1.1 General Introduction to the Topic
Islamic finance is on the march. The underlying logic is simple: All investments and services are consistent with the principles of Islamic law, called Shari’ah, which literally means ‘a clear path to be followed and observed’ (Hourani, 2004a). This clear path is followed only if profit does not stem from interest (riba), speculation (gharrar) or sectors that are considered sinful according to the Qur’an (haraam), namely everything that involves alcohol, tobacco, entertainment, gambling or pork, just to name a few. The high potential of Islamic finance is clear for three reasons. The first reason relates to the emergence of a new consumer type, as there is increased demand for a Shari’ah-compliant way of investing that stems from increased globalization. The middle class from emerging markets rose from one third to 56 percent between the 1990s and 2006 (The Economist, 2009). Many Muslim countries can be found in the list of emerging markets, such as Egypt,
Pakistan and Indonesia. With the Muslim population of the world exceeding 1.5 billion people (about 21 percent of the world population) and due to the fact that it is the fastest growing religion, it becomes clear why the general conditions for Islamic finance are so favourable (Central Intelligence Agency, 2009).
The second reason relates to the global trend for sustainable investment; the fact that Islamic finance is an ethical way of investing which does not invest in harmful businesses and instead donates purified gains to charity is becoming more and more attractive among non-Muslim investors as well (Global Finance, 2007). The Shari’ah aspect makes Islamic financial products an alternative to socially responsible investments (Khan, 2009).
The last reason is a matter of trust; in the face of the financial crisis that began shattering the world in 2007, many investors lost confidence in the traditional banks and their practices (Reuters, 2008; CNN, 2009). Today even the Holy See states that ‘the ethic
principles on which Islamic finance is based may bring banks closer to their clients and to the spirit which should mark every financial service’ (Bloomberg, 2009). According to recent estimates, IFIs could increase their assets under management from roundabout $700 billion to over $1.6 trillion in 2012 (Reuters, 2009).
WICHTIG: Sämtliche Recherchetätigkeiten wurden bei in den Vereinigten Arabischen Emiraten ansässigen islamischen Banken vor Ort durchgeführt.
Inhaltsverzeichnis (Table of Contents)
- 1 Introduction
- 1.1 General Introduction to the Topic
- 1.2 Specific Introduction to the Central Topic
- 1.3 Problem Definition
- 1.3.1 Problem Statement
- 1.3.2 Research Questions
- 1.4 Outline of the Paper
- 2 About Islamic Finance
- 2.1 Characteristics of Islamic Finance
- 2.2 Structural Distinctions Between Both Types of Institutions
- 3 New Product Development
- 3.1 Introduction
- 3.2 NPD in Conventional and Islamic Financial Institutions
- 3.3 Approaches Toward New Product Development
- 4 Risk Management
- 4.1 General Remarks
- 4.2 Risk Management in Islamic Financial Institutions
- 5 Risk Factors
- 5.1 Operational Risk
- 5.1.1 Definitions
- 5.1.2 Operational Risk in Conventional and Islamic Financial Institutions
- 5.1.3 Countermeasures
- 5.1.4 Best Practice Guidelines
- 5.2 Reputation Risk
- 5.2.1 Definitions
- 5.2.2 Reputation Risk in Conventional and Islamic Financial Institutions
- 5.2.3 Countermeasures
- 5.2.4 Best Practice Guidelines
- 5.3 Transparency Risk
- 5.3.1 Definitions
- 5.3.2 Transparency Risk in Both Financial Institutions
- 5.3.3 Countermeasures
- 5.3.4 Best Practice Guidelines
- 5.4 Shari'ah Risk
- 5.4.1 Definitions
- 5.4.2 Shari'ah Risk in Islamic Financial Institutions
- 5.4.3 Countermeasures
- 5.4.4 Best Practice Guidelines
- 5.5 Fiduciary Risk
- 5.5.1 Definitions
- 5.5.2 Fiduciary Risk in Conventional and Islamic Financial Institutions
- 5.5.3 Countermeasures
- 5.5.4 Best Practice Guidelines
- 5.6 Marketing Risk
- 5.6.1 Definitions
- 5.6.2 Marketing Risk in Conventional and Islamic Financial Institutions
- 5.6.3 Countermeasures
- 5.6.4 Best Practice Guidelines
- 6 Success Factors of New Financial Products
- 6.1 General Remarks
- 6.1.1 Contributing Factors to Conventional Financial Product Success
