Unsustainability of the Regime of Interest-Based Debt Financing

Mirakhor, Abbas; Krichene, Noureddine; Shaukat, Mughees

doi:10.12816/0002747

Cited by 16 publications

(4 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Islamic banks can also apply maturity matching strategies between their asset and liabilities. This could be done by channeling short-term funds to finance short-term projects, while long-term funds can be used to finance longterm projects (Mirakhor et al, 2012). This strategy would allow Islamic banks to match the cash flow timing between their depositors and borrowers.…”

Section: Towards a Beter Liquidity Management In Islamic Bankingmentioning

confidence: 99%

Liquidity Management in Islamic Banking: Issues and Challenges

Rizkiah

2018

TIFBR

View full text Add to dashboard Cite

As a financial intermediation, banking industry has and will always be bound with mismatch maturity problem between asset and liabilities which leads to liquidity issue. This article uses a literature study to observe the current liquidity trend in Islamic banking, the issues faced by the existing Islamic liquidity instruments and ways to overcome it. It is found that the common issues associated with Islamic liquidity instruments are sharia issue, inactivity of its secondary market, key issues on short term sukuk issuance and difficulty of cross-border transactions. A better management on liquidity position and a more robust liquidity infrastructure are needed for a better liquidty management in Islamic banking industry.

show abstract

Section: Towards a Beter Liquidity Management In Islamic Bankingmentioning

confidence: 99%

Liquidity Management in Islamic Banking: Issues and Challenges

Rizkiah

2018

TIFBR

View full text Add to dashboard Cite

show abstract

“…In the 1960s this view was modified to cover circumstances under which human cognitive ability and information availability are so constrained that even subjective assessment of outcomes was not possible. Ambiguity arises under such circumstances where the intensity of "ignorance" can create paralysis in the decision making (Ellsberg, 1961;Erbas andMirakhor, 2007 andShaukat, 2012). The result is an ideal recipe for the occurrence of those events which were deemed as highly improbable or never occurring.…”

Section: The Black Swans and The Non-linear 9 Destructive Debt Dynamicsmentioning

confidence: 99%

Financing Economic Growth with Stability from Islāmic Perspective

Shaukat¹,

Ḥasan²,

Alhabshi³

2014

JIBM

Self Cite

View full text Add to dashboard Cite

Evidence has been mounting that the interest-based debt financing regime is under increasing distress. Evidence also suggests that the financial crises, whatever title they carried -exchange rate crisis or banking crisishave been debt related crises in essence. At present, data suggest that the debt-to-GDP ratio of the richest members of the G-20 is expected to reach 120% mark by 2014. There is also evidence that out of securities worth US$ 200 trillion in the global economy, no less than three-fourth represent interest-based debt. It is difficult to see how this massive debt volume can be validated by the underlying productive capacity of the global economy. This picture becomes more alarming considering the anemic state of global economic growth. There is great uncertainty with regard to interest rates. Although policy-driven interest rates are at near-zero level, there is no assurance that they will not rise as the risk and inflation premia become significant. Hence, a more serious financial crisis may be in the offing and a general collapse of asset prices may occur. This paper argues that the survival of the interest-based debt regime is becoming less tenable, as is the process of financialization that has accompanied the growth of global finance over the last four decades. The above has resulted in an unprecedented increase in economic risks; generating (adverse) nonlinearities in system's behavior. Such a behavior is nothing but a demonstration of the verse, "Allah obliterates ribā …." of the Qur'ān. As a result, the search is on for a paradigm shift towards a less volatile and more resilient financing regime. The paper proposes risk sharing based Islāmic financing as suitable alternative and also demonstrates empirically

show abstract

“…Historically stock prices have kept on rising independent of the real economy, mainly propelled by cheap money, until they reach a crisis point. Mirakhor et al (2012) analysed the severe instability of conventional financial markets and argued that Islamic finance, with its core characteristic of risk sharing, may well be a viable alternative to the present interest-based debt financing regime. …”

Section: The Dynamics Of the Open Economymentioning

confidence: 99%