Bringing Islamic banks closer to the ideal: from debt-based financing to equity-based modes

Sadique, Muhammad Abdurrahman (2015) Bringing Islamic banks closer to the ideal: from debt-based financing to equity-based modes. In: Kuala Lumpur International Business, Economics and Law Conference 7 (KLIBEL 2015), 18th-19th April 2015, Kuala Lumpur.

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Abstract

Islamic banks in general employ murabahah-based structures to finance local and foreign trade transactions, albeit with a considerable level of inconvenience. Practical involvement in the field of Islamic banking would reveal that current equity structures, where implemented, comprise various areas that call for a reassessment in the light of shari‘ah principles. Many equity formats in vogue embody features that inhibit them from optimum performance. Profit and loss distribution in equity ventures is a fundamental issue that determines the outcome of Islamic equity financing modes and the extent of influence they could exert on directing the flow of wealth. In some variations of equity investment adopted by Islamic banks, the profit loss sharing mechanism is found to be correlated to the period of the facility in some manner, through ensuring an association between the profit ratio and the duration of investment. The mechanism employed by Islamic banks in deciding the ratio of profit sharing may require further refinement. Structures employed for project financing through equity participation could be further enhanced to reflect the essential aspects that differentiate them from interest-based modes.

Item Type:	Conference or Workshop Item (Plenary Papers)
Additional Information:	5640/45295
Uncontrolled Keywords:	equity financing, debt financing, Islamic commercial law, Islamic finance
Subjects:	H Social Sciences > HG Finance H Social Sciences > HG Finance > HG1501 Banking K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP173.25 Islamic law and other disciplines or subjects K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP490 Furūʻ al-fiqh. Substantive law. Branches of law. K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP490 Furūʻ al-fiqh. Substantive law. Branches of law. > KBP639 Muʻāmalāt
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Ahmad Ibrahim Kulliyyah of Laws > Department of Islamic Law
Depositing User:	Dr Muhammad Abdurrahman Sadique
Date Deposited:	16 Nov 2015 11:24
Last Modified:	05 Mar 2018 15:04
URI:	http://irep.iium.edu.my/id/eprint/45295

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