In modern conventional banking systems, there is an Islamic window which is created by business needed Shania compliant Instruments. When Islamic window started, the Share compliant products offered were typically deposits on the Liability side of the bank, and Islamic trade and financial products were for small and medium enterprises on the asset side of the bank. This research is being done to find out the answers of some related questions.
Like it is believed that for opening an Islamic window, the bank is required to establish the proper firewalls to avoid commingling f Islamic and conventional funds (Chick, & Hess, 2008). It will be beneficial for all MEAN region people, preferring Islamic banking In conventional way. This research alms to examine the viability and the importance of creating an Islamic window from conventional bank. In this research, challenges and opportunities of creating an Islamic window will be discussed with reference to the MEAN region.
Within the MEAN region, AY Rajah Bank has been selected as a case study to be studied. Literature Review Islam Window In Conventional Banking There are a number of increasing financial organizations and conventional banks interested in Islamic finance and investments. The question is whether these conventional banks and institutions would be able to enter this market, or is it possible for them. There are some conditions necessary for conventional institutions to stick to and execute when doing the same (Has, 2005).
Some of the most significant conditions which are required are: complete separation of Islamic fund; establishing a Shari Compliance board; the management dedicated to the Islamic concepts of finance; conservation of the funds of Muslim investors from trespass, raid and negligence and capable of complying with accounting and auditing organizations’ standards for Islamic financial institution or PAYOFF. This subject is of importance and it cannot be over-stated, especially in the light of the expansion of this trend of Islamic banking.
In the recent years, and the oft-repeated claims which are made by customers that their dealings and transaction with the bank completely meet the terms with the share compliance when subjected to Inspection and checking. This proves otherwise. There has not been a huge research seems to have been done on this matter (Main, & Sis, 2008). This is wished that there will be more to come from scholars and academics in regard with specialist research and studies regarding Islamic window in conventional banking.
Requirements regarding Islamic and conventional financial Institutions It Is significant to note before Investigating the actualities of such particular necessities, that Intersect and assistance work has achieved dissimilar amount of forms, concerning Islamic and conventional financial associations in the organization of customer’s reserves (El-Harry, Grains, & Cabal, 2004). This comprises of the following factors: 1)
IF -every institution regarding Islamic institution make available an investment assortment that is reinforced by its expertise of Sharing, but devolves organization of this assortment or portfolio In a peripheral Investment administration which commences to put up with by means of that is laid down by the IF (Chick, & Hess, 2008). On the other hand, this is permissible in Shari in such type of case when the investment manager complies along with the well-defined commandments of Islam and moreover their achieved success is renowned in several existences. ) A traditional financial bank as well as Islamic institution markets vends a product according to the Islamic laws and regulations, which is If’s familiarized and prearranged from side to side its Shari competences(Main, & Sis, 2008). 3) Similarly, a conventional bank or financial institution unties an “Islamic window” on its property and make known to a single asset item for consumption and marketplaces as a product on which Islamic laws have been applied not unlike a fund, or creates an individual Islamic bank or institution.
Furthermore, now days, this is the main subject of debates (Main, & Sis, 2008). On the other hand, some scholars declare that conventional banking is not allowed in Shari, because at some places conventional banks are not doing work according to the Shari. Furthermore, the venture possessions of these conventional banks are actually strained with the help of debarred revenue.
So due to this reason, a question raises that by what means they can invest forbidden funds within the Islamic products? The explanation mentioned by academics or researchers is that these financial administrations or banks solitary focus on manipulating enthusiastic Muslim depositors and as well as in undertaking these practices, unlawfully implicate homeless with the institutions of Islamic financial (El-Harry, Grains, & Cabal, 2004).
Conditions of Shari and Islamic window in conventional banking In order to compare these factors, there is a collection of contemporary scholars or researchers who give permission for this kind of reserves as far as the Shari circumstances settled for them are encountered. Many scholars did not agree about a fact that allocating banking, in obedience along with the experiences of the Shari, in dealings and their sound agreements is unlimited for several members present in that particular organization.
Therefore with this Judgment, it is not restricted absolutely whoever can conduct transactions conferring to requirements of Shari to organize the identical (Has, 2005). In response to the disagreement regarding the source of these reserves is unlawful returns; it can be answered in such a way that there is nothing in order to avoid the funds from being decontaminated, purified, and formerly caption for legalized and allowable methods of business (Has, 2005).
The bank considers fully separated window at a subsidiary premises, when bank feels that the activities of the Islamic window is expanding. Nevertheless, ROR to go to a full subsidiary from a window, the profitability in the lines of Islamic Business must be carefully determined by batiks, as this profit could be greater. Typically, this is because that the overhead windows cost is bear by controlling bank. But it will be required in future for financing by Islamic subsidiary (Shade, et. Al. 2010).
