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Investigation of the expected loss of sharia credit instruments in global Islamic banks

Shahari, Farihana and Zakaria, Roza Hazli and Rahman, Md. Saifur (2015) Investigation of the expected loss of sharia credit instruments in global Islamic banks. International Journal of Managerial Finance, 11 (4). pp. 503-512. ISSN 1743-9132

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Abstract

The purpose of this paper is to investigate the expected outcomes, both of positive and negative returns occurred by shariá credit instruments in global Islamic banks. The annual panel data from 2005 to 2012 is collected from 40 Islamic banks from 12 countries and value at risk (VaR) technique is employed in the investigation process. The findings of this study indicate several outcomes: first, majority of Islamic banks use debt-based financing (DBF) and avoid asset-based financing (ABF) due to the lack of secured rate of fixed returns and collateral. Second, the ABF financing shows the positive returns. Third, interestingly, DBF financing faces higher credit risk compared to ABF even DBF secures its financing through tight policy implementation. Finally, this paper comes up with policy recommendations for the further reduction of credit risks and improvement of bankers’ confidence level in implementing the ABF financing policy.

Item Type: Article (Journal)
Additional Information: 7791/52570
Uncontrolled Keywords: Asset-based financing (ABF), Credit risks and sharia credit instruments, Islamic banks, Debt-based financing (DBF)
Subjects: H Social Sciences > HG Finance > HG1501 Banking
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Kulliyyah of Economics and Management Sciences > Department of Finance
Depositing User: Farihana Shahari
Date Deposited: 10 Nov 2016 08:51
Last Modified: 10 Nov 2016 08:51
URI: http://irep.iium.edu.my/id/eprint/52570

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