A stable and sound financial system plays a critical role in mediating funds from surplus units to investors, making it a prerequisite for economic development. Financial intermediaries have been vulnerable to adverse changes in the local and global economy and experienced frequent bubble-and-bust episodes historically. Analyses of financial crises reveal that the incentive created by neo-liberal financial principles is inconsistent with stable financial systems, and viable solutions require structuring institutions in a way that incentives are well aligned with the fundamental principles of financial systems. By drawing on the theoretical framework of the financial restraint model, this book analyses financial sectors’ rents or bank rents and their effects on banks’ performance and stability, and presents evidence on the relationship between rent and incentive through case studies of both developed and developing countries.

Indonesia is the most populous Muslim country in the world. Taking into account also its endowment and potential economic resources, the Islamic banking industry in Indonesia was expected to take on an important role in facilitating more financial resources and to contribute to the internationalization of the Islamic mode of financing particularly in the Asia-Pacific region. However, the reality is far from the expectation. This book aims to clarify the causes and fundamental constraints leading to the extraordinarily low level of Indonesia’s Islamic financial deepening. 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.

The phenomenal growth of Islamic finance in the last few decades has been accompanied by a host of interesting questions and challenges. One of the critical challenges is how Islamic financial institutions can be motivated to participate in the 'equity-like' profit-and-loss sharing (PLS) contracts. It is observed that Islamic banks are reluctant to participate in the pure PLS scheme which is manifested by the rising concentration of investment on murabaha or mark-up financing. This phenomenon has been the hotbed of academic criticism on the contemporary practice of Islamic banking. This book explains the 'murabaha syndrome' in light of the incentive provided by the current institutional framework and what are the changes required in the governance structure to mend this anomaly.

Pension fund benefits are crucial for pensioners’ welfare and pension fund savings have accumulated to huge amounts, covering a major part of world-wide institutional investments. However, the literature on pension fund economics and finance is rather limited, caused, in part, to limited data availability. This book contributes to this literature and focuses on three important areas. The first is pension fund (in)efficiency, which has a huge impact on final benefits, particularly when annual spoilage accumulates over a lifetime. Scale economies, pension plans complexity and alternative pension saving plans are important issues. The second area is investment behavior and risk-taking. A key question refers to the allocation of investments over high risk/high return and relatively safe assets. Bikker investigates whether pension funds follow the life-cycle hypothesis: more risk and return for pension funds with young participants. Many pension funds are rather limited in size, which may raise the question how financially sophisticated the pension fund decision makers are: rather professionals or closer to unskilled private persons? The third field concerns two regulation issues. How do pension fund respond to shocks such as unexpected investment returns or changes in life expectancy? What are the welfare implications to the beneficiary for different methods of securing pension funding: solvency requirements, a pension guarantee fund, or sponsor support? This groundbreaking book will challenge the way pension fund economics is thought about and practiced.

Central banking independence is a crucial factor for sustainable economic development of multiple countries. The multiple components for such systems, however, makes it difficult to evaluate how the success of such a system may be determined. Monetary Policies and Independence of the Central Banks in E7 Countries is an essential reference source that evaluates the effectiveness of monetary policies and the independence of central banks to contribute to economic development within seven emerging economies (E7): Brazil, China, India, Indonesia, Mexico, Russia, and Turkey. Featuring research on topics such as global economics, independent banking, and foreign investing, this book is ideally designed for financial analysts, economists, government officials, policymakers, researchers, academicians, industry professionals, and students seeking coverage on improved econometric methods for effective financial systems.

In response to the credit crunch during the global financial crisis of 2007–2008, many have called for the re-establishment of regional banks in the UK and elsewhere. In this context, Germany’s regional banking system, with its more than 1,400 small and regional savings banks and cooperative banks, is viewed as a role model in the financing of small and medium-sized enterprises (SMEs). However, in line with the ‘death of distance’ debate, the universal application of ICT-based scoring and rating systems potentially obviates the necessity for proximity to reduce information asymmetries between banks and SMEs, calling into question the key advantage of regional banks. Utilising novel ethnographic findings from full-time participant observation and interviews, this book presents intimate insights into regional savings banks and compares their SME lending practices with large, nationwide-operating commercial banks in Germany. The ethnographic insights are contextualised by concise description of the three-pillar German banking system, covering bank regulation, structural and geographical developments, and enterprise finance. Furthermore, the book advances an original theoretical approach that combines classical banking theories with insights from social studies of finance on the (ontological) foundation of new realism. Ethnographic findings reveal varying distances of credit granting depending on the rating results, i.e. large banks allocate considerable credit-granting authority to local staff and therefore challenge the proximity advantages of regional banks. Nevertheless, by presenting case studies of lending to SMEs, the book demonstrates the ability of regional banks to capitalise on proximity when screening and monitoring financially distressed SMEs and explains why the suggestion that ICT can substitute for proximity in SME lending has to be rejected.

