Article Published In Vol.9 (March-April 2021)

Investment and Financial Product Development in Islamic Banking

Author : Dr.Adil Abdulsalam Ashhoob Abdulsalam

The purpose of this paper is to study of Investment and financial product development in   Islamic banking on investment financing in Islamic. This study employed descriptive survey design. The population of this research consisted of commercial banks offering shariah compliant products. The study used secondary data. Loans advanced to customers were collected. Data was analyzed using Statistical Package for Social Sciences (SPSS) and results were presented in frequency tables and figures. The data was then analyzed in terms of descriptive statistics like frequencies, means and percentages.  The study findings indicated the relationship on how Islamic banks use their investments as loans advanced to customers to finance Islamic banks products. Islamic bank products are the independent variables. The investment is the dependent variable. The products included motor vehicle financing, mortgage financing, asset financing, real estate financing, trade financing and SME financing. The study also indicated that there were various modes of financing used by Islamic banking such as profit and loss sharing. The subject of Islamic financial product development covers various aspects of studies. However, this study aims to analyze the Shariah aspect of Islamic financial product development and discuss the issues arise in the process based on secondary resources. The output of this study should contribute to the advancement of procedure for Islamic financial product development, particularly from the Shariah aspect, as it is the most imperative tool for the Islamic financial institutions to meet their increasing concern about profitability, liquidity, assets value, risk management as well as product acceptability. The study proves that and provides ample spaces for developing Islamic product development, an area in which Islamic financial institutions should focus their resources. The inconsistency can be explained by more investors using other Islamic banking products for financing more than mortgage financing. Overall, it was possible to conclude that the Islamic banking products have spread in the banking sector as all the financial products have been used to a high percentage across the years. The study recommends that the more time may be required for the unique characteristics of Islamic financial instruments to be completely accepted and understood by both bank personnel and customers. It is also recommended that the terms and conditions of acquiring a loan be made more appealing and considerate for more investors to approach the banks for assistance as the Shariah restricts the type of businesses for which Islamic banks can provide financing. For example, they are not permitted to participate in certain prohibited investments or joint venture projects considered to be detrimental to the individual, society, or the environment.

Keywords: Islamic Banking, Financial production and development, Shariah