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VOL.1, NO.

1 MUHARRAM 1433H (DECEMBER 2011)

TWO-STEP MURABAHA P 5

ALSO IN THIS ISSUE


Publications in Spotlight
Getting to Know the Basics
3
4
MASTER IN
ISLAMIC FINANCE
IBIS
Murabaha Sale

Book Review 6 AND BANKING


Islamic Finance for Micro and
Medium Enterprises

Research Activities 7
E-LEARNING P 10 KNOWLEDGE BASE P 11
Training Activities 9
IRTI - The Islamic Research and Training Institute is an affiliate of the Islamic Development Bank
Statistical Data 12 Group responsible for leading the development and sustenance of a dynamic and comprehensive
Islamic Financial Services Industry that supports socio-economic development in Member countries.
New Faces at IRTI 13
www.irti.org
Forthcoming Events 15
Eighth International Conference on
Islamic Economics & Finance
Islam provides for a mandatory
form of charity in the form of

IN FOCUS zakah and other voluntary forms


of charity, such as, sadaqah and
awqaf. The second major issue
with microfinance is its high cost.
Mohammed Obaidullah
Such high cost is justified on
grounds of higher administrative
charges and monitoring costs.
Consequently, we find that the
poor can now receive financing
that they can ill-afford. A solution
to this is again found in the
institutions of zakah, awqaf and
sadaqah, which can absorb
specific components in the overall
cost structure to bring down the
cost to the beneficiary, down to a

A s we are all aware, the global


economic and financial
system is passing through an
a financial system that unduly
favors established businesses
and high net-worth individuals.
level that is truly affordable.

Indeed, these issues were


unprecedented crisis. The crisis, Microfinance is viewed by many sharpely under focus at the
fuelled by excessive debt, has led as a way to meet the challenge recently concluded Third
to severe austerity measures in the of poverty and exclusion. Langkawi Islamic Finance and
form of cuts in social expenditure However, while both conventional Economics (LIFE3) organized
and consequently, to wide-spread microfinance and Islamic by IRTI in partnership with
public despair. Conventional microfinance have similar goals Insaniah University Malaysia. The
economic wisdom is no longer and concerns, there are important deliberations and discussions by
found to provide right solutions points of difference between the eminent scholars in this event
and a search is on for finding two. explored the current challenges
alternative ways of organizing facing the empowerment of
businesses, markets and It has been observed that Muslim communities through
economies. Indeed, this provides microfinance and especially micro- institutions of zakah, awqaf and
an excellent opportunity for Islamic credit, is not usually appropriate sadaqah and came up with many
economists to present the Islamic for the chronically poor and fresh ideas to enhance their
solution to the problem. destitute. Usually the individual applications. These applications
may not possess entrepreneurial will help achieve economic
The greatest economic challenge and technical skills needed for transformation which is needed
to mankind today is economic and wealth creation. Indeed, more now for recovering from the global
social exclusion. Large parts of the than financial services, a poor economic crisis and for building
world population remain excluded person must be provided with a new economic order and a
from the benefits of growth and basic needs, such as, food, shelter, stable financial system.
development, largely due to failure or employment. Such safety nets
of redistribution mechanisms and may be funded through charity.

Knowledge Review
PUBLICATIONS IN SPOTLIGHT
WHAT IS ISLAMIC ISLAMIC BANKING
ECONOMICS (ARABIC) STRUCTURES Dr Muhammad Umer Chapra,
Author: Dr Muhammad Umer Chapra Author: Dr. Abdelrahman Elzahi Saaid Ali an eminent scholar is working
as Research Advisor, IRTI.
Prior to this he worked as
Senior Economic Advisor at
the Saudi Arabian Monetary
Agency (SAMA) . Dr Chapra has
also taught at the Universities
of Wisconsin (Platteville) and
Kentucky (Lexington), USA and
worked in Pakistan at the Institute
of Development Economics and
the Islamic Research Institute.
e-mail: muchapra@isdb.org

