The authors draw on the traditions of Institutional Economics which are concerned with the rules or mechanisms of creating the 'incentive' and 'threat' for economic players because the rules (institutions) would matter as the determinant for economic development and economic efficiency. This book offers a fairly new analytical lens by hypothesizing that Islamic banks must earn additional profit– the authors coined as ‘Islamic bank rent’ - to maintain their franchise value as prudent　Shari’ah-compliant lenders when compared to conventional banks. The authors argued that insufficient provision of the Islamic bank rent opportunity may have caused the Indonesia’s Islamic banks the opportunity to learn and improve their skill and capacity for the credit risk management. The　book　also　offers evidence　in　support　of implementing economic and affirmative policy necessary for incubating and developing the Islamic banking industry in Indonesia and making Indonesia an international Islamic financial hub in the Asia-Pacific region.

This book will be a useful resource for policy makers and researchers interested in Islamic banking in Indonesia.

This Study aims to investigate decision in the interbank money market based on islamic principles.

An application of the Tawhidi methodology is developed in this chapter. This now takes the form of unification by participatory dynamics of the various segmented Islamic financing instruments into a pooled fund. Various consequences of financial and economic stability and development are thereby studied by means of unified development-financing formalism

Acceleration of Islamic banking in Indonesia is still slowed down so the target of Islamic banking Market Share of 5% has not been met. One factor that into the size of the increase in the Market Share of Islamic banking is the amount of financing (Murabaha) provided by Islamic banks. The purpose of this study is to examine the annuity and proportionate pattern in Murabaha financing and its impact on the achievement of the target Market Share of Islamic banks the period January 2001 - March 2015 resulting in a range of markup and the Down Payment (DP) policy which is ideal for the financing pattern annuity and proportionate in Murabaha Islamic banking in achieving Market Share targets. The analytical method used is the simulation of Murabaha financing. The results shows that the financing annuity and proportionate pattern in Murabaha Islamic banking with a mark-up consumer credit rate and DP 10% experienced an upward trend although the increase is still volatile from 2001 to 2015. The financing annuity and proportionately pattern significant in realizing the target achievement banking Market Share sharia 5%. This is due to the increase in total profit and total assets of Islamic banking due to the percentage mark up consumer credit rate more than 10% DP, Acceleration of Islamic banking in Indonesia is still slowed down so the target of Islamic banking Market Share of 5% has not been met. One factor that into the size of the increase in the Market Share of Islamic banking is the amount of financing (Murabaha) provided by Islamic banks. The purpose of this study is to examine the annuity and proportionate pattern in Murabaha financing and its impact on the achievement of the target Market Share of Islamic banks the period January 2001 - March 2015 resulting in a range of markup and the Down Payment (DP) policy which is ideal for the financing pattern annuity and proportionate in Murabaha Islamic banking in achieving Market Share targets. The analytical method used is the simulation of Murabaha financing. The results shows that the financing annuity and proportionate pattern in Murabaha Islamic banking with a mark-up consumer credit rate and DP 10% experienced an upward trend although the increase is still volatile from 2001 to 2015. The financing annuity and proportionately pattern significant in realizing the target achievement banking Market Share sharia 5%. This is due to the increase in total profit and total assets of Islamic banking due to the percentage mark up consumer credit rate more than 10% DP]

