Abstract
This paper examines possible “risk” of a mismatch between global trends of macroprudential regulation and practical efforts of product development to enhance religious values of Islam. The increasing trend of macroprudential regulations is of course essential for maintaining stability in the financial system. One notable trend among them is regulations to segregate simple banking operations of deposit and lending from equity investment and other different types of risk, as seen in the Dodd-Frank Act in the U.S and the retail ring fences regulation in the U.K. This trend heads for the opposite direction that the Islamic financial industry is aiming at, in the sense that the industry shows some signs of promoting equity-based transactions, which is more desirable in terms of Shari’ah. Islamic private equity funds, venture capital, and crowdfunding are good examples. Under these circumstances, financial authority may face the difficulty of choosing a policy option, under the situation of trade-off.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
To be precise, the concept itself was there as early as in 1970s. Section 2.3.1 describes this in more detail.
- 2.
Details in one literature are sometimes different from others, including similar works, but the content in Table 2.1 is considered to wrap up ths situation during this period.
- 3.
The world “macroprudence” can be found in a minutes of a meeting at BIS. See Clement (2010).
- 4.
The Office of the Currency Comptroller in the US issued letters of interpretation of accepting Islamic housing loans in 1997 and 1999. Monetary Authority of Singapore in 2005 changed its banking act to include Murabahah-related transactions into banks’ activities. Japan’s Financial Services Agency revised the banking regulation in 2008 and 2015 to accommodate asset-related Islamic deals.
- 5.
However, Asian Development Bank, for example, is not able to offer asset-related Islamic financial services, such as Murabahah, because its charter allows the Bank to offer only lending, equity, and guarantee. Technically, asset-related financing is not interpreted as lending.
References
Ahmed H (2011) Maqasid al-Shari‘ah and Islamic financial products: a framework for assessment. ISRA Int J Islam Finance 3(1):149–160
Ali AM (2000) The emerging Islamic financial architecture: the way ahead. In: Proceedings of the fifth Harvard University forum on Islamic finance—Islamic finance: dynamics and development. Harvard University, Cambridge
Arvai Z, Prasad A, Katayama K (2014) Macroprudential policy in the GCC countries IMF staff discussion note SDN/14/01. International Monetary Fund, Washington, DC
Askari H, Iqbal Z, Mirakhor A (2010) Globalization and Islamic finance: convergence, prospects, and challenges. John Wiley and Sons, Singapore
BNM (Bank Negara Malaysia) (2014a) Financial stability and payment systems report 2014. Bank Negara Malaysia, Kuala Lumpur
BNM (Bank Negara Malaysia) (2014b) Sustainable, well-grounded Islamic finance sees growth in structured products. Bank Negara Malaysia, Kuala Lumpur
Borio C (2003) Towards a macroprudential framework for financial supervision and regulation? CESifo Econ Stud 49(2):181–216
CGFS (Committee on the Global Financial System) (2010) Macroprudential instruments and frameworks: a stocktaking of issues and experiences bank for international settlements. CGFS Papers No. 38, May
Chapra MU (2007) The case against interest: is it compelling? Thunderbird Int Bus Rev 49(2):161–186
Chapra MU, Khan T (2000) Regulation and supervision of Islamic banks. Occasional Paper No. 3. Islamic Research and Training Institute, Islamic Development Bank
Clement P (2010) The term “macroprudential”: origins and evolution, BIS Quarterly Review (March). Bank for International Settlements, Basel, pp 59–67
Dar H (2010) Global Islamic finance report 2010. BMB Islamic U.K., London
De Lorenzo YT (2007) The total returns swap and the Shariah conversion technology stratagem. Dinar Standard, New York
Diaw A, Salwana H, Adam NBK (2010) Performance of Islamic and conventional exchange traded funds in Malaysia. ISRA Int J Islam Finance 2(1):131–149
El-Gamal MA (2003) “Interest” and the paradox of contemporary Islamic law and finance. Fordham Int Law J 27(1):108–149
Errico L, Farahbaksh M (1998) Islamic banking: issues in prudential regulations and supervision. IMF Working Paper 98/30. International Monetary Fund, Washington, DC
Gabr A (2013) New investment platform Shekra supports startups in Egypt. Wamda, February 17, Dubai
Gainor T (2000) A practical approach to product development. A paper prepared for the Fourth Harvard University Forum on Islamic Finance
GIFF (Global Islamic Finance Forum) (2012) Islamic finance opportunities: country and business guide. GIFF (Global Islamic Finance Forum), Kuala Lumpur
Hamoudi HA (2007) Jurisprudential schizophrenia: on form and function in Islamic finance. Chic J Int Law 7(2):605–622
Hasan Z (2005) Islamic banking at the crossroads: theory versus practice. In: Iqbal M, Wilson R (eds) Islamic perspectives on wealth creation. Edinburgh University Press, Edinburgh, pp 11–25
ICD (Independent Commission on Banking) (2011) Final report. Recommendations. The UK ICB Report, London
Iqbal M, Molyneux P (2005) Thirty years of Islamic banking: history, performance and prospects. Palgrave Macmillan, New York
Leong CC (2014) Development of securitisation in Malaysia—cagamas experience. A presentation made at the Indonesia International Conference on Islamic Finance
Lewis MK, Alagoud LM (2001) Islamic banking. Edward Elgar, Cheltenham
Nagaoka S (2012) Critical overview of the history of Islamic economics: formation, transformation, and new horizons. Asian Afr Area Stud 11(2):114–336
al-Rifai T (1999) Islamic equity funds: a brief industry analysis. Failaka International Inc., Chicago. The headquarter of the company is Chicago
Siddiqui R (2013) Islamic Venture Capital: Crowd Funding. Interview with Shehab Marzban, Khaleej Times, October 2
Sundararajan V, Errico L (2002) Islamic financial institutions and products in the global financial system: key issues in risk management and challenges ahead. IMF Working Paper 02/192. International Monetary Fund, Washington, DC
Wilson R (1983) Banking and finance in the Arab Middle East. Macmillan, London
Yousef TM (2004) The Murabaha syndrome in Islamic finance: laws, institutions and politics. In: Henry CM, Wilson R (eds) The politics of Islamic finance. Edinburgh University Press, Edinburgh, pp 63–80
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Yoshida, E. (2016). Doctrinal Challenge for Islamic Banking on Macroprudential Regulations: A Religion-Regulation Mismatch 2.0. In: Zulkhibri, M., Ismail, A., Hidayat, S. (eds) Macroprudential Regulation and Policy for the Islamic Financial Industry. Springer, Cham. https://doi.org/10.1007/978-3-319-30445-8_2
Download citation
DOI: https://doi.org/10.1007/978-3-319-30445-8_2
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-30443-4
Online ISBN: 978-3-319-30445-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)