T he subject matter of all


economics, irrespective of
whether it is mainstream or Islamic,
T he recent persistence of global
economic imbalances has
highlighted the importance of
is the allocation and distribution financial stability. In this context, the
of scarce resources which have present study tests the implications
unlimited uses. Economics has also of Islamic banks structure on risk
been directly or indirectly involved in and financial stability using bank-
a discussion of human wellbeing, to level data and a model based on
be realized through an improvement a pool cross section of selected Dr. Abdelrahman Elzahi Saaid
in the allocation and distribution Islamic banks and involves different Ali, Economist, IRTI, holds
of resources in conformity with the an M.A. (Economics) from
risk exposure indicators.
social vision. Omdurman Islamic University,
The results show that Islamic banks Sudan and a Ph.D. (Economics)
Different worldviews, however,
are associated with higher credit from International Islamic
reflect different social visions,
and the worldview of a society, risk, but with lower overall risk, most University Malaysia. Prior to
therefore, imperceptibly tends likely as a result of their higher level joining IRTI in 2008, he taught at
to exert a significant influence of charter value. More specifically, the Sudan University of Science
on economic discussions. Since the banks higher franchise values and Technology as an Associate
conventional western economics and greater stability might have Professor. His areas of interest
dominates modern economic resulted from their market power include: financial stability and
thinking, it may be easier for us to based on the assets side. These the impact of risk transfer on the
understand Islamic economics if we results supported competitive- behavior of financial institutions.
look at it against the backdrop of stability views and bank charter e-mail: aelzahi@isdb.org
conventional economics. Part one value paradigm. The results of this
of this paper, therefore, discusses research are expected to be more

3
the goals, worldview and method of valuable to the management of
conventional economics, to prepare Islamic banks and to those who
a suitable background for the are engaged in the fields of Islamic
discussion of Islamic economics in banking and finance.
part two.

Islamic Research & Training Institute


The seller expresses its ap-
proval to the sale and sends the

GETTING TO KNOW THE BASICS invoice.

4. The conclusion of Murabaha


sale contract

MURABAHA SALE The bank and the purchaser


sign the Murabaha sale contract
Mohammed Saleh Ayyash according to the agreement of
the promise to purchase.

5. Delivery and receipt of the


Definition of Murabaha Sale: ity according to the specifica- commodity
tions requested by the buyer
Selling the commodity to the and then re-sell it to him on The seller sends the commodity
buyer for the same purchasing Murabaha basis taking the cost to the place of delivery agreed
price, i.e. which the seller has price of such a commodity plus upon.
paid, plus a certain profit margin a profit margin agreed upon The bank authorizes the benefi-
agreed upon. This margin can be a previously by both of them. ciary to receive the commodity.
percentage of the purchasing price
or a lump sum Steps in Murabaha Sale: The purchaser undertakes the
receipt of the commodity in his
Murabaha Sale is divided into 1. Determination of the need: capacity as a legal representa-
two types: tive and notifies the bank of the
The purchaser determines the
1. Ordinary Murabaha Sale: specifications of the commodity execution of the proxy.
he wants and requests the seller
This type has two parties, the to determine the price.
seller and the buyer. The seller
is an ordinary trader who buys a The seller sends a quotation
commodity without depending valid only for a certain period.
on the buyers promise prior to 2. Signing of the agreement of
his purchase of this commod- the promise to purchase:
ity, then he displays it for sale
based on Murabaha for a price The purchaser promises to buy
agreed upon which of course the commodity from the bank
contains his profit. on Murabaha sale for the cost of
the commodity plus the agreed
2. Murabaha Sale Attached to a upon profit.
Promise:
The bank studies the request
This type has three parties, and determines the conditions
the seller, the buyer and the for approval.
bank as an intermediary trader
between the buyer and the 3. The conclusion of the first sale
seller. The bank here will not contract
buy the commodity unless the The bank notifies the seller of But Allah has permitted
buyer specifies its attributes and its approval to purchase the trade and forbidden riba
makes a promise to purchase commodity. The bank will agree (2:275)
this commodity. Meaning that with the seller on the payment
Islamic banks here undertake method.
the purchase of the commod-

Knowledge Review
Upon notification by the
exporter and the request from

ISLAMIC FINANCE IN PRACTICE the importer, Bank-B advises


the fund provider, Bank-A, to
make the payment of Purchase
Price directly to the exporter.