Purpose – The demand for Saudi Arabian real (SAR) is very high in the pilgrimage (hajj) season while the
authority, unfortunately, does not hedge the hajj funds. As such, the hajj funds are potentially exposed to
exchange rate risk, which can impact the value of hajj funds and generate extra cost to the pilgrims. The
purpose of this paper is to conduct simulations of Islamic hedging for pilgrimage funds to: mitigate and
minimize exchange rate risk, identify and recommend the ideal time, amount and tenors of Islamic hedging
for hajj funds, estimate cost saving by pursuing Islamic hedging and propose technical and general
recommendations for the authority.
Design/methodology/approach – Forward transaction mechanism is adopted to compute Islamic
forward between SAR and Rupiah (Indonesian currency) or IDR. Findings – based on simulations, the paper
finds that: the longer the Islamic hedging tenors, the better is the result of Islamic hedging, the decreasing of
IDR/USD is the right time to hedge the hajj funds and, on the other hand, the IDR/SAR appreciation is not the
right time to hedge the hajj funds.
Findings – Based on simulations, the paper finds that: the longer the Islamic hedging tenors, the better is
the result of Islamic hedging, the decreasing of IDR/USD is the right time to hedge the hajj funds and, on the
other hand, the IDR/SAR appreciation is not the right time to hedge the hajj funds.
Research limitations/implications – The research suggests the authority to (and not to) hedge the hajj
fund, depending on economic conditions and market indicators. Even though the assessment is for the
Indonesian case, other countries maintaining hajj funds might also learn from this paper.
Originality/value – To the best of author’s knowledge, this is the first paper in Indonesia that attempts to
simulate the optimal hedging of hajj funds.

The new government regulation on Islamic finance sector has contributed to the growth of Islamic banking in Indonesia. However, the higher demand of financing in Islamic banking business activities not followed by the good growth of funding. This condition, may cause liquidity problem in the future. Furthermore, Islamic bank need to diversify the allocation of funding sources to liquidity instruments such sovereign Sukuk (SBSN) at the right time in order to reduce liquidity risk. This paper aims to analyze the effects of assets and liabilities on sovereign Sukuk (SBSN) based on model Autoregresif Distributed-Lag (ARDL) for Islamic Bank. The data for Islamic Bank collected from The Financial Services Authority of Indonesia (OJK), and sovereign sukuk data collected from Directorate General of Budget Financing and Risk Management Ministry of Finance (DJPPR). Assets and liabilities determinants factors like, third parties fund / DPK (saving and current account), Musharakah,Murabahah, Cash, deposits account owned by Islamic Bank in Central Bank (giro BI), Islamic Securities owned by Islamic bank, and previous period of sovereign sukuk ownership. In general, results of this study shows that the effects of assets and liabilities on sovereign Sukuk (SBSN) influence significanly positif by third parties fund / DPK (saving and current account), Musharakah Financing, and previous period of sovereign sukuk ownership. Whereas influence significantly negative by Cash, deposits account owned by Islamic Bank in Central Bank (giro BI), Islamic Securities owned by Islamic bank, and Murabahah Financing

A comprehensive overview of key developments in Islamic banking In Islamic Banking in
Indonesia, renowned economist Dr. Rifki Ismal explores current issues in Islamic banking
and financial products with a particular focus on the danger of liquidity risk in Indonesia. It
approaches liquidity risk from the conventional perspective of international banking
standards, as well as from the Islamic banking perspective. Dr. Ismal also covers the issues
of asset-liability balancing, liquidity risk index, organizational structures for managing

This paper appraises demand and supply of liquidity in Islamic banking industry. The author has particularly attempted to consider the future scenario vis-à-vis Islamic banking and check the resiliency of the industry against any liquidity pressure. The paper starts with identifying and analysing sources of demand and supply of liquidity and uses ARIMA models to produce a future estimated number. The paper finds that the industry is managing the liquidity very well as of now. Nevertheless, its resiliency against liquidity problems is not fully satisfactory. Permanent liquidity mismatch might possibly exist during unpleasant economics conditions. Finally, the paper suggests Islamic banks to strengthen their liquid instruments, improve the liquidity management as well as business operation and further educate the public about Islamic banking principles.