The International Economic Association was foremost in reviving professional economists' concern with institutions and their impact in publications such as Economic Institutions in a Dynamic Society (1989). This volume concentrates on the states whose development has been characterised as the 'East Asian miracle' in the light of the performance of other economies starting from similarly low income levels, including India, China, African states - especially Nigeria - and Latin American countries including Brazil. This comprehensive comparative survey in economic history demonstrates the external shocks and interacting domestic forces which constituted the growth dynamic. Nobel Laureates Kenneth Arrow and Douglass North and past President of the IEA the late Michael Bruno are among the thirty-four highly distinguished specialist contributors.

In the collective psyche, a financier is a capitalist. In managerial capitalism, the notion of the ‘manager’ emerged, and the role of the manager was distinct from the role of the ‘owner’. Financial capitalism is similarly underpinned by financiers who are not the holders of the financial assets they buy, sell, trade or advise upon. Finance at Work explores the world of financiers, be they finance-oriented CEOs, CFOs, financial journalists, mergers and acquisitions’ advisors or wealth managers. Part I investigates the professional trajectories of members of corporate boards and financialisation as the dissemination of financial logic outside its primary ‘iron cage’; Part II responds by studying financiers at work within financial occupations or financial operations involving external actors; while Part III pursues the issue of financial boundaries by seeking out the way financial logic crosses these boundaries. Part IV takes back the hypothesis of differentiations within finance presented in Part I, and analyses the internal boundaries of asset management, wealth management and leveraged buyout (LBO) acquisitions. This book is essential reading for researchers and academics within the field of finance who aim to understand the ‘spread of finance’ in contemporary societies.

The ongoing digital transformation is shaping the Islamic mode of financial intermediation and the impact on the faith-based financial mode has been multifaceted. This has raised a host of interesting questions: what is the degree of penetration of Islamic finance in the fintech industry? Are Islamic financial institutions (IFIs) or banks ready to embrace fintech? Is fintech an enabler or barrier to achieve the intended purpose of Islamic finance? Will technology narrow the division between Islamic and conventional finance in the future? These are existential questions for Islamic finance and the book endeavors to examine the impact of financial technology on the industry. The book assesses various fintech business models and how they could be a threat or an opportunity. It also examines whether fintech provides IFIs an edge to serve clients following the Shariah norms and how the adoption of fintech in the Islamic mode is required for meeting the maqasid Al Shariah. The book discusses applicability of fintech like blockchain, digital currency, big data, and AI to different branches of Islamic finance. This book will interest students, analysts, policymakers, and regulators who are working on Islamic finance, financial economics, Islamic economics, and development finance.

The role of government in East Asian economic development has been a continuous issue. Two competing views have shaped enquiries into the source of the rapid growth high-performing Asian economies and attempts to derive a general lesson for other developing economies: the market-friendly view, according to which government intervenes little in the market, and the developmental state view, in which it governs the market. What these views share in common is a conception of market and government as alternative mechanisms for resource allocation. They are distinct only in their judgement of the extent to which market failures have been, and ought to be, remedied by direct government intervention. This collection of essays suggests a breakthrough, third view: the market-enhancing view. Instead of viewing government and the market as mutually exclusive substitutes, it examines the capacity of government policy to facilitate or complement private sector co-ordination. The book starts from the premise that private sector institutions have important comparative advantages over government, in particular in their ability to process information available on site. At the same time, it recognizes that the capabilities of the private sector are more limited in developing economies. The market-enhancing view thus stresses the mechanisms whereby government policy is directed at improving the ability of the private sector to solve co-ordination problems and overcome other market imperfections. In presenting the market-enhancing view, the book recognizes the wide diversity of the roles of government across various East Asian economies-including Japan, Korea, Hong Kong, Malaysia, and China-and its path-dependant and developmental stage nature.