Kuala Lumpur, 7 Dec 2011: The ‘Supervisory regulatory and capital adequacy implications of profit sharing investment accounts in Islamic finance’ article co-authored by Prof Datuk Rifaat Ahmed Abdel Kamel, who is the Adjunct Research Professor at INCEIF, has won an award by an international publishing house.
The 2010 article, published in the Journal of Islamic Accounting and Business Research, was judged an ‘Outstanding Paper’ by the Emerald Literati Network 2011 Awards for Excellence, an annual award given by the UK-based Emerald.
Prof Rifaat receiving his award.
Emerald Business Manager Mr Amex Tan, presented Prof Rifaat with the winning certificate at a ceremony held at INCEIF today. The event was witnessed by INCEIF senior management and Faculty members, as well as media representatives.
Emerald Literati Network comprises authors, editors, and reviewers, and facilitates the development of journals and books by ensuring internationality, diversity, support of scholarly research, and by encouraging applied research.
With more than 100,000 authors worldwide, the Emerald Literati Network continues to be in a class of its own. Emerald runs the awards to celebrate the achievement of the authors and highlight the outstanding quality of the papers published in its journals.
The Outstanding Papers form the backbone of the awards. Each journal published by Emerald is invited to select a winner of the ‘Outstanding Paper’ award and up to three ‘Highly Commended’ awards from the previous year’s volume. As these are chosen following consultation amongst the journal’s editorial team, many of whom are eminent academics or managers, the winning authors would know that their paper was one of the most impressive pieces of work the team would have seen throughout last year.
INCEIF President & CEO, Mr Daud Vicary Abdullah said: “As a university which strives to be the knowledge leader in Islamic finance, we are certainly proud of this recognition for an academic journal written by one of our Faculty members.
“As part of our thought leadership endeavour, we continue to encourage our Faculty members and students to submit articles for internationally renowned journals and embark on research proposals which are of value to the industry.
“This academic article by Prof Rifaat is certainly one of the works which INCEIF is proud to be associated with,” said Mr Daud.
Prof Rifaat’s co-authored paper aims are: “first, to draw attention to the issues of displaced commercial risk (DCR) which arise as a result of the risk characteristics of profit-sharing investment accounts (PSIA), the main source of funding of Islamic banks in most jurisdictions; and, second, to present a value-at-risk approach to the estimation of DCR and the associated adjustments in capital requirements.
The paper’s findings are, first, that the characteristics of PSIA can vary from being a deposit like product (fixed return, capital certain, all risks borne by shareholders) to an investment product (variable return, bearing the risk of losses in underlying investments), depending upon the extent to which the balance sheet risks get shifted (“displaced”) from investment account holders to shareholders through various techniques available to Islamic banks’ management. Second, the paper finds that this DCR has a major impact on Islamic bank’s economic and regulatory capital requirements, asset-liability management, and product pricing. Finally, it proposes an econometric approach to estimating DCR but report that individual Islamic banks generally lack the data needed to apply this approach, in the absence of which panel data for a population of Islamic banks may be used to estimate DCR for that population.
His article drew on his vast experience at the two organisations where he played an instrumental role in creating and served as (their inaugural) Secretary General – the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).
The IFSB issues prudential standards and guidelines for the Islamic financial services industry that are based on the standards and guidelines issued by international prudential standard-setting bodies. “The implementation of these standards should enhance the financial stability of the countries that host Islamic banks,” Prof Rifaat added.