One major problem of Islamic banking in Indonesia today is the high Non-Performing Financing (NPF) with its ratio amounted to 5.68% in June 2016. This paper aimed to identify and examine both macroeconomic and bank-specific factors affecting NPF ratio of Islamic banking. Particularly, it used the panel data regression method with a monthly data basis of eleven Islamic commercial banks in Indonesia. Furthermore, there were two periods examined i.e. from December 2011 to June 2016 (no specific restrictions on economic performance) and from February 2013 to January 2015 (restriction on economic performance). Technically, the dependent variable was NPF ratio (NPF) and the independent variables were Industrial Production Index (IPI), Real Sales Index (IPR), the difference between the BI Rate and inflation (BIREAL), the exchange rate of Rupiah against the US Dollar (EXR), the annual growth of financing (GFINY ), the ratio of financing to total assets (FINTA), the Capital Adequacy Ratio (CAR), Return on Assets ratio (ROA), the coverage of loan loss provision (CKPN), and the concentration of financing in the real estate sector (REFIN). The results showed that in the two periods examined, NPF was significantly influenced by the internal factors. In the first period, NPF was significantly influenced by GFINY, CKPN, and REFIN while in the second period, NPF was significantly influenced by CAR, ROA, CPKN, and REFIN. This shows that the quality of risk management implementation, profitability and capital are important factors in reducing the NPF ratio.

With the impressive emergence of Islamic finance as a branch of Islamic economics, the need for a solid knowledge base that encompasses theories, thoughts and applications related to the subject increased in importance. However, writing about Islamic economics is a great challenge due to the differences in opinion on many of its issues. This includes methodologies for determining the Islamic perspective on economic concepts and issues as well as applicable solutions for today’s economic and social problems. It is further argued that Islamic economics topics are not as clear as those in conventional economics as they have their own religious, spiritual and social dimensions. The points of controversy have generated lengthy discussions. Moreover, Islamic economics encompasses a vast array of topics and approaches, from the purely theoretical, which may include philosophy or religious ideas, to mathematical and quantitative analyses. We tried our best throughout this textbook to simplify, clarify and summarise these concepts to make them accessible to all readers including students, practitioners, academics and even interested non-specialists. This textbook presents, discusses and analyses various topics and issues related to Islamic economics ranging from philosophical, epistemological and methodological to microeconomic and macroeconomic perspectives. In this endeavour, the social aspect of Islamic economics—an essential part of the discipline—is not neglected. The textbook compares Islamic ideas and concepts related to economics with those in conventional economics to highlight Islamic economics as a distinct field of knowledge with an emphasis on the ethical and social aspects. The authors have tried their level best to explain the theoretical concepts as simply as possible without ignoring today’s realities and without compromising Sharīʿah principles and objectives. One of the main objectives of the book is to provide the reader with Islamic economic ideas and solutions that are realistic and applicable within the current highly globalised economic and business environment, which is largely dominated by conventional interest-based systems and institutions. Despite being written for an elementary-level audience, this textbook can also be beneficial to a wide range of specialist and non-specialist readers and seekers of knowledge. For those specialising in Islamic economics, it is an appropriate source of reference to gain an overview on different topics relating to the foundations of Islamic economics. At this point, however, it must be mentioned that each topic deliberated upon, by its nature, would require a book on its own to cover all its aspects. Therefore, further exploration is required for Islamic economics specialists. A list of references and recommended readings is provided for that purpose at the end of each chapter. On the other hand, students of mainstream economics, finance and other academic majors will find this textbook an excellent resource for comprehensive knowledge of Islamic economics and its related issues. Universities may benefit from the different topics presented in this textbook in designing or preparing their economics courses at different levels based on their own curriculums and classes. This textbook could be used at the undergraduate level or even for a master’s level economics or Islamic economics course, especially in an Islamic banking and finance programme or for an MBA having a specialisation in Islamic banking and finance where an economics or Islamic economics course is offered. Furthermore, practitioners and interested readers who are seeking essential and simple knowledge about

