Thirty Years of Islamic Banking History, Performance and Prospects

by Iqbal, Munawar; Molyneux, Philip

• ISBN13: 9781403943255
• ISBN10: 1403943257
• Format: Hardcover
• Copyright: 2005-03-02
• Publisher: Palgrave Macmillan

Summary

This text explains how Islamic banking works and what it offers as an alternative model of financial intermediation. Important questions addressed include: Why Islamic banking started and where it is going; who the main players are at present and whom it will attract in future; what its strengths and weaknesses are; whether Islamic banks will survive in highly competitive and globalized financial markets; what their prospects and potentials are; and how the relative performance and efficiency of Islamic banks compares to conventional banks?

Author Biography

Munawar Iqbal is Chief of Research in Islamic Banking and Finance at the Islamic Development Bank, Jeddah.

Philip Molyneux is Professor in Banking and Finance, and Director of the Institute of European Finance at the University of Wales, Bangor.

Table of Contents

List of Tables and Boxes	vii
Preface	ix
Glossary of Arabic Terms	xi
List of Abbreviations	xvi
About the Authors	xviii
Introduction	1	(3)
Theoretical Foundations of Islamic Banking	4	(14)
Why Islamic banking: the rationale	4	(2)
Principles of Islamic finance: the basis	6	(10)
Conclusion	16	(2)
Development of the Islamic Banking Model	18	(18)
What is Islamic banking: the model	18	(8)
How Islamic banking works in practice	26	(2)
How is Islamic banking different from conventional banking: the salient features	28	(3)
What does the Islamic banking model promise?	31	(3)
Conclusion	34	(2)
History and Growth of Islamic Banking and Finance	36	(36)
How Islamic banking started	36	(2)
Various manifestations of the Islamic financial industry	38	(1)
Country experiences with Islamic banking	39	(7)
Islamic banks and financial institutions working in mixed environments	46	(12)
Islamic banking practices by conventional banks	58	(1)
International Islamic financial institutions	59	(4)
Other institutions	63	(2)
Conclusion	65	(7)
The Performance of Islamic Banks	72	(16)
Soundness	72	(2)
Prudence	74	(2)
Effectiveness	76	(1)
Economy	76	(2)
Profitability	78	(3)
Islamic and conventional banks: a comparative analysis	81	(4)
Conclusion	85	(3)
Efficiency in Islamic Banking	88	(17)
Why study Islamic bank efficiency?	88	(1)
Measuring bank efficiency	89	(8)
Empirical evidence on efficiency in Islamic banking	97	(7)
Conclusion	104	(1)
Challenges Facing Islamic Banking	105	(18)
Theoretical challenges: unresolved issues	105	(6)
Practical challenges: operational problems	111	(10)
Conclusion	121	(2)
Islamic Banking in the Twenty-First Century	123	(18)
Where Islamic banking needs to go: the way ahead	123	(10)
Areas of potential growth	133	(7)
Conclusion	140	(1)
Some Areas for Further Research in Islamic Banking and Finance	141	(11)
Asymmetric information	142	(1)
Moral hazard problems	143	(2)
Adverse selection problems	145	(1)
Principal agent problems and the need for monitoring	145	(2)
Implications of the sharing features of PLS contracts	147	(2)
The need for further empirical investigations	149	(1)
Conclusion	150	(2)
Summary and Conclusions	152	(5)
Notes	157	(3)
Bibliography	160	(6)
Index	166