Founded in 1988 as the first private institution of higher education in the United Arab Emirates and the Gulf region, Ajman University (AU) is now being recognized as an emerging leader on the global academic map.

The 2020 QS World University Rankings lists AU in the top 800 universities globally and among the top 10 worldwide for international students and faculty! The &ldquo;Top 50 Under 50&rdquo; QS Rankings names AU as one of the top 150 young universities in the world. Even our distinct location in the Dubai/Sharjah/Ajman corridor is ranked by QS as the 61st best student destination on the planet. Recently, Ajman University earned Five QS Stars in three ratings categories -- Social Responsibility, Inclusiveness and Learning Environment. We also garnered Four QS Stars for both Teaching and Internationalization.

Ajman University

Islamic Financial Services Industry (IFSI) crosses the age of 40&nbsp;years, and sufficient empirical evidence exists to evaluate in light of the distinctive aspirations. This study fills the gap in the literature by evaluating the performance of IFSI in light of Islamic finance objectives—financial stability, equitable distribution of wealth and social responsibility; Shari’ah principles, and professional practices. Our investigation documents the achievements based on real accounting data from 23 countries, and the suitability of tools in practice to achieve the stated objectives by promotors of IFSI. Findings suggest that the objectives of IFSI have been achieved to an extent. However, visible contribution to the achievement of socio-economic justice is yet to emerge. Practical application of tools shows divergence (in spirit) from the original design, primarily to achieve integration and coherence with the prevailing conventional financial system. IFSI needs collaborative efforts to overcome the challenges at hand.

Finance

College of Business Administration

World University root node

Business Ethics, the Environment & Responsibility

Islamic financial services industry: Aspirations and achievements

This study documents the literary developments and classifies the literature in the area of Islamic Financial Services Industry (IFSI). Our findings are based on articles published in selected Islamic finance specialized journals for six years (2012-2017). Classification is based on multiple factors including subject/specialization areas, country of origin and publications, research methodology, and yearly progress in investigations. Findings suggest that the majority of publications are in the area of general Islamic finance and follow qualitative research methodology. Malaysia and Pakistan were found to be the most significant contributors to the literature. Although the results of empirical studies are mixed, however, the majority favor resilience of IFSI to the global financial crisis (GFC). The potential role of IFSI in poverty alleviation and corporate social responsibility (CSR) has also been highlighted. Demand for IFSI with quality services exists. The literature highlights the lack of Islamic financial literacy and skepticism about Shariah compliance in practice. Need for regulatory framework and application of Islamic accounting is documented. Future research needs to focus on an objective assessment of IFSI in the light of Islamic finance objectives. Also, further investigations are needed to highlight the social role of IFSI-with a focus on CSR, zakah, waqf and microfinance. Additionally, certain specialized areas including accounting, management, and corporate governance need more attention in future researches. © 2020.

Journal of King Abdulaziz University, Islamic Economics

Developments in Islamic finance literature: Evidence from specialized journals

Purpose: Islamic capital markets, i.e. ICMs, featured as socially responsible investments, less levered and more reflective of the real sector, are a recent development in financial markets showing an impressive growth and offering the potential for portfolio diversification benefits. The purpose of this study is to understand the long-run integration of ICMs in the Asia/Pacific region. Design/methodology/approach: This sample includes ICMs of Asia/Pacific region (such as Pakistan, India, China, Japan, Thailand, Malaysia and Indonesia) for 280 weeks between 2011 and 2016. Selected indexes are FTSE Islamic except for Pakistan and Indonesia. Evidence was obtained through the application of correlation, unit root, Johansen cointegration and Granger causality tests. Findings: This study documents the results of the integration of ICMs based on developmental stage, geographic location, economic cooperation and shared religious beliefs/civilization. Partial support was observed for all hypotheses: integration of markets based on economic grouping, location, economic treaties and shared civilization. The Japanese market was the most integrated, while the Indian and Malaysian markets are the least. Evidence supports the shift of leadership role from advanced markets to emerging markets. Practical implications: Selected diversification opportunities are available for global Islamic as well as conventional investors. This study recommends closer cooperation among Muslim majority countries of the region, as well as the effective use of economic cooperation treaties for joint economic growth and prosperity. Originality/value: This study contributes to the literature by providing evidence on the integration of ICMs in an economically important region (Asia/Pacific) that is witnessing an increasing role in the global gross domestic product and international trade. © 2020, Emerald Publishing Limited.