TWO-STEP MURABAHA The importer can clear the


goods from customs based
on this payment. Then at the
time of maturity, it shall repay
A Murabaha sale is very popular
among Islamic financial
institutions as a mode of financing.
the Sale Price directly to
Bank-A at the time of maturity.
the first Sale Price directly to
Bank-B which, in turn, will be
As the transaction flow reveals, repay the second Sale Price to
In the context of international Bank-A takes the direct credit Bank-A.
trade, a Murabaha-based risk of the importer. This may
transactions flow will appear as: This mechanism transfers the
be problematic in practice as direct credit risk of the importer
The importer requests Bank-A Bank-A may not be familiar with to Bank-B which will be the
to purchase a quantity of goods. the importer, the country or the beneficiary of credit provided by
A Murabaha financing subject sector. If Bank-A is to Bank-A.
agreement would be signed reach small and medium-size
beneficiaries in different countries, This kind of usage is ideal to
between Bank-A and the penetrate Small and Medium size
importer by which: it needs to involve a local financial
institution or bank (say, Bank-B) in Enterprises (SMEs) in high risk
Bank-A authorizes the importer the process of financing, which is countries. In this case, Bank-A
to purchase the goods for and familiar with the local conditions. assumes the credit risk of a local
on its behalf. The importer Now this will be a case of two-step Bank-B rather than the importer
covenants that, when acting Murabaha and transactions flow and transfers the cumbersome
as an agent, it shall act as an will appear as follows: credit evaluation process to local
undisclosed agent of Bank and Bank-B, which can effectively
it shall not disclose that it is A Murabaha Agreement is manage it in a more efficient
acting as an agent of Bank-A to signed first between Bank-A (as manner.
the third party. fund provider/1st seller) and
(Based on Seminar Presentation
Bank-B (as purchaser).
In acting as an agent of Bank-A, 2-Step Murabaha as an
the importer shall endeavour to Then, another Murabaha alternative resource mobilization
act as if acting for its account Agreement is signed with tool for Islamic banks in the
and shall take all necessary Bank-B (as 2nd seller) and the context of international trade by
measures to protect Bank-As importer (as purchaser). Ahmet Suayb Gundogdu, Manager,
rights and interests. The importer shall submit Corporate and Structured Finance
effectiveness documents. Department, International Islamic
The importer submits the Trade Finance Corporation at IRTI)
terms and conditions of the
draft purchase contract for
the approval of Bank-A. After Total Murabaha for 109 Major Islamic Banks
the approval, the importer in the Market - 2009
Total (000 US$)
concludes the contract with
no material amendment to, or 250,000,000
247,137,203
waiver or cancellation in, the
200,000,000
contract without obtaining the
prior written consent of Bank-A. 150,000,000
Bank-A shall make the payment

5
100,000,000
of Purchase Price directly to
40,046,388
the exporter. 50,000,000 14,418,093
7,237,030 12,747,891 5,349,343
97,441
The importer can clear the
0
goods from customs based on Murabaha Leasing Mudarabah Musharakah Salam Istisna Other
this payment and shall repay
Source: http://www.ibisonline.net

Islamic Research & Training Institute


murabaha, mudaraba, perpetual
and diminishing musharaka, salam

BOOK REVIEW and qard and their application


in microfinance. The next three
papers deal with models of

ISLAMIC FINANCE
microfinance with case studies
of village-bank model in Jabal Al
Hoss, Syria, joint-liability-group

for Micro and Medium Enterprises model in Bangladesh and the


cooperative model in Australia. Two
interesting papers on integrating
Edited by Mohammed Obaidullah & Hajah Salma Haji Abdul Latiff zakah and awqaf with microfinance
follow. The last four papers
emphasize the role of education

M icrofinance and Islamic Inclusive Islamic Financial Sector and training for microfinance; and
finance have much in Development: Enhancing Islamic examine the role of government
common. Islam emphasizes Financial Services for Micro in enhancing financial inclusion
ethical, moral, social, and religious and Medium Sized Enterprises through microfinance.
factors to promote equality and organized by Islamic Research and
fairness for the good of society Training Institute of the Islamic
as a whole. Many elements of Development Bank and the Centre
microfinance are consistent for Islamic Banking, Finance and
with the broader goals of Management of Universiti Brunei
Islamic finance. Both advocate Darussalam. The papers included
entrepreneurship and risk sharing in this volume seek to deal with
and believe that the poor should major issues of theoretical and
take part in such activities. Both practical significance and provide
focus on developmental and social useful insights from experiences The book deals
goals. Both advocate financial of real-life experiments in Shariah-
inclusion, entrepreneurship and compliant MME finance. with major issues
risk-sharing through partnership
The first two papers deal with
of theoretical
finance. Both involve participation
by the poor. There should,
the concept of social solidarity, and practical
therefore, hardly be much doubt
responsibility and microfinance.
The first paper in this volume
significance and
about the possibility of a successful
marriage between the two. This
examines the basic joint-liability- provide useful
may involve experimenting with
based microfinance model and insights from
finds support for it in the concept
the best practices and models
of Asabiyah or social solidarity. The experiences
of conventional microfinance
while modifying the products and
second paper reviews the notion of real-life
services to make them Shariah-
of corporate social responsibility
and the place of microfinance
experiments
compliant. Issues pertaining
to Islamic microfinance is the
as a tool of poverty alleviation. in Shariah-
subject of this edited volume
The next seven papers deal with compliant MME
Islamic contracts and products for
containing eighteen carefully
microfinance. More specifically, finance
selected research papers that
they deal with various Shariah-
were presented at the First
nominate modes, such as,
International Conference on

Knowledge Review
RESEARCH ACTIVITIES
INTERNATIONAL RESEARCH EVENTS
IRTI organized and participated in a number of research events across the globe, a theme-wise summary of
which is provided below.