The commercial sector has been dominating the development of the Islamic finance since its emergence. As a matter of fact, Islamic finance has a social sector that is potential to further drive the commercial sector and reciprocally has tremendeous benefits in term of societal welfare to the social sector. This reciprocal relationship could become a potential catalyst for sustainable economic development and also one of Islamic financial deepening efforts. For doing so, project based sukuk with the spirit of real sector development through social sector can be innovated. Particularly, an awqaf linked sukuk with awqaf assets as part of underlying assets is proposed to finance governmental projects and infrastructure development. This paper explores the potential issuance of the awqaf linked sukuk structured through strategic alliance across government institutions and corporates through Public Private Partnership (PPP) to contribute to sustainable economic development and social welfare. It is hoped that the realization of awqaf linked sukuk could become an impetus to the global sukuk issuance within Islamic finance landscape

Purpose

This paper aims to examine the effect of management accounting–strategy coalignment on the maqasid Shariah-based performance of Islamic banks in Indonesia. The study also examines the role of the corporate life cycle of Islamic banks in influencing the relationship between management accounting–strategy coalignment and performance.

Design/methodology/approach

Management accounting practices, management control systems, strategy and maqasid Shariah-based performance are measured using questionnaires which were distributed to 97 directors and heads of Islamic banks. The model of this study is analyzed using structural equation model.

Findings

This study finds that the coalignment between low cost-oriented strategy, strategic management accounting practices and mechanistic management control system has positive impact on improving maqasid Shariah-based performance. However, this study is unable to verify that corporate life cycle strengthens the positive relationship between management accounting–strategy coalignment and performance.

Research limitations/implications

Limited indicators of management accounting practices in this study illustrate less comprehensive management accounting practices. Further studies may add other relevant management accounting as described by the International Federation of Accounting Committee to provide a more comprehensive management accounting practices.

Practical implications

This study provides recommendations to the management of Islamic banks to design management accounting practices and management control systems that fit to their strategic orientation.

Originality/value

This paper fulfils limited empirical studies on management accounting practices and strategy in Islamic banking industr

This paper is an empirical survey of Indonesian Islamic bank’s depositors and Islamic bankers. By using an online questionnaire posted in survey website provider, namely www.surveymonkey.com, the survey was conducted from January to March 2009. There are 408 depositors and 17 Islamic bankers (Directors, General Managers, Head of Risk Management Team/Division) who participated in the survey. All (five) Islamic banks (BUS) and twelve Islamic banking unit (UUS) have been represented and all banker respondents correspond to 97% of all Islamic banking institutions. Every individual and Islamic banker had the same chance to be selected since there is no category of respondent (simple random sampling).

Purpose

Islamic banks need to manage depositors' deposit withdrawals in a well manner in order to be able to optimize depositors' funds in their portfolio financing. Taking into account the Indonesian Islamic banking industry as a study case, this paper attempts to analyze the depositors' withdrawal behavior. Moreover, it also analyzes the responses of Islamic banks to mitigate such deposit withdrawals.

Design/methodology/approach

First, the paper accommodates the flow of funds of the Indonesian Islamic banking operations. Second, it formulates a liability side model of the competitive Islamic banking industry referring to some ideas from the conventional models. Then, the paper uses linear probability model (LPM) to identify depositors' withdrawal behavior and to analyze the responses of Islamic banks to mitigate deposit withdrawals.

Findings

It is found that depositors withdraw their money if: Islamic banks do not generate incomes from their financing; interest rate goes up; and total deposits tend to decrease. As such, Islamic banks have to anticipate this withdrawal behavior by doing two actions: reserving some liquidity and adjusting return sharing ratio to depositors. The output of this paper should benefit the policy markers and Islamic banks to understand depositors' behavior in withdrawing money and determine appropriate policies to manage it.

Originality/value

The best of author's knowledge, this is the first paper trying to analyze the depositors' withdrawal behavior with LPM model taking into account the Indonesian Islamic banking industry.

In Indonesia, Islamic banking shows a progressive performance with a robust performance of banking indicators. Its operations engage non bank financial institutions, Islamic money and capital market and takaful (Islamic insurance) with the ultimate target of financing the real sector and improving the economy. However, there are still some challenges to be solved in particular the small market share, lack of human resources and, lack of product development. Some recommended actions are proposed in the paper to mitigate those problems and foster the development of the Islamic banking industry