The reliance on Islamic windows must be indicated as a basic platform to move into the industry of Islamic finance, it is a common practice in Western countries and South East Asia as compared to Middle East, where the concept is of establishing separate Islamic banks I. . In Kuwait (Main, & Sis, 2008). Once an Islamic window is operated in the conventional bank and gathers considerable base of customers for Islamic banking, then an Islamic subsidiary may be established or even Islamic Bank (Main, & Sis, 2008).
The bank gets advantage by following these two ways, either from scope’s economies or concentration of expertise and knowledge. According to Has (2004), the bank will be capable of offering a broad range of Shari compliant banking products as compare to alone Islamic window. For instance, maybe it is better prepared for engaging fully in the investment activities as according to Islamic banking, like investment in compliance with Shari and underwriting the SKU issuance, or managing the treasury and financial operations (Abdullah, Hosannas, & Mohammad, 2007).
The benefit of opening a subsidiary over an occupied conversion is that, with the previous, the parent bank may continue servicing its conventional customers, despite the fact that the subsidiary increases its Islamic activities in a wide range in clear split-up from the conventional business. On the other hand, a quiet conversion the principles of Shari thus recovers its trustworthiness.
Even though it does not appear to be an extensive apprehension restricted by the industry, it is quite necessary to mention that particular scholars of Shari have mentioned their problems and as well as issues related to the authenticity of establishing Islamic banks that are actually using resources through conventional (El-Harry, Grains, & Cabal, 2004). The main reason due to which issues are raised is that usually it is not assured that the funds which are usually provided by the branches of parent bank will initiate from the sources of Islamic compliant.
For this reason, the initial subsidiary capital may be unacceptable of undesirable according to the rules of Islamic society (Offer, 2005). Even though a long debate has been started on this topic which is becoming the sources of raising issues, although there are many solutions in order to solve this issue, but one of the proposed solutions is that the permission should be given to the authorities so that they can form a new Islamic institution, but if it agrees in order to make future generous contributions so that the original funds can be purified according to the desires (Nauseas, 2007).
AY-Rajah sank In the world the largest Islamic bank is AY-Rajah Bank which has established its activities in 1957. It has the experience of 50 years in the trade activities as well as the banking activities. The mission of the bank is to rely on the principles of Islamic Shari and because of its vision of forward thinking in banking, it has been growing. Its aim is to hire fresh graduates and Job seekers who enjoy a high level of professional ambition as a sign of encouragement and to give them the opportunity of building a promising future (Offer, 2005).
The mission of the AY Rajah bank is to be most successful and it should be able in admiring for its innovative service, people, genealogy and Shari compliant products, both locally and internationally. The vision of the AY Rajah bank is to be a trust worthy in delivering innovative financial solutions that enhances quality of life everywhere. In 2010, the total asset that has been listed by stock markets of Arab is up to $1. 394 trillion (Shade, et. Al. 2010). With the total asset of about $82. 95 billion, the spot has been taken by CNN (Shade, et. Al. 2010). In the top list of fastest growing banks, Liana Bank is among them with the profit growth of 2,737. 7% (Shade, et. Al. 2010). In total Islamic banking, $293 billion sets reached among 18 banks (Shade, et. Al. 2010). In the Islamic banking, AY-Rajah bank is in top list having $58. 9 billion as its total assets (Shade, et. Al. 2010). In loan $55. 30 billion (Shade, et. Al. 2010). In 2010, across 75 banks in MEAN region has a deposit of total of $979. Billion (Shade, et. Al. 2010). Conversion from a conventional bank to an Islamic bank The conversion from a conventional bank to an Islamic bank similarly offerings some challenges regarding operational side, the several items in the balance sheet of bank will be tangled into interest-bearing dealings. Finance general practitioners have leaned approaches that depend on more than a few Islamic products in order to avoid this issue for explanatory purposes (Nauseas, 2007).
As a final point, permitting Islamic banks, and windows, will intensify the manager inconvenience on the supervisory body. In the meantime, there will at the moment be an innovative type of organization/commotion that needs its own controlling background. In some other words in accumulation to the Basel I or Basel II Capital Consensuses, administrators will have to be acquainted along with the solicitation of the IFS ideals for Islamic banks (Shade, et. L. 2010). If the society wants to build appropriate and reliable resources in order to supervise Islamic banks, then the authority regarding decision-making possibly will for the moment limit the several numbers of Islamic licenses which it gives to the members. Now such type of strategy has been observed in case of Islamic banking, some examples of it are that by means of the Kuwaiti authorities ever since in the year of 2003 (Nauseas, 2007).
