HAS THE DUBAI FINANCIAL CRISIS LED TO A LOSS OF CONFIDENCE IN THE Essay

HAS THE DUBAI FINANCIAL CRISIS LED TO A LOSS OF CONFIDENCE IN THE ISLAMIC SUKUK - Essay Example Also, Aljarhi (2008) mentions that sukuk can be a good solution to help the sub-prime crisis, but what happened in Dubai with Nakheel’s sukuk perhaps changes all previous concepts because investors have been informed that Nakheel cannot pay off its profit. Research Objectives and Questions Objectives 1 Analyze Islamic financial instruments and research the mechanisms of Nakheel Sukuk 2 Research the factors that caused the Dubai financial crisis 3 Analyze how the Dubai crisis impacted the Sukuk investing in Islamic Financial institutions Questions What factors influenced investors’ confidence in Islamic financial instruments? For this questions to be answered a research and analysis of corner Islamic finance principles as well as performance of Islamic finance institutions as for Islamic instruments effectiveness will be carried out. The data will be majorly based on financial and other statements of Islamic financial institutions. 1 What is Sukuk and their elements that have added to the popularity of Financial investing instruments? 2 What are the mechanisms for Nakheel Sukuk to work effectively in financial markets? Sukuk instrument will be analyzed and against its performance. 3 What were the causes of the Dubai financial crisis? To answer this question an extensive research of data in regard to economic states, economic activities and other factors will be undertaken to learn and analyze events that caused the Dubai financial crisis. 4 What was the role of sukuk in the Dubai financial crisis? Analysis of Nakheel Sukuk in 5 How did the Dubai crisis impact Islamic financing? Analyze the use and performance of Islamic finance in aftermath of the critical times in Islamic finance. Literature Review The literature reviewed in this proposal critiques many writers who have written about Islamic bonds - sukuk. The research aims to show the gap of knowledge concerning confidence in Islamic bonds (sukuk) after the Dubai financial crisis. There are three types of literature that have been discovered: firstly, literature about the causes of the financial crisis which has happened in Dubai; secondly, literature about the impact on sukuk after the Dubai financial crisis; and finally, literature concerning the theory of sukuk which is based on the Islamic financial system. Klomp (2009), in his journal about the significant causes of the banking crisis, says that the absolute important factors that affect directly on a financial crisis are: 1) High credit growth 2) Negative GDP growth 3) High real interest rates. Lewis (2010) has other points in his journal that say that the causes of the financial crisis include individual and cognitive psychology, social influences, psychology used by economists, the good society, and culture and human agency. Rotheli (2010) believes that the causes of the financial crisis can be summarised as risk misperception, policy mistakes, and banks’ bounded rationality. He agrees with Klomp (2009) in a credit cycle in which banks increase their credit supply and stop lending during recessions. That puts banks in a troubled situation in the future, where investors can pay their debts. The financial crisis of Dubai, as mentioned by Bassens, Derudder and Witlox (2010), started in November 2009 when the latest news informed that the largest development agency in Dubai,