EVENT VENUE COLLABORATING INSTITUTION OUTCOME


Frontiers of Islamic Banking and Finance
Durham, The roundtable aimed at establishing a
Islamic Finance Roundtable United Durham University and ISRA coherent understanding between financial
Kingdom economists and Shariah scholars

Workshop on Morality and Markfield, The Markfield Institute of Higher The workshops shed lights upon the
Economics United Education role of morality and ethics in shaping the
Kingdom economic behavior.

6th IDB Global Forum on Islamic The forum highlighted liquidity risk
Finance Managing Liquidity and Jeddah, KSA In conjunction with the IDB Annual management which has become one
of the most widely discussed topics
Enhancing the Size of Islamic Meeting in Islamic finance industry after the
Financial Institutions financial crisis.
Risk Management, Regulation and Supervision of the Islamic Finance Industry
Islamic Financial Sector The conference stimulated critical
Development: Post Financial Crises Langkawi, Insaniah University, Malaysia thoughts on state of Islamic banking
and the Resilience of Islamic Malaysia development after the crisis
Financial Services
Future of Arab Economics in the The conference stimulated critical
Light of the Local and International Cairo, Egypt The Arab Society for Economics thoughts on the challenges the lie ahead
Challenges in the region

Egypt Economic Workshop for the It was aimed at creating awareness


next 20 years Cairo, Egypt The Institute of National Planning among academicians and practitioners
in Egypt
International Conference on Islamic Islamabad, Riphah Centre of Islamic Business A number of good papers on various
Business & Finance: the Present Pakistan (RCIB), Riphah International important issues were presented in the
State and the Way Forward University, Islamabad conference.

Orientation Seminar on Islamic Markfield, The Islamic Foundation, United It was aimed at creating awareness
Finance United Kingdom among academicians and practitioners
Kingdom in the UK
Poverty Alleviation and Maqasid-Based Development
3rd Insaniah IRTI Life International The workshops shed lights upon the role
Conference 2010 on Contemporary Langkawi, Insaniah University, Malaysia of religious belief in the development of
Issues on Aqidah Dimension in Malaysia Islamic economics discipline.
Islamic Economics
2nd International Conference on Khartoum, Sudan Academy of banking and The conference stimulated critical
Inclusive Islamic Financial Sector Sudan Financial Sciences thoughts on state of Islamic microfinance
Development during and after the crisis
The Role of Islamic Waqf in Alexandria, The forum highlighted the role of waqf as
Supporting Higher Education in Egypt Alexandria University, Egypt financial instruments in supporting higher
Muslim World education.

Istanbul, Kuwait Awqaf Foundation and A comprehensive discussion on the


Forum Awqaf jurisprudential issues Turkey the Ministry for Religious Affairs current issue of waqf.
Republic of Turkey

7
The objective of the event
was to find an effective
Symposium on Endowment and Dubai, UAE Kuwait Awqaf Foundation and and efficient way to
Education Zayed University, UAE revive the role of the
waqf to support
education

Islamic Research & Training Institute


RESEARCH ACTIVITIES
IN-HOUSE RESEARCH STUDIES
In-house research constitutes a major activity at IRTI. The studies that have been recently completed are as
follows:
A theory of profit sharing, income inequality and capital accumulation
Salam contract through new view in the contemporary applications
Liquidity management in Islamic finance
Targeting and socio-economic impact of microfinance: a case study of Pakistan
Islamic microfinance: an inclusive approach with special reference to Pakistan
Measuring operational risk exposures in Islamic banking: a proposed measurement approach
The impact of credit risk transfer on Islamic banks lending behaviour and financial stability
Risk attitude of a finance manager and progressive remuneration scheme: an analytical approach

