUT+3 (Qatar, Indonesia, Saudi Arabia, Malaysia, UAE, Turkey, Bahrain, Kuwait and Pakistan). For this purpose, it uses bank specific, market structure, and macroeconomic variables that are utilized from Orbis Bank Focus and World Bank database. To capture endogeneity problem and unobserved heterogeneity, dynamic approach is used by employing system GMM estimation. The major findings of the study show higher profit persistency of Islamic banks (IBs) than conventional banks (CBs). The results also suggest that profitability determinants of IBs and CBs are different. Concerning the risk behavior, bank capitalization and credit risk variables are more important for CBs. Crisis results attribute better resilience to Islamic banks.

Macroprudential Tools and Its Relationship with Monetary Policy Tools

The stability at both individual financial institution and financial system level are a prerequisite for the implementation of monetary policy. In particular, financial stability indicators are aggregate measures comprising of microprudential and macroprudential indicators, which define and signal the health and soundness of financial system in a country. The balance sheet of individual financial institution and financial system provide the information for deriving the financial stability indicators, which partly become the targets of monetary policy. Therefore, understanding the working of both macroprudential and monetary policies are crucial for measuring the soundness and stability of financial system. The aim of this chapter is to help guide policymakers and researchers in identifying policy-relevant questions that can inform policy decisions on the design and implementation of macroprudential policy tools going forward and on the interaction with monetary policy. Secondly, it is aimed to provide information for policymakers on existing issues, which can inform their current policy debates. The analysis of monetary policy tools, doctrines, and the implementation of monetary policy from selected countries are taken as comparison with the macroprudential tools. From the analysis, it is identified that macroprudential and monetary policy tools are different as well as the both of the targets. The effects of macroprudential policy tools are on the financing growth, leverage or capital, and asset prices. While the effects of monetary policy tools are on the reserve position and the benchmark rate in determining the profit margin and profit to be distributed. It is also concluded that the challenge for policymaker in analyzing the effectiveness of both macroprudential and monetary policies are to avoid financial instability.

Macroprudential Regulation and Policy for the Islamic Financial Industry

The Islamic fi nance model is suffi ciently well specifi ed at the “bank-toclient” level, but does not regulate the “central bank-to-bank” and “bank-to-bank” relationships. This chapter proposes a concrete Shari’ah -compatible mechanism for setting up an Islamic interbank loan (In the Islamic fi nance industry, the word “loan” is usually avoided because of associations with interest-based funding. However we use it in this chapter, as the term “interbank loan market” is well established and the substitution of the word “loan” with the word “funding” may lead to misunderstandings) market and managing Islamic bank liquidity, which allows a segregation of Islamic and non-Islamic fi nance. Islamic banks should as a minimum, delink from LIBOR and other traditional reference rates and come up with their own fi nancial benchmarks.

Concentration and competition in dual banking industry: A structural approach

The purpose of this paper is to investigate the evolution of market concentration and competition in Malaysian dual banking industry for the period of 1997-2013. This study utilized structural approach to investigate changes in the market structure particularly the level of concentration and competition that contributed by several structural changes which take place in the dual banking system. According to structural approach, concentration plays an important role in examining the link between concentration and competition. Therefore, present paper utilized the structural approach to measure various concentration indexes to provide significant evidence on the changes in the market structure of Malaysian banking industry for the largest available data set of 1997-2013. Pearson correlation analysis was also used to examine the consistency of those various measures used in this study. The paper found evidence that structural changes have altered the market structure of the banking industry which comprises of Islamic and conventional banking system. The results also indicate that dual banking industry operates in the monopolistic competition structure. Therefore, concentration indexes can be used by authorities to decide on the optimal number of banks operating in the industry.

Tawarruq time deposit with wakalah principle: an option that triggers new issues

The development of Islamic banking system in offering the products which is based on the shariah principles has witnessed a tremendous success. There are many new products being introduced as alternatives to conventional ones. Yet, at the same time, some of these products remain hotly debated amongst jurists on their validity and subsequently become non-compliant products. One of such products that have been introduced is tawarruq-based deposit product. In addition, the newly introduced Islamic Financial Services Act 2013 states that deposit products which are characterized as principal guaranteed feature could not be offered based on mudarabah or wakalah as they are only appropriate for investment products (principal non-guaranteed products). Therefore, the introduction of tawarruq-based deposit product by Islamic banks could be the best alternative to take place. However, the wakalah principle is also embedded in this twarruq deposits. Hence, this paper makes an attempt to analyze the adoption of wakalah in the tawarruq deposit that may trigger new issue.

Poverty and social security in Islam

Handbook on Islam and Economic Life is a unique study, one of the first of its kind to consider Islam within a broader economic sphere. Covering a wide breadth of topics and research, it explores how Islam impinges upon and seeks to shape major aspects of economic life including economic organisation, business and management, finance and investment, charity, mutuality and self-help, and government. It concludes by analysing the link between religion and development, the present economic situation in Arab countries and the causes of underdevelopment in Muslim countries.