Contractual agreement creates new principles in the financial intermediation theory

Ruhaini Muda, Ismah Osman, Sharifah Faigah Syed Alwi, Abd. Ghafar Ismail

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

Abstract

This paper discusses the differences in the key arguments of the traditional financial intermediation theory and Shariah principles. The main issues have been identified as the fundamental arguments in explaining the existence of financial intermediaries are transaction cost, asymmetric information and risk management. The aim of this paper is to provide an insight of the roles of financial intermediaries in the traditional financial intermediation theory and Shariah principles from the aspect of contractual agreement. Since, both equity and debt contracts be present in the financial market, Islamic financial institutions expose to the same issues as discussed in the financial intermediation theory. Therefore, in contractual agreement additional monitoring, supervision and alignment of incentives are required to minimize transaction costs and asymmetrical information. Indeed, the roles of Islamic financial institutions are essential to achieve the objectives and rationales of the Shariah, (maqasid as-Shariah), which intend to protect and preserve interests related to the overall well being and welfare of the economic system.

Original languageEnglish
Title of host publicationCreating Global Competitive Economies: 2020 Vision Planning and Implementation - Proceedings of the 22nd International Business Information Management Association Conference, IBIMA 2013
PublisherInternational Business Information Management Association, IBIMA
Pages1101-1115
Number of pages15
Volume3
ISBN (Print)9780982148914
Publication statusPublished - 2013
Event22nd International Business Information Management Association Conference, IBIMA 2013 - Rome
Duration: 13 Nov 201314 Nov 2013

Other

Other22nd International Business Information Management Association Conference, IBIMA 2013
CityRome
Period13/11/1314/11/13

Fingerprint

Risk management
Information management
Costs
Economics
Monitoring
Financial intermediation
Islamic financial institutions
Financial intermediaries
Transaction costs
Financial markets
Economic systems
Incentives
Supervision
Debt contracts
Equity
Well-being
Alignment
Asymmetric information
Rationale

Keywords

  • Financial contracts
  • Financial intermediation
  • Islamic banking
  • Shariah principles

ASJC Scopus subject areas

  • Business and International Management
  • Management Information Systems
  • Management of Technology and Innovation
  • Information Systems and Management

Cite this

Muda, R., Osman, I., Alwi, S. F. S., & Ismail, A. G. (2013). Contractual agreement creates new principles in the financial intermediation theory. In Creating Global Competitive Economies: 2020 Vision Planning and Implementation - Proceedings of the 22nd International Business Information Management Association Conference, IBIMA 2013 (Vol. 3, pp. 1101-1115). International Business Information Management Association, IBIMA.

Contractual agreement creates new principles in the financial intermediation theory. / Muda, Ruhaini; Osman, Ismah; Alwi, Sharifah Faigah Syed; Ismail, Abd. Ghafar.

Creating Global Competitive Economies: 2020 Vision Planning and Implementation - Proceedings of the 22nd International Business Information Management Association Conference, IBIMA 2013. Vol. 3 International Business Information Management Association, IBIMA, 2013. p. 1101-1115.

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

Muda, R, Osman, I, Alwi, SFS & Ismail, AG 2013, Contractual agreement creates new principles in the financial intermediation theory. in Creating Global Competitive Economies: 2020 Vision Planning and Implementation - Proceedings of the 22nd International Business Information Management Association Conference, IBIMA 2013. vol. 3, International Business Information Management Association, IBIMA, pp. 1101-1115, 22nd International Business Information Management Association Conference, IBIMA 2013, Rome, 13/11/13.
Muda R, Osman I, Alwi SFS, Ismail AG. Contractual agreement creates new principles in the financial intermediation theory. In Creating Global Competitive Economies: 2020 Vision Planning and Implementation - Proceedings of the 22nd International Business Information Management Association Conference, IBIMA 2013. Vol. 3. International Business Information Management Association, IBIMA. 2013. p. 1101-1115
Muda, Ruhaini ; Osman, Ismah ; Alwi, Sharifah Faigah Syed ; Ismail, Abd. Ghafar. / Contractual agreement creates new principles in the financial intermediation theory. Creating Global Competitive Economies: 2020 Vision Planning and Implementation - Proceedings of the 22nd International Business Information Management Association Conference, IBIMA 2013. Vol. 3 International Business Information Management Association, IBIMA, 2013. pp. 1101-1115
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