At the starting stages, “The Central Bank of Kuwait” (CB) restricted that only three members are permitted to operate the Islamic banks so that the operation could remain under the prosperous control authorities. Furthermore, this policy was accepted for giving permission to the CB in order to develop an adequate amount of competence and aptitude to administer this new-fangled subdivision of the banking system either it is Islamic or conventional, and further initially give permission to the infant Islamic banks to build up to some extent a protected and secluded environment (Cabal, 2005).
On the other hand in certainty, this suggested approach is not entirely unwarranted, but in reality the outcome of the operations and practices of such type of reliable firms [Islamic windows]. Each and every of the monetary products that are the similarly the subject matter of dispute surrounded by Muslim scholars, and actually which are regarding assessment and inspection, which have been made believe with the help of Islamic Windows (Has, 2004).
Supervisory establishment in case of Islamic banking According to Abdullah, Hosannas, & Mohammad (2007), the supervisory establishment is also a well-known in order to take part in an influential and as well as vital developmental role, and the main reason is that they can put some critical effects on the degree of success and achievements regarding Islamic banking, furthermore it is inverted into a conventional system (Sol, 2007).
Due to this in this way, the responsibility of the administrator control is not only to assurance financial and as well as profitable strength, other than also to promote a surroundings wherever Islamic banking be capable to propose a suitable reaction to consumer or in the other words the members of that particular Islamic bank, because the costumer show their attention towards Islamic products (Offer, 2005).
This is not good to say that dictatorial compensation should be specified to Islamic institutions, but somewhat a early stages of the development, several Islamic transactions will not most probably descend into illegal voids and accordingly it may be acceptable by the obtainable illegal framework, or in some other words it might be observed along with reserve through the common public (Imam, & Spark, 2010).
Several clients of Islamic banking consider that conventional banks are concerned in immoral from an Islamic Shari point of view -economic activity, as well as usury, and financing activities that are strictly not allowable in the religion of Islam. They accept as true that their lath, by the use of the Islamic windows of conventional banks, might be second- hand to economics such actions, for the reason that the separation which is between the conventional bank and the Islamic window is not an authentic and existent one.
At the end, it must say that this explains the unwillingness that the observer in the present day from abundant clients of Islamic banking in order to deal with Islamic windows and as well as their financial and economic products, more than ever when there is a private Islamic bank obtainable as an unconventional. Islamic Window in Conventional Banking in MEAN Region In recent years, it has been seen that the mostly of the Islamic institution are having their focus on their expansion in the international foot prints.
In the Middle East and North Africa (MEAN) countries the Islamic finance has now become an essential element in their societies in the gaining ground of the financial landscape and in the development agendas in the region as well as also in the individual countries. The Islamic window in the conventional bank has been considered as a growing business that caters the financial needs of the people without disagreeing or conflicting the social values and religious beliefs.
The countries which have witnessed the commencement of Islamic Banking operation includes countries of Europe, North America and some parts of Asia these services are offered through the creation of Islamic windows at the existing conventional banking system (Madam, & Madam, 2004). In these countries the regulated bodies plays a role in facilitating a conductive market environment for the Islamic products. MEAN has been considered as the widely acknowledged to be at the forefront in Islamic finance.
In MEAN, the success of industries is due to the importance of strong regulatory support in the building of Islamic windows in the conventional banking system. In the MEAN region in terms of banking, the situation has been changed since 2000 as it offers the more competitive products and shows increased development in terms of specific Islamic financial regulation that enables the dynamic growth of the industry (Cabal, 2005).
In the MEAN region, the government of countries Bahrain, Pakistan, and Malaysia plays a significant role in terms of supporting the development of strong Islamic finance system in terms of conducting a Islamic window in conventional banks. In the MEAN egging the financial institution that runs the Islamic windows in the convention banking system may include Citibank, Deutsche Bank HASH etc has played an essential role in enhancing coverage by providing new and innovative products (Imam, & Spark, 2010).
The Islamic window in conventional banking system makes the financial system to be financially stronger and also makes it less risky. In MEAN region creating of Islamic window in the conventional banking sows greater advantage as it benefits especially in the productivity and it gives the people a introduced the necessary regulatory changes which has been making Islamic window n the conventional banking system by making Islamic finance possible and more efficient.