IN-HOUSE RESEARCH SEMINARS


A summary of IRTI in-house research seminars is presented below.
NO NAMES TOPICS
18 Dr. Mahmoud Sami Nabi (IRTI) A Theory of Profit Sharing, Income Inequality and Capital Accumulation
Performance and Stability of Islamic Microfinance Institutions and Their Role in Socio-
17 Prof. Dr. Nasim Shirazi (IRTI) Economic Development: A Case Study of Some IDB Member Countries
16 Dr. Mohammed Obaidullah (IRTI) Zakah Management for Poverty Alleviation
Dr. Abdoulie Sireh Jallow
15 The Empirics of an Optimal Currency Area in West Africa
(Operations Complex, IDB)
Governance and Audit in Islamic Financial Institutions (IFIs): A Guide to Shariah Audit
14 Dr. Zurina Shafii (USIM) Applications Part 2
Governance and Audit in Islamic Financial Institutions (IFIs): A Guide to Shariah Audit
13 Dr. Zurina Shafii (USIM) Applications
11. Dr. Abelrahman Elzahi (IRTI) The Impact of Credit Risk Transfer on Islamic Banks Lending Behavior and Financial Stability
Prof. Syed Khalid Rashid
10. Certain Legal and Administrative Measures for the Revival and Better Management of Awqaf
(Visiting Scholar, IRTI)
Dr. Dadang Muljawan (IRTI) Risk Attitude of a Finance Manager and Progressive Remuneration Scheme: An Analytical
12. Approach
9. Dr. Nasim Shah Shirazi (IRTI) Targeting and Socioeconomic Impact of Microfinance: A Case Study of Pakistan
Dr. Nailul Murad
8. Enhancing Waqf Contributors Participation Through Program Development Perspective
(Visiting Scholar, IRTI)
7. Elnur Aliyev (ITFC) Islamic Structured Finance: Deal of the Year 2010
Measuring Operational Risk Exposures in Islamic Banking: A Proposed Theoretical
6. Hylmun Izhar (IRTI) Framework
5. Dr. M. Saleh Ayyash (IRTI) The Causes and Solutions of the Problems of Training Divisions in IRTI and IDB
2-Step Murabaha as an alternative resource mobilization tool for Islamic banks in the
4. Ahmet Gundogdu (ITFC) context of international trade
3. Dr. Nailul Murad (IRTI) Enhancing Contributors Participation in Waqf
2. Dr. Salman Syed Ali (IRTI) Islamic Banking in MENA Region
1. Hylmun Izhar (IRTI) Modelling Operational Risks in Islamic Banking: A Proposed Framework

Knowledge Review
TRAINING ACTIVITIES

T he importance of capacity building and human capital development for the growth and development of the
Islamic financial services industry can be hardly overemphasized. The following training events were recently
organized by IRTI in IDB member countries with a view to achieve above objectives.

Event Country Collaborating Institution


Governance in Islamic Financial Institutions Syria Central Bank of Syria
The Egyptian Cabinet Information and Decision Support
Managing Think Tank Egypt Centre (IDSC), Egypt
Islamic Capital Markets: A Window to Iran Securities and Exchange Organization, Tehran, Iran
Betterment and Justice
Awqaf Property Development South Africa National Awqaf Foundation, South Africa
Workshop on : (i) Preparation of Bankable Iran Sherif University, Iran
Project Documents (ii) Sukuk
Risk Management in Islamic Banking Operation Egypt Egyptian Banking Institute (EPI), Central Bank of Egypt
PPP Modality for infrastructure project Lebanon Institute of Finance, Ministry of Finance
financing
SME and Microfinance Turkey TEPAV-TOBB
Commercial Arbitration from the Islamic International Islamic Center for Arbitration and
UAE
Perspective Reconciliation
Workshop on Zakah for the Professionals Nigeria Zakah & Sadaqat Foundation
Cadres
Shariah Auditing and Supervision in Islamic Jordan Institute of Banking Studies
Financial Institutions
Lectures on Islamic Finance Kazakhstan Istisna Corporation, Astana, Kazakhstan
Management and Investment of Awqaf i. Kuwait Awqaf Public Foundation, Kuwait
Qatar
Properties ii. Awqaf General Administration, Qatar
Project Management and Quality Assurance Lebanon Office of H.E. the Alternate IDB Governor
Technologies
Workshop on Zakah Guinea Conakry Secretariat General for Religious Affairs, Guinea
Economic Policy Institute, Arab Monetary Fund, Abu
Building a Sustainable Islamic Banking System UAE Dhabi
Global Leadership Development Institute (GLDI),
Islamic Insurance and Takaful Indonesia Indonesia
The Role of Islamic Banks in Financing Small Jordan Institute of Banking Studies, Jordan
and Medium Enterprises
S. A. Kamel Centre for Islamic Economics, Al-Azhar
Economics for Shariah Scholars Egypt University

Awareness Program for IDB Group Staff


IRTI in collaboration with Human Resource Management Department of the IDB Group recently organized a
series of Awareness Programs in Islamic Banking and Finance for staff of the IDB Group, three at the basic
level and two at intermediate level.
Training Guides
At IRTI, the following training guides were developed as part of its capacity building efforts:
Zakah Management for Poverty Alleviation by Dr. Mohammed Obaidullah
Islamic Modes of Finance by Dr. Mohammad Saleh Ayyash
Awqaf Development and Management by Dr. Mohammed Obaidullah
9
Islamic Research & Training Institute
LEARNING PROGRAMS
Master Program Distance Learning
(e-Learning) Program
I RTI 14th Distance Learning Course on Intermediate
Islamic Economics has now commenced. Among
the Instructors participating in the course are Dr. M.
Umer Chapra, Prof. Dr. Zubair Hasan, Dr. Anas Zarka,
Dr. Fahim Khan and Dr Habib Ahmad. The latest list
of participating universities is as follows:

Durham University, UK
The Markfield Institute of Higher Education
(MIHE), UK
Al Imam Al-Ouzai University in Lebanon
International Islamic University Islamabad, Pakistan
University of Indonesia
Imam Sadiq University, Iran

IRTI Distance Learning Program prospectus can be


obtained from IRTI website.