- 6.1.2 Contributing Factors otof Islamic Financial Product Success
- 6.1.3 Characteristics of Successful Conventional Financial Products
- 6.1.4 Characteristics of Successful Islamic Financial Products
- 7 Research Framework
- 7.1 Summary of the Hypotheses
- 7.1.1 Section 1: New Product Development
- 7.1.2 Governance Risk Management
- 7.1.3 Success Factors
- 7.2 Research Methodology – Qualitative Research
- 7.2.1 Research Planning
- 7.2.2 Research Execution
- 7.3 Sample Determination
- 8 Research Results
- 8.1 Research Phase
- 8.2 Analytical Issues
- 8.2.1 Section 1: NPD Process Details
- 8.2.2 Section 1: Control Measures - Utilization
- 8.2.3 Section 1: Control Measures - Frequency
- 8.2.4 Section 1: Department(s) with Biggest Influence
- 8.2.5 Section 1: Major Problems in NPD Process
- 8.2.6 Section 1: Departments With More Influence
- 8.2.7 Section 2: Treatment of Governance Risk
- 8.2.8 Section 2: School of Thought Followed
- 8.2.9 Section 2: Most Important Governance Risk Factors
- 8.2.10 Section 3: Biggest Success Factors
- 8.2.11 Section 3: Governance Risk Management and Product Success
- 8.2.12 Section 3: Governance Risk Management Adequate
- 8.2.13 Section 3: Improve Governance Risk
- 8.3 Summary
- 9 Conclusion, Contributions and Limitations
- 9.1. Conclusion
- 9.2 Contributions
- 9.2.1 Academic Contributions
- 9.2.2 Managerial Contributions
- 9.3 Limitations
- 9.4 Future Research
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This master thesis aims to investigate the relationship between governance risk management and the successful development of financial products in Islamic financial institutions (IFIs). The research focuses on the specific challenges IFIs face in balancing their unique principles with the demands of modern financial product development.
- Governance Risk Management in IFIs
- New Product Development in IFIs
- Success Factors for Islamic Financial Products
- Shari'ah Compliance and Risk Management
- The Role of Transparency and Fiduciary Duty
Zusammenfassung der Kapitel (Chapter Summaries)
- Chapter 1: Introduction provides a general overview of the topic, introduces the specific research focus on governance risk management and new product development in IFIs, defines the problem statement and research questions, and outlines the structure of the paper.
- Chapter 2: About Islamic Finance delves into the characteristics of Islamic finance and highlights the structural distinctions between Islamic and conventional financial institutions.
- Chapter 3: New Product Development explores the process of NPD in both conventional and Islamic financial institutions, examining different approaches towards new product development.
- Chapter 4: Risk Management introduces the concept of risk management in general and specifically within the context of Islamic financial institutions.
- Chapter 5: Risk Factors examines several key risk factors including operational risk, reputation risk, transparency risk, Shari'ah risk, fiduciary risk, and marketing risk. For each factor, the chapter discusses its relevance in both conventional and Islamic financial institutions, analyzes the countermeasures and best practice guidelines to mitigate such risks.
- Chapter 6: Success Factors of New Financial Products analyzes the contributing factors and characteristics that contribute to the success of conventional and Islamic financial products.
- Chapter 7: Research Framework outlines the research methodology used in the study, including the research planning and execution, and discusses the sample determination process.
- Chapter 8: Research Results presents the findings of the research, focusing on the analysis of the NPD process, governance risk management practices, and success factors in IFIs.
Schlüsselwörter (Keywords)
This research focuses on governance risk management, new product development, Islamic finance, Shari'ah compliance, operational risk, reputation risk, transparency risk, fiduciary risk, marketing risk, and success factors in the context of Islamic financial institutions.
- Quote paper
- Michael Bock (Author), 2010, Governance Risk Management and Financial Product Development in Islamic Financial Institutions, Munich, GRIN Verlag, https://www.grin.com/document/158340
