Saiful Azhar Rosly

Bio: Saiful Azhar Rosly is an academic researcher from International Centre for Education in Islamic Finance. The author has contributed to research in topics: Islam & Exploratory factor analysis. The author has an hindex of 16, co-authored 30 publications receiving 1263 citations. Previous affiliations of Saiful Azhar Rosly include International Islamic University Malaysia & Global University (GU).

Performance of Islamic and mainstream banks in Malaysia

Abstract: The study found that Islamic banking scheme (IBS) banks have recorded higher return on assets (ROA) as they are able to utilize existing overheads carried by mainstream banks. As this lowers their overhead expenses, it is found that the higher ROA ratio for IBS banks does not imply efficiency. It is also inconsistent with their relatively low asset utilization and investment margin ratios. This finding confirmed our contention that Islamic banking that thrives on interest‐like products (credit finance) is less likely to outshine mainstream banks on efficiency terms. Although Islamic credit finance products may have complied with Shariah rules, their lack of ethical content is not expected to motivate IBS banks to strive for efficiency through scale and scope economies.

Critical Issues on Islamic Banking and Financial Markets: Islamic Economics, Banking and Finance, Investments, Takaful and Financial Planning

Abstract: This book examines the principles and practices ofIslamic banking and financial markets, particularly from the Malaysian experience. The main objective of Islamic financial system is to govern the flow of funds from the surplus sector to the deficit sector and it does so to promote justice ('adalah). That is, by adhering to Shariah principles and achieving efficiency - doing the right thing and doing it right, public and private interest interests are can both be protected. By doing so, the legal and moral dimensions of product design and development are now equally important. In this way halal status should not discount how Islamic products affects general economic activities. It means that Shariah advisors should not only approve Shariah complaint products along the juristic plane but dutifully consider how the products can affect income disparities and poverty, economic stability and growth. For this reason, the principle of risktaking (ghorm) and the principle of work (kasb) and the principle of liability, accountability, responsibility (daman) are paramount in determining Shariah legitimacy of profits and earnings derived from Islamic financial transactions. Risk (ghorm), work (kasbh) and liability (daman) constitute the essence of trading and commerce (ai-bay') the Holy Quran has enjoined over usury (riba). By risk, it means allowing capital to depreciate and appreciate as dictated by the market forces. By work, it refers to value-additions namely, knowledge and skills imparted into the business process. Liability means the responsibility each party must assume in the contract such as providing warranties on the goods and services sold. Based on these principles ofrisk, work and responsibility, also known as the principle of equivalent countervalue ('iwad), the ethical and moral dimension of Islamic fmancial transactions can be realized and thus promote the sense of justice the Quran attempts to convey. It helps people take a second-look at financial products that have received Shariah compliant status and help control potential duplication of interestbearing products bearing the Islamic label.

Shariah parameters reconsidered

Abstract: Purpose – The purpose of this paper is to explain three additional parameters, namely maqasid al‐Shariah, financial reporting, and legal documentation of contract for determining Shariah legitimacy of financial instruments in Islamic financial institutions. Currently, contract ('aqd) is the only parameter recognized by Shariah scholars at the supervisory level.Design/methodology/approach – This analysis begins with examining the pitfalls of the contract approach and proceeds to present the maqasid, financial reporting and legal documentation approaches in ascertaining absolute Shariah compliant of financial products.Findings – The paper argues that the four approaches must be applied in package in determining Shariah compliant status to avoid costly errors that might lead to litigations and loss of competitiveness in the Islamic financing business.Originality/value – The paper provides new insights and integrated analysis of Shariah auditing where knowledge clusters concerning the Shariah, economics, fina...

Al-bay' bithaman ajil financing: impacts on Islamic banking performance

Abstract: The dual-banking system in Malaysia is expected to put Islamic banks at a disadvantage due to the latter's over-dependency on fixed rate asset financing such as al-bay' bithaman ajil and murabahah. When interest rates are rising, rational product choice among non-Muslim customers (NMC) is expected to produce a shifting effect that may frustrate deposit mobilization and at the same time able deplete an Islamic bank's earnings. The shifting effect occurs when NMC either transfer deposits from Islamic banks to conventional banks, or, in a period of declining interest rates, opt for loans rather than for deferred sale financing. These shifts occur solely due to pecuniary incentives sought by NMC as the suppliers of deposits or demanders of funds. During an economic slowdown normally accompanied by falling interest rates, the shifting effect is expected to increase idle balances as the demand for fixed rate asset financing declines. Thus, in the choice of banking products, it is argued that NMCs will be the main beneficiaries of the dual-banking system since they are open to more options than the Muslim customers (MC). Consistent with these expectations, we find that profit margins of Bank Islam Malaysia suffered a decline between the 1996–1997 period of rising interest rates while interest margins of conventional banks showed a rising trend. © 1999 John Wiley & Sons, Inc.

