Hasan, Zubair (2008): Islamic banks:Profit sharing, equity, leverage lure, and credit control. Published in: JKAU: Islamic Economics , Vol. 23, No. 1 (January 2010): pp. 129-146.
Download (224kB) | Preview
This paper deals with three basic issues in Islamic banking: First, how the profit sharing ratios in mudarabah contracts are in principle determined? Second, do the actual sharing ratios result in an equitable division of profit between the banks on the one hand and the depositors on the other? Finally, can the central bank use the profit sharing ratio along with the rate of interest for credit control so as to mitigate leverage lure in a dual banking system? The paper provides a brief explanation as an answer to the first question. The response to the second is negative but is positive to the third. It suggests a policy tool the central banks can possibly use to prevent the sort of credit turmoil as the world is facing today in 2008 because of leverage lure. The tool may also help improve return to investors and thus establish some equity in the distribution of profits.
|Item Type:||MPRA Paper|
|Original Title:||Islamic banks:Profit sharing, equity, leverage lure, and credit control|
|English Title:||Islamic banks:Profit sharing, equity and credit control|
|Keywords:||Islamic banking; Two-tier mudarabah; Profit sharing ratio; Division of profit; Leverage lure|
|Subjects:||D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Zubair Hasan|
|Date Deposited:||25. Apr 2011 07:09|
|Last Modified:||11. May 2015 21:29|
Anwar, Muhammad (1987) Modeling Interest Free Economy: A Study in Macroeconomics and Development, The International Institute of Islamic Thought, Herndon, VA, USA.
Hasan, Zubair (2008) Credit Creation and Control: An Unresolved Issue in Islamic Banking, International Journal of Islamic and Middle Eastern Finance and Management, UK, 1(1): 69-81 (Emerald).
Hasan, Zubair (2002) Mudarabah as a Mode of Financing in Islamic Banking: Theory, Practice, and Problems, Middle East Business and Economic Review 14(2): 41-53.
Hasan, Zubair (1991) The Financial System and Monetary Policy in an Islamic Economy, by Mohsin Khan and Abbas Mirakhor: Comments”, JKAU: Islamic Economics, 3: 85-93.
Hasan, Zubair (1985) “Determination of Profit and Loss Sharing Ratios in Interest-Free Business Finance”, Journal of Research in Islamic Economics, Jeddah, 3(1): 13-27.
INCEIF (August 28, 2008) Panel discussion on Settlement of Islamic Finance and banking Disputes: Issues and solutions, Bank Negara Auditorium, Kuala Lumpur.
Khan, Mohsin and Mirakhor, Abbas (1989) “The Financial System and Monetary Policy in an Islamic Economy, JKAU: Islamic Economics, 1(1): 39-57.
Mokhtar, Shabnam (2008) Risk Absorbent features of a profit sharing investment account, Islamic Financial News (IFN) October 10, pp. 16-17.
Siddiqui, Shamim Ahmad (2008) An Evaluation of Research on Monetary Policy and Stability of the Islamic Economic System, The 7th International Conference in Islamic Economics 1-3 April, (Conference Papers) pp: 235-270.
Siddiqi, M.N. (1978) Ghair soodi bankari (Urdu), Islamic publications Lahore.
The Economist (print edition) (2008): Faith-based finance. September 4.
The New Straits Times Supplement 30 August 2008, P.7.
Times of India (TIO) Sunday, 05 October 2008.
Websites Malaysia Home Loan: Profit Distribution Range of Islamic Banking Products http://www.bnm.gov.my/index.php?ch=174&pg=467&ac=370 Meezan Bank: Karobari Munafa Account Profit calculation and distribution method Profit in profit sharing: TIME RHB Islamic: Investment categories Bank Al Habib Ltd http://www.bankalhabib.com/IB_Declarationofprofit.php Standard Chartered Bank Malaysia: General investment Account Alternative profit sharing ratios Bank Negara Malaysia Islamic Banking: Concepts and products http://www.bnm,gov.my/index.php?ch=174&pg=469&ac=