Loughborough University
Leicestershire, UK
LE11 3TU
+44 (0)1509 263171
Loughborough University

Loughborough University Institutional Repository

Please use this identifier to cite or link to this item: https://dspace.lboro.ac.uk/2134/6803

Title: An analysis of capital regulation for Islamic banks
Authors: Muljawan, Dadang
Keywords: Banking
Issue Date: 2002
Publisher: © Dadang Muljawan
Abstract: This thesis makes a theoretical contribution to the design of the capital adequacy assessment framework for Islamic banks. The proposed capital regulation is aimed at enhancing the Islamic banks' operational sustainability. The first analytical section in the thesis discusses the nature of sharing contracts. The analysis helps to explain the current reluctance to use sharing contracts by the players in the Islamic banking system. Each individual will always try to optimise his utility, monetarily as well as religiously, as a form of compliance with religious rules. However, in an adverse condition, religious and risk-averse customers will compromise the two utility objectives (i.e. adopting hybrid types of contract that, to some extent, deliver his minimum required financial return besides also complying with religious norms). The second analytical section in the thesis discusses possible improvements to the capital regulation of Islamic banks. This includes the possibility of enhancing the fiduciary as well as the agency roles performed by the Islamic banks. The analysis produces a number of propositions. The first proposition is to require the banks to have prudent assets-liabilities (capital) structures and to have adequate financial cushions. The second proposition is to require the shareholders of Islamic banks to observe a minimum level of financial participation; and to require the banks to disclose crucial financial information to investors. Theoretically, the higher the level of financial participation and the higher the quality of information provided, the better the quality of the contract entered into by the banks and 'their customers. The last part of the discussion, embracing empirical analysis, shows the important role played by capital in absorbing temporary financial shocks (especially when debt-based deposits are dominant). The discussion also covers the possibility of using statistical techniques for assessing the soundness of Islamic banks' operational activities.
Description: A Doctoral Thesis. Submitted in partial fulfillment of the requirements for the award of Doctor of Philosophy of Loughborough University.
URI: https://dspace.lboro.ac.uk/2134/6803
Appears in Collections:PhD Theses (Economics)

Files associated with this item:

File SizeFormat
250894.pdf47.55 MBAdobe PDFView/Open


SFX Query

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.