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Table 1
GIFT (Governance Index for Trusts) index in Islamic finance
212
Ranking
Country
Score (max 100.0)
1
Malaysia
80,8
2
Saudi Arabia
80,4
3
Indonesia
64,7
4
United Arab Emirates
59,8
5
United Kingdom
49,9
6
Bahrain
46,4
7
Kuwait
44,8
8
Singapore
41,4
9
Qatar
41,2
10
Hong Kong
38,7
…
…
…
54
Syria
7,4
55
Uzbekistan
5,5
…
…
…
62
Niger
2,7
63
Gambia
2,1
64
Suriname
0,7
The index applied a total of 19 indicators across five different categories for each
country. These five categories are: Talent; Regulation; Infrastructure; Islamic Fintech Market
& Ecosystem; and Capital. These categories were weighted before an overall score was
determined, with a heavier weighting given to the Islamic Fintech Market & Ecosystem
category, since this is the most indicative by far of a country’s current conduciveness to
Islamic Fintech specifically. Examples of indicators used:
Talent:
Employment in knowledge-intensive services, university ranking.
Regulation:
Presence of Fintech regulations.
Infrastructure:
ICT use, domestic credit to private Sector, university-industry
collaboration.
Islamic Fintech Market and Ecosystem:
Number of Islamic Fintechs in a country, number
of Islamic financial institutions
Capital:
New business density, number of venture capital deals.
Islamic finance would seem at first sight to be ideally suited to the needs of small
business, as
mudarabah
(profit-sharing) provides the Islamic bank the opportunity to share in
the success of any enterprise, without penalizing businesses unduly for any failure. The
partial transfer of risk from the entrepreneur to the bank inevitably makes the bank reluctant
to engage in such financing unless a higher return is anticipated. Having such a return in the
form of a substantial share of anticipated profits may deter the entrepreneur from seeking the
finance in the first place. There is in addition a principal
–
agent problem of asymmetric
information. Where the bank is the principal and the entrepreneur the agent, there will
always be the temptation to report a lower profit. This is why financial reporting by the
entrepreneur for successful
mudarabah
is very important as it avoids the moral hazard
problem.
In practice most Islamic bank financing is through
murabahah
trade financing, a
reflection partly of the low-risk nature of such finance, which involves the bank purchasing a
good on behalf of a client and reselling the good to the same client at a predetermined mark-
up. Such financing in many countries throughout the Muslim world simply reflects business
demands and the trading character of much economic activity. In these countries the types of
212
N. Nazarov, a scientific article "Islamic banking: problems, solutions and prospects" p 3., 2023
373
financing do not differ significantly between conventional and Islamic banks; rather it is the
financing methods that differ. Leasing or
ijarah
is the second most popular method of
financing for many Islamic banks, but this has also become more significant for conventional
banks. The latter often provide leasing facilities through specialized subsidiaries, but Islamic
banks tend to view leasing as a mainstream activity and part of their core business. Again
unlike
musharakah
, there is little risk involved, as the goods or equipment being leased serve
as collateral for the financing.
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