Alternative Pricing Mechanisms for Islamic Financial Instruments: Economic Perspective

Saba, Irum and Alsayyed, Nidal (2010): Alternative Pricing Mechanisms for Islamic Financial Instruments: Economic Perspective.

Abstract

The Islamic banking industry has been trying for the last two decades to extend its outreach to expand its operation business and services in a comparable zone to conventional banking. This paper discusses one of the important hurdles in the growth of Islamic banking which is the use of KIBOR as benchmark for pricing the Islamic banking products. Muskun home financing product of BankIslami Pakistan Limited is used in this paper to elaborate the pricing and benchmarking of product, spread between the conventional interest rate and Islamic profit rate as well as the alternative product pricing mechanism to be used by Islamic banks for this product. Details of Muskun home financing product are discussed in this paper in addition to the marketing strategy, market approach, product development, and all other relevant processes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic Economics, KIBOR, Benchmarking, Pricing, Riba based system, Confidence
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; A - General Economics and Teaching > A1 - General Economics > A10 - General; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics

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