Mohd Adib Ismail

Role of Islamic Banking in Financial Inclusion: Prospects and Performance

According to Global Financial Development Report 2014, the proportion of adult population holding bank accounts in 25 out of 48 Organization of Islamic Cooperation (OIC) member countries surveyed stands below 20 %. Part of the reason is Muslims’ voluntary exclusion of interest-based financial services. On average, 28 % adults in the OIC countries hold a bank account at a formal financial institution. On the other hand, only 7.7 % of the poorest 40 % people in the OIC countries borrow from financial institutions. Furthermore, in the OIC countries, like Guinea-Bissau, Gabon, Chad, Sudan, Syria, Mozambique, Gambia, and Iraq, microfinance outreach are not even catering to the 1 % of the poor people in these countries. In 26 out of 36 OIC countries where sufficient data are available, we find that not even 10 % of the poor people are under the microfinance radar. Thus, this presents a challenge as well as an opportunity for Islamic banks to increase their outreach toward fostering inclusive finance in the OIC countries.

Energy consumption, emissions and economic growth in Bahrain

This study examines the Granger causality relationships between economic growth, energy consumption and emissions, from 1980 to 2007 in Bahrain, controlling for capital and urban population using Toda and Yamamoto’s approach. It was found that there is unilateral causality which runs from urban population, economic growth, capital and energy consumption to environment. Further, we found strong support for causality running from economic growth to energy consumption, emissions and capital. The existence of these linkages suggests that the government of Bahrain may pursue energy efficiency strategies and carbon emissions reduction policy in the long run without impeding economic growth. Additionally, the long run pursuit of high economic growth given sustained increases in energy efficiency may also reduce CO2 emissions intensity per unit of her GDP.

Intertemporal consumption behaviour in OIC countries

This study aims to examine the consumption behaviour in Organization of Islamic Cooperation countries.,Using time series and panel data, this study estimates rational expectations permanent income hypothesis model and the intertemporal elasticity of substitution, and examines the response in consumption to expected and unexpected changes in income.,The evidence supports the phenomenon of loss aversion. The response of consumption to unexpected income changes is statistically significant in only one-third of the countries in the sample. Conversely, the response of consumption to expected income changes is statistically as well as economically significant in one-fourth of the countries in the sample. The intertemporal elasticity of substitution is also statistically insignificant in majority of OIC countries in the sample.,The evidence in support of loss aversion in preferences could help in explaining the low penetration of equity-based risk sharing instruments in Islamic finance.,The excess sensitivity of consumption to income suggests that redistribution efforts to enhance incomes of poor households could help in enhancing their consumption levels.,The study takes a comprehensive sample across time and space for OIC countries as compared to previous studies and also adjusts the budget constraint for Zakat.

Dasar fiskal terhadap perbelanjaan swasta: analisis SVAR di Malaysia

Bermula dengan episod belanjawan defisit yang berpanjangan sejak tahun 1998 di NSM, menunjukkan kutipan hasil cukai kerajaan tidak berupaya untuk menampung perbelanjaan yang menyebabkan kerajaan perlu memikirkan sumber pembiayaan alternatif seperti melalui terbitan bon. Mengikut teori dana boleh pinjam, terbitan bon kerajaan menyebabkan penurunan harga bon dan seterusnya cenderung meningkatkan kadar bunga pasaran. Kenaikan kadar bunga pasaran menyebabkan kos dana meningkat yang menyebabkan firma cenderung mengecilkan saiz pelaburan. Ini menyebabkan peningkatan perbelanjaan kerajaan yang dibiayai melalui terbitan bon tidak dapat memberikan kesan sepenuhnya kepada peningkatan pendapatan negara malahan mewujudkan kesan asakan keluar ke atas pelaburan swasta. Kertas ini bertujuan untuk mengkaji keberkesanan dasar fiskal iaitu kejutan positif perbelanjaan kerajaan dan hasil kerajaan (cukai) terhadap pelaburan swasta di Malaysia. Kajian ini menggunakan model SVAR (Structural Vector Autoregressive) dalam ekonomi terbuka bersaiz kecil untuk mengenal pasti tindak balas dinamik kejutan dasar fiskal terhadap pelaburan swasta. Data kajian adalah data siri masa sukuan bagi tempoh 1991:1-2016:3. Analisis fungsi tindak balas impulse dan penguraian varian telah digunakan untuk mengupas keberkesanan dasar fiskal terhadap perbelanjaan swasta. Hasil kajian menunjukkan kesan kejutan perbelanjaan kerajaan mewujudkan kesan asakan keluar terhadap pelaburan swasta manakala bagi penggunaan swasta mengalami kesan positif. Bagi kesan kejutan hasil cukai kerajaan menunjukkan keputusan yang sama iaitu pelaburan swasta mengalami kesan negatif manakala penggunaan swasta mengalami kesan positif.