Understanding Islamic finance

Abstract: List of Boxes and Figures. Foreword. Preface. Acknowledgements. PART I FUNDAMENTALS. 1 Introduction. 1.1 Economic Scenario in the Neoclassical Framework. 1.2 Conventional Debt: A Recipe for Exploitation. 1.3 Growth per se May not Lead to Socio-economic Justice. 1.4 Social Welfare Activities of the States. 1.5 The Main Culprit. 1.6 The Need of the Hour. 1.7 Economics and Religion. 1.8 Islamic Principles Can Make the Difference. 1.9 Regulating Trade and Business. 1.10 Islamic Finance Passing Significant Milestones. 1.11 Could it Work to Achieve the Objectives? 1.12 About this Book. 2 Distinguishing Features of the Islamic Economic System. 2.1 Introduction. 2.2 Islamic Shari'ah and its Objectives. 2.3 Why Study Islamic Economics? 2.4 Islamic Economics: What should it be? 2.5 Paraphernalia of Islamic Economics. 2.6 Summary. 3 The Main Prohibitions and Business Ethics in Islamic Economics and Finance. 3.1 Introduction. 3.2 The Basic Prohibitions. 3.2.1 Prohibition of Riba. 3.3 Business Ethics and Norms. 3.4 Summary and Conclusion. 4 The Philosophy and Features of Islamic Finance. 4.1 Introduction. 4.2 The Philosophy of Islamic Finance. 4.3 Debt versus Equity. 4.4 Islamic Banking: Business versus Benevolence. 4.5 Exchange Rules. 4.6 Time Value of Money in Islamic Finance. 4.7 Money, Monetary Policy and Islamic Finance. 4.8 Summary. PART II CONTRACTUAL BASES IN ISLAMIC FINANCE. 5 Islamic Law of Contracts and Business Transactions. 5.1 Introduction. 5.2 Mal (Wealth), Usufruct and Ownership. 5.2.1 Defining Various Related Terms. 5.3 General Framework of Contracts. 5.4 Elements of a Contract. 5.5 Broad Rules for the Validity of Mu'amalat. 5.6 W'adah (Promise) and Related Matters. 5.7 Types of Contracts. 5.8 Commutative and NonCommutative Contracts. 5.9 Conditional or Contingent Contracts. 5.10 Summary. 6 Trading in Islamic Commercial Law. 6.1 Introduction. 6.2 Bai' - Exchange of Values. 6.3 Legality of Trading. 6.3.1 Trade (Profit) versus Interest: Permissibility versus Prohibition. 6.4 Types of Bai'. 6.5 Requirements of a Valid Sale Contract. 6.6 Riba Involvement in Sales. 6.7 Gharar - A Cause of Prohibition of Sales. 6.8 Conditional Sales and "Two Bargains in One Sale" 6.9 Bai' al'Arbun (Downpayment Sale). 6.10 Bai' al Dayn (Sale of Debt). 6.11 Al 'Inah Sale and the Use of Ruses (Hiyal). 6.12 Options in Sales (Khiyar). 6.13 Summary. 7 Loan and Debt in Islamic Commercial Law. 7.1 Introduction. 7.2 The Terms Defined. 7.3 Illegality of Commercial Interest. 7.4 Loaning and the Banking System. 7.5 Guidance from the Holy Qur'an on Loans and Debts. 7.6 The Substance of Loans. 7.7 Repayment of the Principal Only. 7.8 Time Value of Money in Loans and Debts. 7.9 Instructions for the Debtor. 7.10 Instructions for the Creditor. 7.11 Husnal Qadha (Gracious Payment of Loan/Debt). 7.12 Remitting a Part of a Loan and Prepayment Rebate. 7.13 Penalty on Default. 7.13.1 Insolvency of the Debtor. 7.14 Hawalah (Assignment of Debt). 7.15 Security/Guarantee (Kafalah) in Loans. 7.16 Bai' al Dayn (Sale of Debt/Debt Instruments). 7.17 Impact of Inflation on Loans/Debts. 7.18 Summary. PART III ISLAMIC FINANCE - PRODUCTS AND PROCEDURES. 8 Overview of Financial Institutions and Products: Conventional and Islamic. 8.1 Introduction. 8.2 What is Banking or a Bank? 8.3 The Strategic Position of Banks and Financial Institutions. 8.4 Categories of Conventional Financial Business. 8.5 The Need for Islamic Banks and NBFIs. 8.6 The Issue of Mode Preference. 8.7 Islamic Investment Banking. 8.8 Islamic Financial Markets and Instruments. 8.9 Summary and Conclusion. 9 Murabaha and Musawamah. 9.1 Introduction. 9.2 Conditions of Valid Bai'. 9.3 Murabaha - a Bai' al Amanah. 9.4 Bai' Murabaha in Classical Literature. 9.5 The Need for Murabaha. 9.6 Specific Conditions of Murabaha. 9.6.1 Bai' Murabaha and Credit Sale (Murabaha-Mu'ajjal). 9.7 Possible Structures of Murabaha. 9.8 Murabaha to Purchase Orderer (MPO). 9.9 Issues in Murabaha. 9.10 Precautions in Murabaha Operations. 9.11 Musawamah (Bargaining on Price). 9.12 Summary. 10 Forward Sales: Salam and Istisna'a. 10.1 Introduction. 10.2 Bai' Salam/Salaf. 10.3 Benefits of Salam and the Economic Role of Bai' Salam. 10.4 Features of a Valid Salam Contract. 10.5 Security, Pledge and Liability of the Sureties. 10.6 Disposing of the Goods Purchased on Salam. 10.6.1 Alternatives for Marketing Salam Goods. 10.7 Salam - Post Execution Scenarios. 10.8 Salam-Based Securitization - Salam Certificates/Sukuk. 10.9 Summary of Salam Rules. 10.10 Salam as a Financing Technique by Banks. 10.11 Istisna'a (Order to Manufacture). 11 Ijarah - Leasing 279. 11.1 Introduction. 11.2 Essentials of Ijarah Contracts. 11.3 General Juristic Rules of Ijarah. 11.4 Modern Use of Ijarah. 11.5 Islamic Banks' Ijarah Muntahia-bi-Tamleek. 11.6 Summary of Guidelines for Islamic Bankers on Ijarah. 12 Participatory Modes: Shirkah and its Variants. 12.1 Introduction. 12.2 Legality, Forms and Definition of Partnership. 12.3 Basic Rules of Musharakah. 12.4 The Concept and Rules of Mudarabah. 12.5 Mudarabah Distinguished from Musharakah. 12.6 Modern Corporations: Joint Stock Companies. 12.7 Modern Application of the Concept of Shirkah. 12.8 Diminishing Musharakah. 12.9 Diminishing Musharakah as an Islamic Mode of Finance. 12.10 Summary and Conclusion. 13 Some Accessory Contracts. 13.1 Introduction. 13.2 Wakalah (Agency). 13.3 Tawarruq. 13.4 Ju'alah 13.5 Bai' al Istijrar (Supply Contract). 14 Application of the System: Financing Principles and Practices. 14.1 Introduction. 14.2 Product Development. 14.3 The Nature of Financial Services/Business. 14.4 Prospects and Issues in Specific Areas of Financing. 14.5 Islamic Banks' Relationship with Conventional Banks. 14.6 Fee-based Islamic Banking Services. 14.7 Summary and Conclusion. Appendix: The Major Functions of a Shari'ah Supervisory Board in the Light of the AAOIFI'S Shar ~ i'ah Standard. 15 Sukuk and Securitization: Vital Issues in Islamic Capital Markets. 15.1 Introduction. 15.2 The Capital Market in an Islamic Framework. 15.3 Securitization and Sukuk. 15.4 Summary and Conclusion. 16 Takaful: An Alternative to Conventional Insurance. 16.1 Introduction. 16.2 The Need for Takaful Cover. 16.3 The Shari'ah Basis of Takaful. 16.4 How the Takaful System Works. 16.5 Takaful and Conventional Insurance Compared. 16.6 Status and Potential of the Takaful Industry. 16.7 Takaful Challenges. Appendix: Fatawa (Juristic Opinions) on Different Aspects of Insurance. 17 An Appraisal of Common Criticism of Islamic Banking and Finance. 17.1 Introduction. 17.2 The Common Myths and Objections. 17.3 Appraisal of Conceptual Criticism. 17.4 Appraisal of Criticism on Islamic Banking Practice. 17.5 Conclusion. 18 The Way Forward. 18.1 Introduction. 18.2 Agenda for the Policymakers. 18.3 Potential, Issues and Challenges for Islamic Banking. 18.4 Conclusion. Acronyms. Glossary. References. Arabic/Urdu References. Suggested Further Reading. Index.