Because of the growing Muslim population in the MEAN region has been considered as a primary factor for the success of Islamic finance as it is in line with the principles of Shari that plays a significant role in defining the general lifestyle. The Islamic window in the conventional bank is growing widely as it helps in overcoming the barriers of religion and faith and it also makes the Islamic banking products more attractive as it gives the appeal of profit loss sharing (Imam, & Spark, 2010).
The viability and the importance of creating an Islamic window from conventional bank Islamic window in conventional banking can be described as a separate department within a conventional bank through which a person regulates his business by employing only Shari compatible instruments. The bank establishes appropriate firewalls to avoid intermingle or merging of the funds of both the conventional and Islamic system.
An Islamic Window may offer its products and services through conventional branches or dedicated Islamic branches of the conventional bank Within a conventional bank the Islamic window is conducted ender the supervision of strict guidance given by an independent team of Shari Advisory Board which is mainly comprised of the Muslim Scholars who have known reputation, credibility and social recognition who helps in developing and providing the Islamic financial products to those clients who demanded such products (Sol, 2007).
The services that have been offered by Islamic window in conventional banking may differ from bank to bank as some bank offers full Islamic banking services for the clients where as other offers only specific services which may only include only specific services such as Islamic investment and financing (Cabal, & Lineally, 2002). The conventional banks take advantage of opening the Islamic windows in their existing branch network through which they can the potential new clients.
An increasing numbers of conventional banks around the world are considering the possibility of providing the services Islamic financial products through conducting Islamic windows. The activities of Islamic window are expanding to a greater extent the conventional bank may consider in resulting a fully segregating the window in to a separate subsidiary (Madam, & Madam, 2004).
In conventional banking, the Islamic window is considered as a support division rather Han an operational division as their work is only related to the developing Islamic banking services in cooperation of various other departments of the banks. The Islamic window is of immense importance as the customers are showing great interest in such types of services which may result the growth of Islamic window to greater extent in resulting a bank to become a full Islamic bank in itself (Rash, & Hosannas, 2009).
This may occur due to two reasons firstly it can be because of the demands place on the bank and secondly it can be due to the success of Islamic window resulting in the conventional banks. The Islamic window is also essential managing the relationship between the bank and the authorities of the Islamic Shari relating to the sanction and monitoring services (Pollard, & Gamers, 2007).
In MEAN, the benefits of allowing a Islamic window in conventional banking helps in breaking the monopoly held by the Islamic banks on the industry that results in the creates the option available to Islamic banking customers, Hence this will lead the accelerated development of the services offered by the Islamic banking industry and when the conventional banks conduct the Islamic window by providing Islamic Nanking services will result a boom for them (Useful, 2007).
The Islamic windows in conventional banking plays a significant role in the development of Islamic banking & finance as they are by and large less harsh and rigorous in implementing strict requirements of Shari. In conventional banking the Islamic window is essential for the Islamic investment with its governing Shari rulings and plan is measured as an open area for all those people who are hoping to give it a try and it should be provided that they approach it from its front door (Abdullah, Hosannas, & Mohammad, 2007).
The growth of Islamic window in conventional banking in MEAN region over the past several years continues in generating the optimism for the future of Islamic banking. Since the competition ramps up, and early warning signs show growth slowing down, Islamic financial institutions have plenty of opportunities of the work to do whereas the strategy is to focusing on distinct segment of positioning and competing with the conventional banks head-on, or a blend of both, sustaining growth will require most of the Islamic windows in conventional banking to achieve a greater efficiency across the value chain (Pollard, & Gamers, 2007).
It is considered that those conventional banks having Islamic windows are in a stronger position to capture untapped market opportunities and master the changing dynamics of their industry (Rash, & Hosannas, 2009). When the conventional bank results in operating an Islamic window for a specific period of time and within this shorter period it is able to gather the considerable and enormous customer base for the Islamic activities, therefore results in a conventional bank to decide to establish an Islamic subsidiary or even fully convert it to a full-fledged Islamic bank. The example can be the AY-Rajah Bank.
If the conventional bank follows these two routes it will show a wide range of benefit or profit in the economies of scope and concentration of knowledge and expertise (Mali, Caisson, & Napier, 2006). This will make the bank to offer under a single roof a wider range of the Shari compliant banking products than through the Islamic window alone. The existence of the policies and the operational procedures for the banks Islamic windows and the Islamic services that have been offered by the bank are different from the procedures of the conventional Nanking system (Cabal, & Lineally, 2002).
According to Mali, Caisson, & Napier (2006), the advantage of doing the full conversion is that with the former bank it may continue its services by providing to the conventional customers awhile from the subsidiary it is able to expand its Islamic activities in a clear separation from the conventional banking business. Whereas on the other hand a full conversion helps the banks firm commitment to operate under the principles of Shari thus able to enhance its credibility.