Journal of Islamic Accounting and Business Research

Portfolio selection in Asia/Pacific region-Islamic markets

This study documents the impact of price variations in global markets, specifically oil, on stock returns at Pakistan stock exchange (PSX). We select three global markets (oil, gold and currency exchange) and two PSX indices (conventional and Islamic) for a period 2009-2020 to provide evidence. Monthly data for the selected time series is used for analysis. Analysis techniques include descriptive statistics, stationarity testing, Johansen cointegration, correlation and regression analysis. Findings suggest joint long-run co-movements of selected markets. Regression results indicate the significance of oil prices at 1% level, with positive signs, in the stock return generation process at PSX (for both indices conventional and Islamic). Other selected markets (gold and currency exchange) are although significant but at a higher degree, with negative signs. For the oil market, results confirm the demand-pull inflation hypothesis in Pakistani market. Results also confirm shifting to gold market by investors in the period of reductions in stock returns. Finally, depreciation of domestic currency discourages investors in buying stocks. We recommend investors to have an eye on oil, gold and currency markets while making investment decisions at PSX. We also recommend to policymakers to take timely actions for exchange rate stability, to avoid the outflow of capital. To the best of our knowledge, this is the only study documenting the influence of global markets on stock returns at PSX in recent years. © 2020, Econjournals. All rights reserved.

Fulltext

International Journal of Energy Economics and Policy

Relationship between oil and stock markets: Evidence from Pakistan stock exchange

Purpose: This study aims to evaluate the role of the prevailing currency systems in achieving (or departing from) the socio-economic objectives of a progressive and just society; i.e. featuring stability and equitable distribution of wealth. Design/methodology/approach: After documenting historical developments in currency systems, the study reviews the Islamic perspective on the matter. Features of an ideal currency system are listed and then a critical evaluation of existing currency systems – fiat, banking and cryptocurrency – is undertaken. Findings: It is found that existing currency systems – fiat, banking and cryptocurrency – are not compatible with the socio-economic objectives of a forward-looking, progressive society, which upholds transparency and justice as its core values. The study documents that Sharīʿah norms have no preference or dislike for any of the existing currency systems. Any prudent currency system compatible with the objectives of the Islamic financial system (i.e. stability and equitable distribution of wealth) is acceptable. A single international reserve currency (with country-specific legal tendering) is subject to the risk of destabilisation across global markets. Practical implications: This paper recommends autonomy of central banking, the spending of seigniorage for the welfare of community members, development of asset-backed currencies (following ṣukūk structures), as well as multiple international reserve currencies and joining of hands by professionals and Sharīʿah scholars to design a currency system compatible with the Islamic financial system. This paper’s recommendation is against the adoption of cryptocurrency that lacks the backing of real assets. Originality/value: The study contributes to the literature by evaluating the compatibility of existing currency systems in the achievement of socio-economic objectives of a welfare state which seeks to uphold justice and equitable resource distribution as core values in the financial system. © 2020, Muhammad Hanif.

ISRA International Journal of Islamic Finance

Developing a fair currency system

Purpose: The purpose of this paper is to present an analysis of current practices of Islamic mortgages in the light of the principles of Islamic financial system, to document divergences – if any. A subsidiary goal is to develop an Islamic Mortgage Model (IMM) based on Musharakah principles. Design/methodology/approach: The author documents theoretical underpinnings of risk-return sharing from the Shari’ah perspective. A comparative study of conventional and Islamic mortgages is completed; existing practice of Islamic mortgages analyzed in the light of Musharakah principles and divergences identified. IMM is developed after taking divergences and Musharakah principles into considerations. A housing case is used to highlight differences (in financial terms) under multiple methods and scenarios. Findings: Study documents multiple divergences from Musharakah principles in the existing practice of Islamic mortgages including ignorance of market pricing in the negotiation of rentals and trading of equity units, and transfer of all ownership risks and rewards (vacancy, damage, destruction and market) to one partner (i.e. customer). Practice is divergent from principles in the area of economic substance. Modified IMM is developed by taking into account Musharakah principles; and differences highlighted by calculating financial figures – to determine financial rights and liabilities of the parties. Practical implications: Divergence from the principles of risk-return sharing leads to failure in the achievement of Islamic finance objective of equitable distribution of wealth. Moreover, protection of capital for financier reduces the market abilities to achieve financial stability by matching credit expansion with the rise in the real economy. Shari’ah boards and regulators, as well as, management of Islamic banking industry are expected to incorporate proposed changes in-practice for the realization of Islamic finance objectives. Originality/value: This study contributes to Islamic finance literature in the area of risk-return sharing. Based on important objectives of Islamic finance – equitable distribution of wealth and financial stability – divergences identified and a modified IMM in the light of Musharakah principles is presented. Descriptive rules are transformed into financial figures to document financial rights and liabilities of the concerned parties. © 2019, Emerald Publishing Limited.