I RTI successfully launched its online Masters


Program in Islamic finance and banking with
Insaniah University College (IUC) and the first
For more enquiries, please contact: dlp@isdb.org

intake for the program was finalized on June 26th


2011G. The demand for enrollment in the first intake
exceeded fifty applicants out of which 11 students
were accepted, including 4 IDB staff students. The Did you register
program is currently accepting applications for the
second intake which is planned to start in December with Islamic Banks
2011.
Information System
IRTI also signed an MOU with the Russian Islamic
University to support a similar programme targeted at (IBIS)?
the CIS Region and Russian Federation.
For More Information: IBIS provides comprehensive financial
Dr. Khalifa Mohamed Ali,
data and access to a multitude of
IRTI Learning Programs Coordinator reports pertaining to Islamic Financial
e-mail: khalifaali@isdb.org Institutions.
Phone: +9662-646 6226,
Fax: +9662-637 8927 Membership is FREE and signing up is
P.O. BOX 5925 -Jeddah 221432 quick and easy.
Kingdom of Saudi Arabia
http://www.ibisonline.net/
http://mifb.insaniah.edu.my

Knowledge Review
KNOWLEDGE BASE
IBIS A Cutting Edge In order to address this, IRTI has embarked on a
major initiative - the Islamic Banks Information System
Project (IBIS) - to serve the seekers of Islamic financial data.
The date are presented in a processed and easily
readable format Besides particular analysis; with

C oncrete, reliable and accurate information is one


the essential apparatus for researchers, data
analysts, academicians and professionals in the field
its own financial questionnaire, an online database
program IBIS gives the users a big opportunity for
general comparisons, industrial benchmarking and
of Islamic finance. Lack of adequate data, either
maturity analysis.
due to the difficulties of data collection or because
of non-informative reporting by Islamic Financial Please visit the following link for more detail.The
Institutions is a major constraint for serious academic IBIS Team wants to thank you for all your positive
research. A quick comparison between the websites feedbacks. http://www.ibisonline.net
of Islamic Banks and Traditional Banks shows us the
lack of financial transparency among Islamic banks as
compared to their conventional counterparts.

11
Islamic Research & Training Institute
STATISTICAL DATA
The Assets Volume of Islamic Banks (000 US$) - 2009
Region Country # Banks per Country Shares (%) per Region Shares (%)
Albania 1 44,091 0.009%
Europe 1,925,388 0.40%
United Kingdom 4 1,881,298 0.389%
United Arab
Emirates 5 56,380,607 11.673%
Bahrain 21 21,998,207 4.554%
Jordan 2 4,582,575 0.949%
Kuwait 4 47,305,298 9.794%
Middle East Palestine 1 293,661 0.061% 219,344,618 45.41%
Qatar 4 22,538,812 4.666%
Saudi Arabia 4 62,779,711 12.997%
Syrian Arab
Republic 2 1,632,766 0.338%
Yemen 2 1,832,980 0.379%
Azerbaijan 1 21,408 0.004%
Bangladesh 6 7,587,349 1.571%
Indonesia 3 4,260,112 0.882%
Asia Iran 7 128,509,365 26.605% 243,693,350 50.45%
Malaysia 18 75,952,287 15.725%
Pakistan 6 5,085,992 1.053%
Turkey 4 22,276,837 4.612%
Egypt 2 7,186,400 1.488%
Sudan 15 10,023,805 2.075%
Africa 18,055,068 3.74%
Tunisia 1 523,261 0.108%
South Africa 1 321,602 0.067%
Grand Total: 114 483,018,424 100% 483,018,424 100%

Sectorial Financing of Islamic Banks (000 US$) - 2009 Regional Murabaha Lines (000 US$) - 2009
(Based on data for 81 Islamic Banks) (Based on data for 109 Islamic Banks)

49,850,407 50,399,603
1,892,741
7,848,204 356,590
4,843,426

31,021,323 131,727,812
46,593,970 107,204,598
31,425,241
56,165,272

8,504,031
Europe Asia
Consumer Durables Real Estate & Construction Middle East Africa
Agricuture Banks & Financial Institutions
Manufacturing Service
Trading Others
Transportation
Source: http://www.ibisonline.net

