A model of the demand for Islamic banks debt-based financing instrument

Mansor Jusoh, Norlin Khalid

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

This paper presents a theoretical analysis of the demand for debt-based financing instruments of the Islamic banks. Debt-based financing, such as through baibithamanajil and al-murabahah, is by far the most prominent of the Islamic bank financing and yet it has been largely ignored in Islamic economics literature. Most studies instead have been focusing on equity-based financing of al-mudharabah and al-musyarakah. Islamic bank offers debt-based financing through various instruments derived under the principle of exchange (ukud al-mu'awadhat) or more specifically, the contract of deferred sale. Under such arrangement, Islamic debt is created when goods are purchased and the payments are deferred. Thus, unlike debt of the conventional bank which is a form of financial loan contract to facilitate demand for liquid assets, this Islamic debt is created in response to the demand to purchase goods by deferred payment. In this paper we set an analytical framework that is based on an infinitely lived representative agent model (ILRA model) to analyze the demand for goods to be purchased by deferred payment. The resulting demand will then be used to derive the demand for Islamic debt. We also investigate theoretically, factors that may have an impact on the demand for Islamic debt.

Original languageEnglish
Title of host publicationAIP Conference Proceedings
Pages1079-1085
Number of pages7
Volume1522
DOIs
Publication statusPublished - 2013
Event20th National Symposium on Mathematical Sciences - Research in Mathematical Sciences: A Catalyst for Creativity and Innovation, SKSM 2012 - Putrajaya
Duration: 18 Dec 201220 Dec 2012

Other

Other20th National Symposium on Mathematical Sciences - Research in Mathematical Sciences: A Catalyst for Creativity and Innovation, SKSM 2012
CityPutrajaya
Period18/12/1220/12/12

Fingerprint

economics
liquids

Keywords

  • Contract of deferred sale
  • Debt-based financing
  • Inter-temporal utility maximizing model
  • Islamic banking
  • Islamic debt

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

A model of the demand for Islamic banks debt-based financing instrument. / Jusoh, Mansor; Khalid, Norlin.

AIP Conference Proceedings. Vol. 1522 2013. p. 1079-1085.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Jusoh, M & Khalid, N 2013, A model of the demand for Islamic banks debt-based financing instrument. in AIP Conference Proceedings. vol. 1522, pp. 1079-1085, 20th National Symposium on Mathematical Sciences - Research in Mathematical Sciences: A Catalyst for Creativity and Innovation, SKSM 2012, Putrajaya, 18/12/12. https://doi.org/10.1063/1.4801250
Jusoh, Mansor ; Khalid, Norlin. / A model of the demand for Islamic banks debt-based financing instrument. AIP Conference Proceedings. Vol. 1522 2013. pp. 1079-1085
@inproceedings{c9130fb5ed1a453193a8281e068f55c8,
title = "A model of the demand for Islamic banks debt-based financing instrument",
abstract = "This paper presents a theoretical analysis of the demand for debt-based financing instruments of the Islamic banks. Debt-based financing, such as through baibithamanajil and al-murabahah, is by far the most prominent of the Islamic bank financing and yet it has been largely ignored in Islamic economics literature. Most studies instead have been focusing on equity-based financing of al-mudharabah and al-musyarakah. Islamic bank offers debt-based financing through various instruments derived under the principle of exchange (ukud al-mu'awadhat) or more specifically, the contract of deferred sale. Under such arrangement, Islamic debt is created when goods are purchased and the payments are deferred. Thus, unlike debt of the conventional bank which is a form of financial loan contract to facilitate demand for liquid assets, this Islamic debt is created in response to the demand to purchase goods by deferred payment. In this paper we set an analytical framework that is based on an infinitely lived representative agent model (ILRA model) to analyze the demand for goods to be purchased by deferred payment. The resulting demand will then be used to derive the demand for Islamic debt. We also investigate theoretically, factors that may have an impact on the demand for Islamic debt.",
keywords = "Contract of deferred sale, Debt-based financing, Inter-temporal utility maximizing model, Islamic banking, Islamic debt",
author = "Mansor Jusoh and Norlin Khalid",
year = "2013",
doi = "10.1063/1.4801250",
language = "English",
isbn = "9780735411500",
volume = "1522",
pages = "1079--1085",
booktitle = "AIP Conference Proceedings",

}

TY - GEN

T1 - A model of the demand for Islamic banks debt-based financing instrument

AU - Jusoh, Mansor

AU - Khalid, Norlin

PY - 2013

Y1 - 2013

N2 - This paper presents a theoretical analysis of the demand for debt-based financing instruments of the Islamic banks. Debt-based financing, such as through baibithamanajil and al-murabahah, is by far the most prominent of the Islamic bank financing and yet it has been largely ignored in Islamic economics literature. Most studies instead have been focusing on equity-based financing of al-mudharabah and al-musyarakah. Islamic bank offers debt-based financing through various instruments derived under the principle of exchange (ukud al-mu'awadhat) or more specifically, the contract of deferred sale. Under such arrangement, Islamic debt is created when goods are purchased and the payments are deferred. Thus, unlike debt of the conventional bank which is a form of financial loan contract to facilitate demand for liquid assets, this Islamic debt is created in response to the demand to purchase goods by deferred payment. In this paper we set an analytical framework that is based on an infinitely lived representative agent model (ILRA model) to analyze the demand for goods to be purchased by deferred payment. The resulting demand will then be used to derive the demand for Islamic debt. We also investigate theoretically, factors that may have an impact on the demand for Islamic debt.

AB - This paper presents a theoretical analysis of the demand for debt-based financing instruments of the Islamic banks. Debt-based financing, such as through baibithamanajil and al-murabahah, is by far the most prominent of the Islamic bank financing and yet it has been largely ignored in Islamic economics literature. Most studies instead have been focusing on equity-based financing of al-mudharabah and al-musyarakah. Islamic bank offers debt-based financing through various instruments derived under the principle of exchange (ukud al-mu'awadhat) or more specifically, the contract of deferred sale. Under such arrangement, Islamic debt is created when goods are purchased and the payments are deferred. Thus, unlike debt of the conventional bank which is a form of financial loan contract to facilitate demand for liquid assets, this Islamic debt is created in response to the demand to purchase goods by deferred payment. In this paper we set an analytical framework that is based on an infinitely lived representative agent model (ILRA model) to analyze the demand for goods to be purchased by deferred payment. The resulting demand will then be used to derive the demand for Islamic debt. We also investigate theoretically, factors that may have an impact on the demand for Islamic debt.

KW - Contract of deferred sale

KW - Debt-based financing

KW - Inter-temporal utility maximizing model

KW - Islamic banking

KW - Islamic debt

UR - http://www.scopus.com/inward/record.url?scp=84876945494&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84876945494&partnerID=8YFLogxK

U2 - 10.1063/1.4801250

DO - 10.1063/1.4801250

M3 - Conference contribution

SN - 9780735411500

VL - 1522

SP - 1079

EP - 1085

BT - AIP Conference Proceedings

ER -