Islamic Banking and Finance Review

Financing Attitude of Islamic and Conventional Banking Institutions towards Small and Medium-Sized Enterprises (SMEs) in Pakistan

Saqib Sharif, Mirza Abdul Mateen Baig — Tue, 26 Dec 2023 00:00:00 +0000

Purpose: The current study attempted to investigate the banks’ financing attitude towards Small and Medium-Sized Enterprises (SMEs) in Pakistan. The study further aimed to determine the difference in financing attitude between Islamic and conventional banks.

Design/Methodology/Approach: The quarterly data was collected from the State Bank of Pakistan’s (SBP’s) website (the Central Bank of Pakistan). Moreover, regression analysis was applied to contrast the attitude of Islamic and conventional banking institutions in Pakistan towards SMEs financing.

Findings: The evidence suggested that Islamic banking institutions are more inclined towards financing SMEs as compared to their conventional counterparts. However, overall, the results were weakly significant at 10% level.

Research Limitations/Implications: The current study examined the attitude of the type of banks towards SME financing and compared Islamic financial institutions with conventional ones. However, SMEs outstanding financing data by individual financial institutions was not available, which could, if available, help to understand lending attitudes at a bank level.

Originality/Value: To the best of authors’ knowledge, no study has discussed and compared financing attitudes of Islamic and conventional banking institutions towards SMEs in Pakistan so far. Therefore, the current study attempted to fill this gap by contributing to the extant literature on financing to SMEs. Moreover it also added new dimensions and as per the authors’ knowledge, it was the first research conducted on banking-type level in Pakistani context.

Integration between ESG Goals and Value-Based Intermediation Approach within the Paradigm of Islamic Finance

MUHAMMAD MUSA — Thu, 28 Dec 2023 00:00:00 +0000

Environmental, Social, and Governance (ESG) goals is a trending topic for scholarly discussion around the globe because of their emphasis on the social and environmental impact of human activities on the society. They are also linked with the performance of institutions and governance effectiveness. A Shariah-compliant Islamic finance structure or governance framework contributes to achieve sustainability and tackle global issues and challenges. From the ESG perspective, there is no doubt there are many barriers and challenges in implementing these goals, especially in financial institutions. Apart from other approaches, the Value-based Intermediation (VBI) approach is introduced to achieve the common objectives within the Islamic financial system. This research aims to integrate the ESG goals and VBI approach in the Islamic finance paradigm. It is a qualitative research that includes a bibliometric analysis, where the secondary data was extracted from the available literature comprising research papers, books, and institutional and organizational reports. Simulataneously, statistical information extracted from the Scopus database was used for bibliometric analysis. We found that there are a lot of commonalities between these concepts like sustainability is one of them that is linked with ecological footprints and social impacts and governance efficiency. Islamic banking needs to transform from profit-oriented to value-oriented, as it is closer to the fundamental principles of the Shariah and global objectives. In this regard, the implementation of ESG screening with Shariah screening and VBI element in Islamic finance products and services is important.

Futures’ Trading Practices in Pakistan: A Shariah-based Evaluation

ANEES TAHIR — Thu, 28 Dec 2023 00:00:00 +0000

In Pakistan, stock and commodity futures are frequently traded on the Pakistan Stock Exchange (PSX) and Pakistan Mercantile Exchange (PMX). Futures contract is an agreement between two parties, namely the seller and the buyer, to deliver an asset at a future date against a particular price. It is a contract which comes into effect at a future point of time. A futures contract allows the buying and selling of underlying stocks or commodities at a certain date in the future, at future prices. It is generally settled in cash without delivering or receiving the subject matter or contract. Shariah scholars have divergent opinions about the validity and permissibility of such types of contract. This study aims to explain the Shariah position of these contracts. In particular, this article examines the divergent opinions of Shariah scholars, finance experts and economists on the issue. The prevailing view in modern Islamic jurisprudence is that futures are merely a form of speculation and gambling. Besides, there is no productive economic activity involved in futures trading. It is suggested that, while examining the validity or invalidity of futures a distinction should be made between the purpose of futures trading, as to whether it is for making speculative gains or for a genuine hedging purpose. The distinction should also be made between deliverable futures and cash-settled futures. Futures can be structured on two independent promises as well as wakalah contract.

Managerial Entrenchment through Earnings Management: A Critical Analysis in the Light of Shariah and Ethics

Dr. Qazi Yasir Arafat, Qazi Waseem Jan — Thu, 28 Dec 2023 00:00:00 +0000

The managers of commercial organizations often seek to obtain the shares of their organizations in order to benefit both monetarily and non-monetarily, a phenomenon known as managerial entrenchment. This involves possessing both shareholding and employment positions simultaneously within the organization. It may be achieved through various means and techniques; one of these is known as earnings management (EM). This study aims to critically examine the practice of managerial entrenchment through EM in light of Islamic jurisprudence and ethics. The current evaluation is based on the primary sources of the Shariah and contemporary fiqh. It was found that this practice often violates Shariah law and ethical principles. Employment and shareholding within an organization are permissible according to some interpretations of Hanbali and contemporary Hanafi fiqh but only with certain prerequisites. Managerial entrenchment through EM often fails to meet these prerequisites. It may result in lying, misrepresentation, and unjust acquisition of wealth. Therefore, it is necessary to control the trend of EM and managerial entrenchment in order to prevent ethical violations and maintain ethical business practices.

- Investigation of Shariah Compliant Green Firm Performance Using Eco-Efficient Infrastructure and Green Organizational Capabilities:

uzma kashif — Thu, 28 Dec 2023 00:00:00 +0000

The primary goal of this study is to investigate the impact of eco-efficient infrastructure and organizational capabilities on shariah compliant shariah compliant green organizational performance, with shariah compliant sustainable production serving as a moderator. To achieve the study's goal, data were collected from 528 respondents in the manufacturing sector using a stratified sampling technique. The findings showed that a firm's eco-efficient infrastructure and organizational capabilities play an important role in achieving green performance; additionally, Shariah-Compliant Sustainable Production plays an important mediating role. This study contributes to the development of policies for organizations to improve their green performance and theoretically eco-efficient infrastructure, which has been overlooked in previous literature.