Towards an integrative framework for understanding Muslim consumption behaviour

Purpose - This paper aims to integrate Islamic and mainstream economics framework towards a more realistic understanding of Muslim consumption behaviour. Design/methodology/approach - The model incorporates some of the Islamic institutions like period-wise deduction of Zakat from endowments. It also includes bequests which could be significant given the Islamic injunctions on inheritance distribution and the significance placed on the institution of family. Furthermore, the model integrates the assumption that consumption opportunity set will axiomatically filter out the prohibited consumption goods from the consumption set in both contemporaneous and inter-temporal consumption. Findings - Zakat ensures contemporaneous redistribution from endowment surplus households (those having Zakatable endowments above Nisab) to endowment-deficient households (those having Zakatable endowments below Nisab). The lifetime resources are scaled down for endowment surplus households because of the payment of Zakat in both periods and leaving bequests in old-age period, while the lifetime resources are scaled up for endowment deficient households because of the receipt of Zakat in both periods and receiving the bequests in youth. Originality/value - The authors show how some of the Islamic principles and institutions can be integrated in the mainstream economics framework, especially in research studies where the objective is to understand and describe reality rather than persuasion and idealization.

Exploring Efficiency, Co-integration, Causality and Volatility Clustering in Unrestricted and Islamic Portfolios

Unlike unrestricted portfolios, Islamic portfolios have a narrow opportunity set for investment. They also face trading restrictions due to the prohibition of futures, short selling, options and day trading which can potentially create significant limits to arbitrage. In this study, we explore weak-form market efficiency in comparable unrestricted and Islamic portfolios. The study also investigates the existence of Autoregressive Conditional Heteroscedasticity (ARCH) effects in the returns series of unrestricted and Islamic portfolios in developed and emerging markets. Finally, we also investigate the existence of bi-directional causality between portfolios. From the runs test, we find that the returns of most indices are random, except for a few. Finally, we also find strong evidence for co-integration and causality in both directions between Islamic and unrestricted market portfolios.

Firm's investment and monetary policy: Panel analysis of shariah compliant firms in Malaysia

This paper examines the effects of monetary policy on firm balance sheet channel by focusing on syariah compliant firm’s investment spending listed in Bursa Malaysia from year 2003 until 2011. The dynamic panel data method namely Generalized Method of Moments (GMM) is used in investigating two monetary policy channels namely interest rates and broad credit channel using a dynamic neoclassical investment model. The sample of the firms has been split into small and large firm to identify the heteregoneity of monetary policy effects on invetsment spending across firm size. The empirical results reveal that both monetary policy channels, namely interest rates and broad credit channel are relevant for the case of Malaysia. This findings indicate that investment spending of syariah compliant firms do respond to monetary policy changes. Moreover, the investments of small firms are more dependent on internal cash flow than that of large firms. Therefore, the policy maker should take into account the differences in firms characteristics in implementing monetary policy to ensure that their policy is effective.