International Journal of Emerging Markets

Islamic mortgages: principles and practice

م وفقا لمتطلبات يف الأس $ أساليب وعمليات تص ذه الدراسة الضوء ع سلط المستخلص. نية وشرعية. قمنا بتحليل نقدي لثمان مؤسسات م من ناحية م يف الأس $ عة الإسلامية لتص + الشر وجود العديد من I عة الإسلامية. خلصت نتائج الدراسة إ + لاختبار مدى التوافق مع مبادئ الشر أسس التقييم (قيمة OP عة الإسلامية، الاختلاف + و مخالف لأسس الشر ا: ما UV السلبيات العملية م الإسلامي، عدم وضوح _` الدخل وفقا للمن ]^ الأصول للقيمة السوقية)، عدم كفاية أساليب تط ل الإسلامي، e مواكبة نمو سوق التمو OP تطبيق نظم البيع، ضعف مراجعة حدود التفاوت، الفجوة ية وواقع j عض الممارسات البي l عدم التحقق من l وانب المتعلقة mn عض ا l OP وكذلك ا لإخفاق ح الدراسة نموذج ]o عمليات البيع. تق ً ا متوافق ً م الأسواق يف أس $ عة الإسلامية لتص + ا مع مبادئ الشر درجة الانحراف عن المبادئ الشرعية. ع qr إطار متفق عليھ ومب OP الإسلامية.This study highlights the issues in the screening process of Sharīʿahcompliant stock universe from Sharīʿah and professional perspectives. We have critically analyzed Sharīʿah-compliance methodologies of selected (eight) institutions in the light of Islamic principles of business. The findings suggest multiple weaknesses in the process, including variations in tolerance limits (for harām-elements), variations in the use of calculation methods (total assets and market capitalization), insufficient income purification mechanism, and confusions about the application of bay' al-sarf and bay' al-dayn regulations. In addition, we find lack of revisions in the tolerance limits, corresponding to the expansion of the Islamic finance market. We also find that certain important areas, such as questionable marketing and sales practices and environmental damages, are ignored in filtration. This study proposes a Shariah-compliance rankings mechanism for Islamic stock markets, within agreed upon framework, based on the degree of violations. © 2019 King Abdulaziz University Scientific Publishing Center.

Shariah screening process of capital markets: An evaluation of methodologies

Purpose: This study aims to develop a Sharīʿah-compliance rating mechanism for the Islamic financial services industry (IFSI), with a special focus on banking. The banking sector is taken as the area of focus due to its leadership role in the volume of global Sharīʿah-compliant assets. Design/methodology/approach: The objectives of the Islamic financial system (IFS) are selected as the basis for ratings. A range of performance indicators (leading to achievement of the objectives) is grouped into four broader categories and used in the study to allocate scores with a sum total of 100. Special considerations – including the amount of resources required in performing an activity, suitability of prevailing business conditions, the degree of compulsion/discretion in performing a task and linkage with the essence of the IFS – were taken into account in the allocation of scores. Findings: This study groups multiple performance measures into four categories, including portfolio construction (deposits mechanism, participatory and asset-based modes of financing), access to finance (service to the less-privileged and sector screening), reputation (disclosures and stakeholders’ survey) and Sharīʿah governance (Sharīʿah supervision and controls, charitable operations, human resources, product development and organization). The Portfolio, Audit, Reputation and System (PARS) rating system is then developed. Practical implications: A Sharīʿah-compliance rating system is helpful in measuring the progress towards goal achievement of the IFS and in gaining stakeholders’ trust. It is also important for Sharīʿah boards and regulators in policy formulation, for management in addressing weaknesses and taking corrective measures and potentially for standard-setting bodies. Originality/value: This study presents a comprehensive quantitative Sharīʿah-compliance rating mechanism, taking into consideration the objectives of the IFS – equitable distribution of wealth and financial stability, in addition to Sharīʿah-compliance in operations. Development of Sharīʿah-compliance quality ratings for Islamic banking is essential to gain customers’ trust; the suggested methodology is thus a contribution to the literature on Islamic finance. © 2018, Muhammad Hanif.

