Achieving the objective of the interest-free economy is critical for Islamic countries because interest is categorically prohibited in Islam. However, this objective has proved elusive partly because Islamic countries have to work within the capitalistic framework which crucially depends on interest to equilibrate debt and credit. Forces of globalization have made it hard for a country to exist in isolation in a world dominated by the capitalistic system. In this study, we have found that the legislative measures undertaken in Iran and Pakistan to outlaw Riba have not proved effective and have also opened backdoor to Riba . We have argued that a vibrant growth in the Islamic financial system is not enough per se unless some of the instruments at the disposal of Islamic financial institutions (IFIs) such as Murabaha and Ijarah are further reviewed to ensure strict compliance with the standards of Shariah. More importantly, the operations of the IFIs have to embody the spirit at the root of injunctions prohibiting Riba . It is argued that some space within the capitalistic system can be expeditiously used probationally such as maintaining zero interest rates and pursuing policy of interest free loans. However, achieving the objective of interest-free economy is not possible unless we develop effective institutions. We also highlighted the critical role of moral commitment to achieve the objective of Riba-free economy. Using data for the OIC countries, we found that the strong commitment at the mass level required to establish the vibrant Islamic economic and financial institutions is lacking.

Keywords: Interest-free economy, Zero-interest rate, Islamic Financial Institutions (IFIs).

The main focus of the research was finding out the extent to which banks were utilizing risk management practices in managing different risks and assessing management of risk measures of Islamic banks of Pakistan. This was an empirical research study which employed quantitative research methods. Secondary data of five banks was collected by using content analysis through annual reports from 2009 to 2014. Data was analyzed by using descriptive statistics and regression analysis. The dependent variable was liquidity risk and age, profitability, leverage, tangibility and size were used as independent variable. It was found that liquidity risk was mainly defined by leverage, tangibility and age. However, it showed a statistically insignificant relationship between size, profitability and liquidity risk. This research will be useful for Islamic banks, conventional banks, practitioners as well as from academic point of view.

Key words: Islamic banks, Risk, Liquidity

Shari'ah compliance is a cardinal principle in Islamic finance which must be observed by Islamic financialinstitutions in Malaysia and other emerging markets as it provides the original basis (or raison d'etre) forestablishing a faith-based and commercially viable alternative financial system. In fact, it is this unique anddistinctive ethico-religious feature that distinguishes Islamic finance from conventional finance. Theimposition of this additional requirement makes it necessary for Islamic financial service providers to operateaccording to Shari'ah [the law and objectives of the Shari'ah (maqasid al-Shari'ah)]. Prominence should notonly be given to legality of transactions, financial performances and profitability; these technical andcommercial parameters must also be enhanced by realization of the maqasid of public good. To gaugewhether IFIs are complying with Shari'ah, the compliance itself must be measured from end- to-end to coverthe whole spectrum of activities: from product development, operational process, human resourcemanagement, information technology application systems, to dispute resolution mechanisms. The integratedand comprehensive approach of Malaysia comes highly recommended as it will reflect the holistic worldviewof Islam. Protection of consumers, environmental protection, securing and realization of public benefit,should therefore form the central theme of Shari'ah compliant finance. When applied to banks and takafuloperations, it necessitates the business organisations to fine-tune Shari'ah compliance to a more humancentric tenor or orientation in its rule application, whilst achieving macro-economic goals of economicprosperity and social justice. The risk of Shari'ah non-compliances can be costly to the IFIs as it will lead toinvalidation of contract resulting in non-halal income and possibility of legal suits from aggrieved customersand harming industry's credibility. This paper highlights the legal and regulatory measures undertaken byMalaysia to fine-tune Shariah compliance. It gives greater focus to the general issues relating to Shari'ahcompliance within the Takaful industry and the challenges of control. Recommendations are made forstakeholders to operationalize the Maqasid al-Shari'ah through the inclusion of an ethical and moralparameter to complement legal compliance, and preparing the industry to move towards a Shariah-basedoperating environment.

Key words: Shari'ah compliance, maqasid al-Shari'ah, fine-tuning, human-centric, ethical parameters, protection of consumers, Islamic Financial Services Act 2013

Since the introduction of Islamic Banking in the international financial paradigm extensive research has been under attention with the purpose of identifying the factors that influence the adoption of Islamic banking. With the objective of identifying the factors that influence the selection of Islamic Banking in Pakistan, this study investigates the impact that factors like attitude, social and religious influence, governmental support and pricing have in deciding whether to go for conventional banking or Islamic banking. The sample comprised of 250 respondents and collected from customers of Islamic banks by using a structured questionnaire. The study used SPSS to analyze the data using reliability analysis, factor analysis, descriptive analysis, and correlation and regression analysis. The results suggest that attitude, social and religious influence and government support to be significant factors in inclining a customer towards Islamic banking.

The unprecedented amount of losses born by the banking industry during the crisis has brought into spotlight the issues concerning regulatory oversight, risk management and disclosure. However, Islamic banking industry remain immunized against the negative effects of crisis and have shown resilience.This study examines the relationship between multi-layer corporate governance model of Islamic banking and their performance. The sample size consists of 17 Islamic banks, 5 from Pakistan and 12 from Malaysia for the period 2009-2015. The results of the study show that Shari'ah supervisory board (SSB) size exerts significant and negative effect on value of firm. University education of Shari'ah board found positive and significant. While, factors related to board structure were found statistically insignificant, which could indicate that in case of Islamic banks' performance Shari'ah supervision related corporate governance factors are the significant determinants. To check the impact of supervisory/advisory role of SSB, sample is divided in two parts; the results of advisory were almost similar as of overall sample. However, the results of supervisory role of SSB worsen the results. Few important policy implications have been derived from results (i) Smaller sized SSB having knowledge of finance and accounting increase the value of firm (ii) strict supervisory role of SSB reduce the performance since there is a trade-off between profit and strict ethical compliance.

Keywords: Corporate governance, Shari'ah supervisory board, board structure, bank performance

Over the last three decades in Pakistan, the Islamic Financial Services have evolved as a primecomponent of the financial sector by growning in size and diversity. Within the universe of Islamic financial industry, the Modarabas have remained pioneer Islamic Financial Institutions in Pakistan. The development of Modaraba as a Shariah compliant mode of business and its transformation into an institutional framework with proper legislation, regulatory and monitoring structure, and operating guidelines is a sole feature of Pakistani Islamic Financial market. In fact, Modarabas as Islamic financial institutions are the forerunnersin flourishingthe Islamic financial sector of Pakistan.The the Securities and Exchange Commission of Pakistan (SECP) recently introduced reforms and strengthened the regulatory framework of Modaraba sector that enlarged the Modaraba sector asset base to PKR 41 billion (US$ 380.0 million) by the end of December 2016. At present,the sector has low level of leverage, growing quality assets and healthy dividend payouts.The progress in the sector is largely due to strengthening of governing laws particularly the guidelines for Sharia compliance issued by the Registrar Modaraba. Effective monitoring and strong surveillance by the office of Registrar Modaraba has also supported a lot for better performance of the sector and enhancement of confidence of investors. At present 25 Modarabas are operating in Pakistan's financial market as listed entities and are engaged in various Shariah compliant business activities.In the last three decades, Modarabas emerged as a main segment within the sector of non-banking Islamic financial institutions. It is a viable and reliable source of medium term financing with an opportunity to earn Riba-free income. Recently, many good corporate entities have made their debuts into Modaraba business and the market experts foresee a significant number of new entrants in the sector which will further strengthen this segment and find their way to set new milestones in coming years. The following article covers current status and progress of the sector, its challenges and future business opportunities.