Performance of Islamic and mainstream banks in Malaysia

Abstract: The study found that Islamic banking scheme (IBS) banks have recorded higher return on assets (ROA) as they are able to utilize existing overheads carried by mainstream banks. As this lowers their overhead expenses, it is found that the higher ROA ratio for IBS banks does not imply efficiency. It is also inconsistent with their relatively low asset utilization and investment margin ratios. This finding confirmed our contention that Islamic banking that thrives on interest‐like products (credit finance) is less likely to outshine mainstream banks on efficiency terms. Although Islamic credit finance products may have complied with Shariah rules, their lack of ethical content is not expected to motivate IBS banks to strive for efficiency through scale and scope economies.

Determinants of customers' intention to use Islamic personal financing: The case of Malaysian Islamic banks

Abstract: Purpose – Islamic banking and finance is an emerging global industry founded on Islamic ethical precepts. Just as in the case of conventional banks, Islamic banks are expected to offer products that consider the needs of their customers. The present study investigates the effects of the following factors: attitude; social influence; religious obligation; government support; and pricing, on the intention to use Islamic personal financing.Design/methodology/approach – The sample comprised of 150 customers of two fully fledged Islamic banks in Malaysia: Bank Islam Malaysia Berhad and Bank Muamalat Malaysia Berhad. Data were obtained through a face‐to‐face survey using semi‐structured questionnaire. Out of a total of 150 responses, only 136 responses were usable for further analysis. The study used factor analysis, correlation and regression to analyse the data.Findings – The study found three determinants to be significant in influencing the intention to use Islamic personal financing, namely, attitude, soci...