Sharīʿah-compliance ratings of the Islamic financial services industry: a quantitative approach

Islamic finance being a relatively new business segment, however, have shown promising results so far. In addition to banking services, Islamic finance has started penetrating in other sectors including capital markets and insurance. This study aims to evaluate the newly emerging Takaful sector in Pakistani market. The study covers an overview of insurance sector including Takaful; comparative financial analysis of Takaful industry with conventional insurance; an insight into the accounting and legal framework for Takaful; a customer survey to document the perception about Takaful business; and an insight and documentation of challenges to Takaful operations. Findings suggest Takaful business has low market share, although growing at a faster pace. The past financial performance appears to be poor, though with singnificant potential depicted by healthy growth. A reasonably good regulatory framework is also in place. Overall, market sentiments are very positive about Takaful insurance in Pakistan.

Journal of Islamic Economics, Banking and Finance

An evaluation of takaful insurance: Case of Pakistan

Purpose: This study is intends to understand and document the impact of market-based—market returns and momentum—as well as firm-specific—size, book to market ratio (B/M), price to earnings ratio (PER) and cash flow (CF)—factors on pricing of Shari’a compliant securities as explanation of variations in stock returns in an emerging market—Pakistan’s Karachi Stock Exchange.Methodology: Initially, we test Fama and French (FF) three-factor model—market risk premium, size, and B/M—followed by modified FF model by including additional risk factors [PER, CF and momentum] over a ten year period (2001 to 2010).Findings: Our results support superiority of FF three-factor model over single-factor capital asset pricing model (CAPM). However, addition of further risk factors—including PER, CF and momentum—improve explanatory power of the model as well as refine the selection of risk factors. In our study CF, B/M and momentum factors remain insignificant. Traditional B/M factor in FF model is replaced by PER.Practical implications: Based on the modified FF model, we propose a stock valuation model for Shari’a compliant securities consisting of three factors: market returns, size, and earnings which explains 76% variations in cross sectional stock returns..Originality/Value: To the best of our knowledge, this is the first study (which combines market-based as well as fundamental factors) on pricing of Islamic securities and identification of risk factors in an emerging market—Karachi Stock Exchange.

Journal of Islamic Accounting & Business Research

Risk and Returns in Shari’a Compliant Cross-section Stocks : Evidence from an Emerging Market

This study documents the asset pricing mechanism of Sharīah compliant securities listed on the the Karachi Stock Exchange. We select the CAPM market model to test for the impact in variations of stock returns on a sample of Sharīah-compliant companies on ten years monthly data (2001-10). We first test the basic CAPM (Capital Asset Pricing Model) and its modified form known as the Sharīah-compliant asset pricing model (SCAPM). We also analyse return differences due to size (market capitalization), book to market (B/M) value, price-earning ratio (PER), and cash-flow yield (CFY). Our results find a strong impact of the market index on stock returns (adj-R2 70%) and confirm the anomalies of size, B/M, CFY, and PER, while SCAPM is slightly better in explaining variations in cross-sectional stock returns.