Knowledge Review
NEW FACES AT IRTI
Hylmun Izhar Prior to joining He taught courses of his specialization and conducted
IRTI, IDB, he was a lecturer at seminars at both IIUM and KAAU. He has published
the Markfield Institute of Higher several papers in refereed International Journal with
Education (MIHE), Leicester, focus on Syntactic Studies, Translation Studies,
United Kingdom where he taught Contrastive Linguistics and Computational Linguistics.
Islamic Financial Instruments,
Economic Development and
Dr Dadang Muljawan is currently
Finance and Cross Culture
a Senior Economic Researcher
Management. He was also a
at IRTI-IDB. He holds BSc
Research Associate in Islamic
in Engineering Physics from
Finance at Oxford Islamic Finance, Ltd, a wholly
Bandung Institute of Technology,
owned subsidiary company of the Oxford Centre for
MBA from PPM Graduate School
Islamic Studies (OXCIS), Oxford, United Kingdom.
of Management, and PhD in
In 2005, he was awarded Master degree in Islamic Economics from Loughborough
Banking, Finance and Management with distinction by University, UK. He has written a
Loughborough University, United Kingdom. number of research publications
Mr Izhar was honoured Doctoral Fellowship by the in international journals and presented papers in
Graduate School, Durham University and is currently international conferences. His areas of interest
completing his PhD at Durham Islamic Finance cover financial supervision and regulations, and
Programme, School of Government and International financial assessment both in micro level and macro
Affairs, Durham University. level. He has been exposed to more than 10 years
He has also presented numerous papers in various of experience in the Central Bank of Indonesia as
international conferences in the area of Islamic an economic researcher and the IFSB in the area
Economics and Islamic Banking and Finance. of prudential database for Financial Soundness
Indicators (FSI). Currently, he is in charge in
Having been an active contributor to Muslim World
researches relating to the development of regulatory
Book Review, Mr. Izhars academic articles appear
framework for Islamic financial institutions.
in a number of refereed journals such as Review of
Islamic Economics, IIUM Journal Economics and Dr. Nasim Shah Shirazi joined
Management, Journal of Islamic Banking and Finance IRTI as a Senior Economist. His
and Kyoto Bulletin of Islamic Area Studies. areas of interest are Development
Economics, Public Finance and
Dr. Wejdan Kenali joined IRTI as
Islamic Economics. The focus
an Arabic Language Editor. He
of his research has been on
occupied the position of Assistant
Development Economics, Public
Professor of Arabic Language and
Finance and Islamic Economics.
Literature, International Islamic
He has number of publications
University Malaysia (IIUM). He
to his credit, including research
contributed as a Visiting Scholar
articles in the national and international journals,
to the Faculty of Arts and as a
books and research reports.
Collaborator Editor at the Scientific
Publishing Center, King Abdul Before joining IRTI, IDB, he has been

13
Aziz University (KAAU). He holds a PhD in Arabic all along working as a University
Language and Literature from theUniversity of Jordan. teacher and researcher over a
He occupied the function of Coordinator of Information period of last 30 years. He served
and Communication Technology, IIUM and the International Islamic University,
function of Coordinator of Arabic Writing Lab, IIUM. Islamabad holding different positions

Islamic Research & Training Institute


including Dean School of Economics, Director Internships at IHEC Sousse. He taught several courses
Research and Director/Dean International Institute of including: International Finance and International
Islamic Economics (IIIE). He has worked for Allama Economics, Monetary Economics and Advanced
Iqbal Open University, Islamabad, International Microeconomics (Asymmetric Information in the
Islamic University Malaysia and Suleyman Demirel Insurance Market); and research seminars on the
University, Almaty, Kazakhistn. He also served Economics of Banking Regulation and The
Pakistan Poverty Alleviation Fund in a consultative Economic Modeling of Financial Crises.
capacity. His main areas of research focus on the vulnerability
of developing countries to banking and currency
Dr. Mahmoud Sami Nabi,
crises; financial imperfection and the economic
joined IRTI as a Researcher
development process; and the finance-development
Economist. He occupied the
theme in general. He has published several papers in
position of Associate Professor
refereed international journals. His recent publication
of economics at the University
is Capital Mobility and the Optimal Monetary Policy
of Sousse- IHEC (Tunisia). He
Rule: A Tunisian Case Study, In David Cobham and
is a research associate of the
Mongi Boughzala (eds.): Inflation Targeting in MENA
Economic Research Forum
Countries, Palgrave Macmillan, August 2011. (Co-
(Cairo) and a Fellow of the Institute of Islamic Banking
author: Ndiame Diop).
and Insurance (London). He holds an Engineering
Diploma from Tunisia Polytechnic School, and an He has recently focused his research on Islamic
MSc in mathematics applied to economics and Economics and Finance and produced the following
a PhD in economics from the University of Paris working papers:
I Panthon-Sorbonne. He also obtained in 2002 a Have Islamic banks been more resistant than
Diploma of Islamic Banking and Insurance from the conventional banks to the 2007-2008 financial
Institute of Islamic Banking and Insurance (London). crisis?
He occupied the function of Director of Studies and A Theory of Profit Sharing, Income Inequality and
Capital Accumulation

IRTI RESEARCH GRANT


this context the importance of basic and applied
research as a critical driver of such development can
be hardly overemphasized.

