GLOBAL REPORT ON ISLAMIC FINANCE
frontier knowledge in Islamic finance for the industry, with the support of the industry and academia. Trust and confidence in using Islamic financial services needs to be increased. Public awareness can be increased by promoting Islamic financial literacy, including knowledge of which financial products are best suited for particular purposes.
Notes 1. For more on this, see the maqƗs ̙id al-sharƯ‘ah as developed by al-Ghazel and al-Shatibi, in Zarqa (1980). 2. Askari and Krichene (2014) provide a review of the arguments in support of risk sharing being the essence of Islamic banking and the major reason for its stability. Hassan and Dridi (2010) also argue that risk-sharing characteristics of Islamic banking should increase stability, thereby stimulating growth. 3. Religiosity was measured as the percentage of adults in a given country who responded affirmatively to the question, “Is religion an important part of your daily life?” in a 2010 Gallup poll. 4. There are many reports on the state of Islamic banking, but they adopt different approaches, leading to a wide range of estimates of the size of the industry. Data on Islamic banks often cover commercial as well as investment banks, and sometimes they even include multilateral institutions such as the Islamic Development Bank. Such differences in the choice of institutions to include explain the wide range of estimates of the size of the Islamic banking industry. 5. Dar and Presley (2000) suggest several explanations for the tendency of Islamic banks to prefer to use modes of financing other than profit and loss–sharing (overwhelmingly murƗbah̙ah). 6. IFSB-15 provides guidelines for the components of regulatory capital (Tier 1 and Tier 2). IFSB-15 also defines common equity as the Tier 1 core capital and preferred stock as the additional Tier 1 capital. Currently, the IFSB standard is the only international guideline to integrate Islamic contracting principles into the global financial system. A unified adoption of this standard would ensure that institutions offering Islamic financial products and services assign sufficient capital to cover the risk of the institution’s Islamic operations.
THE ISLAMIC BANKING SECTOR
References Abedifar, P., S. Ebrahim, P. Molyneux, and A. Tarazi. 2015. “Islamic Banking and Finance: Recent Empirical Literature and Directions for Future Research.” Journal of Economic Surveys 29 (4): 637–70. Askari, H., Z. Iqbal, N. Krichene, and A. Mirakhor. 2010. The Stability of Islamic Finance: Creating a Resilient Financial Environment for a Secure Future. Singapore: John Wiley and Sons (Asia). ———. 2012. Risk Sharing in Finance: The Islamic Finance Alternative. Singapore: John Wiley and Sons (Asia). Askari, H., and N. Krichene. 2014. “Islamic Finance: An Alternative Financial System for Stability, Equity, and Growth.” PSL Quarterly Review 67 (268): 9–54. Bankscope. 2014/2015. Database. https://bankscope .bvdinfo.com/version-2016114/home.serv ?product=scope2006. Chapra, M. U. 2011. “The Global Financial Crisis: Can Islamic Finance Help?” In Islamic Economics and Finance: A European Perspective, edited by J. Langton, C. Trullols, and A. Turkistani. London: Palgrave Macmillan. Dar, H., and J. Presley. 2000. “Lack of Profit Loss Sharing in Islamic Banking: Management and Control Imbalances.” International Journal of Islamic Financial Services 2 (2): 3–18. Hassan, M., and J. Dridi. 2010. “The Effects of Global Crises on Islamic and Conventional Banks: A Comparative Study.” IMF Working Paper WP/10/201, International Monetary Fund, Washington, DC. IFSB (Islamic Financial Services Board). 2015. Islamic Financial Services Industry Stability Report 2015. Kuala Lumpur: IFSB. ———. 2016. Islamic Financial Services Industry Stability Report 2016. Kuala Lumpur: Islamic Financial Services Board. Imam, P., and K. Kpodar. 2015. “Is Islamic Banking Good for Growth?” Working Paper WP/15/81, International Monetary Fund, Washington, DC; also presented at the inaugural World Bank-IDB-Guidance Financial Symposium on Islamic Finance, Istanbul, September 8–9. IMF (International Monetary Fund). 1998. World Economic Outlook: Financial Crises: Causes and Indicators. Washington, DC: International Monetary Fund.
73