Risk and returns of Sharīah compliant stocks on the Karachi stock exchange - A CAPM and SCAPM approach

Purpose: Islamic financing is based on the ideology of Islam, proposing a different economic system than capitalism. The essence of Islamic financing lies in trading of goods, provision of services and/or investment under profit and loss sharing. This study aims to examine legal forms and economic substance of the contracts used by the Islamic financial industry. Design/methodology/approach: To conclude on the objectives of the study, five most widely used contracts (modes/products), including Murabaha, Ijarah, Diminishing Musharaka, Sukuk and Mudaraba (deposits), were selected to test against the theory of the Islamic financial system. Findings: It is found in the process that legally (legal form) contracts/products are in line with theory; however, economic substance is not very different from conventional counter parts. Practical implications: Through application of alternative calculation measures/methods and proper training of human resources, Islamic financial institutions can shift economic substance of contracts in line with the theory of Islamic finance. Originality/value: Islamic finance is an emerging area, and reasonably good amount of literature is available; however, perhaps, this is the only piece of work focusing on calculation methods, contributing in economic substance of contracts, being used in modern Islamic finance in addition to legal form as per essence of Islamic financial system. © 2016, © Emerald Group Publishing Limited.

International Journal of Islamic and Middle Eastern Finance and Management

Economic substance or legal form: an evaluation of Islamic finance practice

With the advent of world crisis in developed western economies during first decade of 21 st century investors' focus shifted towards East. South Asian markets displayed outstanding performance in this era. One of the major attractions for investors is the market efficiency of underlying economy. This study has examined the weak form of efficient market hypothesis on the four major stock exchanges of South Asia including, India, Pakistan, Bangladesh and Sri Lanka. Historical index values on a monthly, weekly and daily basis for a period of 14 Years (1997-2011) were used for analysis. We applied four statistical tests including runs test, serial correlation, unit root and variance ratio test. Findings suggest that none of the four major stock markets of south-Asia follows Random-walk and hence all these markets are not the weak form of efficient market. To our knowledge this is the first ever study is being conducted which covers leading South Asian markets, hence an evidence on market efficiency of this region is being contributed in literature. © IDOSI Publications, 2012.

World Applied Sciences Journal

Testing weak form of efficient market hypothesis: Empirical evidence from South-Asia

The purpose of this empirical study is to analyze and compare the performance of Islamic and conventional banking in Pakistan and to find out which of the banking stream is performing better than other. For this study, sample of 22 conventional banks and 5 Islamic banks were selected. For in-depth understanding and sound comparison, key performance indicators were divided into external and internal bank factors. The external factor analysis includes studying the customer behavior and perception about both Islamic and conventional banking. Internal factor analysis includes measure of differences in performance of Islamic and conventional banks in terms of profitability, liquidity, credit risk and solvency. Nine financial ratios were used to gauge profitability, liquidity and credit risk; and a model known as "Bank-o-meter" is used to gauge solvency. Findings suggest in terms of profitability and liquidity conventional banking leads, while in credit risk management and solvency maintenance Islamic banking dominates. Motivating factors for customers of Islamic banking are the location and Shari'a compliance, while in case of conventional banking it is wide range of products and services. © EuroJournals Publishing, Inc. 2012.

International Research Journal of Finance and Economics

Comparative performance study of conventional and Islamic banking in Pakistan

This study investigates the validity of Capital Asset Pricing (CAP) Model in Karachi stock exchange (KSE). The data of 387 companies of 30 different sectors on monthly, quarterly and semiannual basis are used. The Paired sample t- test is applied to find the difference between actual and expected returns. Results show that capital asset pricing model (CAPM) predict more accurately the expected return on a short term investment as compare to long term investment. It is recommended that the investors should more focus on CAPM results for short term as compare to long term investments in KSE.

European Journal of Economics, Finance and Administrative Sciences

Validity of capital assets pricing model: Evidence from KSE-Pakistan

Islamic financial instruments are categorized objectively as Sharia compliant and Sharia based. Sharia compliant instruments are used by Islamic Financial Institutions (IFIs) aggressively and the share of Sharia based financial instruments is even less than 3%A in investment portfolios of IFIs working in Pakistan. This study is conducted to evaluate the suitability of existing business environment in Pakistan for application of Sharia based financing. Opinion survey of finance professionals, Islamic bankers, entrepreneurs and academicians is conducted through questionnaire. Findings suggest a number of hurdles (e.g. the dominance of conventional banking, earnings manipulation by firms, higher taxes, weaker auditing, lack of trust and confidence in the abilities of Musharaka partners, riskiness of Musharaka and inability of conventional financial reporting framework to ensure transparency) are there in the way of popularity of Musharaka financing. Increased awareness, new product development, capacity building of IFIs, reforms in financial reporting framework and strengthening audit institution, may help in the implementation of Musharaka financing.