The IRTI Research Grant Program (IRGP) is designed


to encourage cutting-edge research in the frontier
areas of Islamic economics and finance among the
global researcher community. Currently, the program
is supporting three on-going research projects
and looks forward to a larger number of project
proposals in future. The program is an affirmation of
the commitment of IDB Group towards developing
Islamic economics and finance as a discipline

I slamic economics and finance is now stepping into


a rapid development stage and expected to serve
as another formidable pillar sustaining the economic
and as a systemic solution to global economic
problems.

development regionally as well as internationally. In

Knowledge Review
BACKGROUND OF

FORTHCOMING EVENTS
CONFERENCE SERIES
The first conference in the
series was held in Makkah Al
Mukaramah, Kingdom of Saudi
EIGHTH INTERNATIONAL CONFERENCE ON ISLAMIC Arabia in 1976 under the auspices
ECONOMICS & FINANCE of King Abdulaziz University,
SUSTAINABLE GROWTH AND INCLUSIVE ECONOMIC DEVELOPMENT
Jeddah and it marked the start of
FROM AN ISLAMIC PERSPECTIVE
December 19-21, 2011 Doha, Qatar development of Islamic economics
and finance as modern scientific
disciplines. The second conference
was held in
Islamabad, Pakistan, in 1983
under the auspices of the
International Islamic University,

T he Eighth International
Conference on Islamic
Economics and Finance is jointly
students, and practitioners to
address the problems of poverty
alleviation, inclusive economic
Islamabad. The third conference
was held in 1992 at the
being organized by the Islamic growth, and macroeconomic International Islamic University,
Research and Training Institute stability from the perspective of the Selangor, Malaysia. The fourth
(IRTI), Qatar Foundations Faculty Islamic Economics and Finance conference was held in 2000
of Islamic Studies (QFIS) through discipline. at Loughborough University,
its Islamic Economics and The conference will witness Loughborough, U.K. The fifth
Finance Centre, the International presentations of theoretical and conference was held in Bahrain
Association for Islamic Economics, empirical research papers in under the auspices of Bahrain
and the Statistical, Economic Arabic and English languages University, Bahrain in 2003. The
& Social Research & Training broadly in the areas of:
sixth conference was held in 2005
Centre for Islamic Countries Islamic economics in Jakarta under the auspices of
(SESRIC), with the support of other Critique/assesment of different the Indonesian Ministry of Finance
stakeholders. The Conference will models and policies of and the Central Bank of Indonesia.
provide a platform for dialogue and economic development
The Seventh Conference was held
discussions between policymakers, The way out towards practical
in Jeddah under the auspices of
academics, researchers, graduate and implementable road maps
King Abdulaziz University in 2008.
For more information about
previous conferences in this series,
please visit:
http://islamiccenter.kau.edu.
sa/7iecon/index_english.html

Doha, Qatar
15
Islamic Research & Training Institute
IMPORTANT DATES

IDB PRIZE: March 31, 2012: SCHOLARSHIP


Award ceremony PROGRAM
December 31, 2011:
Deadline for receiving 7th FORUM March 31, 2012:
nominations Closing date for IRTI
March 31, 2012: scholarship program
Jan 2012-Feb 2012: IDB Global Forum on applications
Evaluation Process Islamic Finance - Role of
Islamic Finance in Job June 30, 2012:
March 01, 2012: Creation in conjunction Recipient notifications for
Announcement of the with IDB Annual Meeting IRTI scholarship program
Laureate (s) in Sudan

ABOUT IRTI
Editorial Board
T he Islamic Research and Training Institute (IRTI) was established
in 1401H (1981G). The purpose of the institute is to undertake
research for enabling the economic, financial and banking activities Dr. Mohamed Obaidullah
in Muslim countries to conform toShariahand to extend training mobaidullah@isdb.org
facilities to personnel engaged in economic development activities in Dr. Mahmoud Sami Nabi
IDB member countries. The Institute is located within the headquarters msnabi@isdb.org
ofIDBin Jeddah, Saudi Arabia.
Dr. Wejdan Kenali
wejdan@isdb.org
Contact us Br. Mehmet Fehmi EKEN
Islamic Research and Training Institute meken@isdb.org
Member of the Islamic Development Bank Group
P.O.Box 9201 - 21413 Jeddah, Kingdom of Saudi Arabia
General Phone: +966-2-6361400 IRTI Fax: +966-2-6378927
Director Gen. Office: +966-2-6466131
E-Mail: irti@isdb.org

Knowledge Review