Thus the Islamic windows in conventional banking will results n increasing the supervisory burden on the regulator since it will now require a new type of activity that requires its own regulatory frame work (Useful, 2007). Proposed Methodology The scientific research mission is to increase the understanding of a process either it that eventually able to solve the problems that has been occurred within the society in one way or another way. The purpose of scientific research is rises from the essentialness of man in order to solve the most critical day to day life problems.
This research has been conducted in order to know the nature and transformation of the rounding’s that meet with the need and interest of the people. The scientific research is very creative and innovative by nature that requires the application of least scientific knowledge. In the process of research the part of methodology (Sheikh, 2012). By implementing the smallest scientific knowledge the type of scientific research is original and ground-breaking.
The method of doing the research is the science that shows people to discourse certain procedure professionally and efficiently to accomplish the outcomes anticipated and to fulfill the mission to give the strategy in the process. Research Approach The individuals use is extremely necessary to see the extent of study to be carried into result before making a decision to carry out the analysis, divide the categories of preliminary studies, descriptive, reciprocity and informative. Preliminary studies are accustomed for assembling the bottom and at on the daily basis precede the opposite 3 varieties (Sheikh, 2012).
So descriptive and reciprocity studies are overall analysis primarily based, that successively give info to hold out informative studies that initiates to produce a way of knowing things and are extremely structured. Qualitative Phase According to this research, conclusion of qualitative phase is reliant on in-depth examination of AY Rajah Bank. Additionally tentative in nature, foundation for the quantitative phase is based upon qualitative phase; by which, importance of creating Islamic window in conventional bank will be measured objectively.
Qualitative research brings out apprehension of subjective factors as well as behaviors of respondents (Sheikh, 2012). Quantitative Phase According to this study the general values quantification will be formed by MEAN region will be accumulate on large level before it’s linked with the amount of economic output assessing importance of Islamic window. In the quantitative research phase by establishing a plan to form the connection between two types of variables which includes dependent and independent or it can be an outcome variable in a population (Hopkins, 2008). Data Collection In any research, data Collection is a vital feature.
Quantitative and qualitative data methods are used for the data collection methods for influence assessment differs beside a range. Data can be quantitative and qualitative. Data sources are approximately classified into primary and secondary data. Primary data is the data that has been gathered from first-hand-experience. It is the data which has not been printed yet (Prefers, et. Al. 2007). This type of data collection method is more dependable, accurate and impartial. Primary data has not been altered or improved by human beings, so its strength is better than the other source of collecting data, I. . Secondary data. The data which has been collected from a source that has been published in any form is known as the secondary data. The review of literature in verily research is on the basis of secondary data. Secondary data is mostly gathered room books, Journals, online sources, libraries, etc. Secondary data frequently eagerly out to be much easier (Prefers, et. Al. 2007). The approach of analysis and consideration allow a traditional activity for a systematic ordering, which helps in performing the achievement of the objectives.
Development of this monograph is so important, which deals with the procedures of generating a data in a general sense. According to this monograph, main methods of data collection are only broadly outlining the gains and loss of evaluating a little about the instruments that has been operated and the types of responses (Sheikh, 2012). In this research study, the method which will be used to gather data is mostly primary sources. All the main data will be gathered by using survey method in the primary data collection method.
In surveys, people from MEAN region will be asked to fill the surveys to get the answers of all research questions. This research has mainly used primary data as its significance cannot be ignored. This research will not be Just done on the basis of secondary data, as these researches are not those much reliable. Data will be analyses with the help of descriptive method, by using tables, charts and graphs. Questionnaire The method in which an instrument or printed form is used, planned to acquire solution for the resulting problems in under study and that is devoted or consulted fills itself.
The questionnaire can be enforced single people or the community being present dependable researcher or collect information, or ample may be mailed to selected recipients. Several reasons of using questionnaire in this research are its cost comparatively low, its capability to present information on a greater number of people without taking a long time and the ease of obtaining, quantify, analyze and understand the information (Sheikh, 2012). Sampling Sampling is a shortcut procedure for examining a whole population. It is not always possible to do research on the whole population.
Due to this sampling is done. In this, data is collected on a small part of the whole population, and then it is used to notify what the whole picture is like. It is very important to select a suitable sampling strategy to be used for getting a descriptive and statistically effective sample of the whole population. Sampling would be done by using convenience sampling within non-probability one. Customers of Islamic banking within MEAN region will be asked to fill the questionnaire. Almost 100 people will be asked to fill the questionnaire.
