Open Daily: 10am - 10pm | Alley door pickup 10am - 7pm 3038 Hennepin Ave Minneapolis, MN
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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
On the Microfoundation of Islamic Finance

On the Microfoundation of Islamic Finance

Koch, Philipp

Paperback

Business General

ISBN10: 3639676963
ISBN13: 9783639676969
Publisher: Blues Kids Of Amer
Published: Sep 10 2014
Pages: 68
Weight: 0.25
Height: 0.16 Width: 6.00 Depth: 9.00
Language: English
This book outlines the theoretical foundations of Islamic finance and summarizes empirical studies on current practices in Islamic banking. The main finding is that there is a discrepancy between the paradigmatic version of Islamic finance and the way it is currently implemented. The most substantial deviation is that profit and loss sharing contracts are only used on a low scale in Islamic banking when projects or individuals are funded. The microeconomic analysis of Shariah-conform profit and loss sharing contracts reveals possible reasons for this discrepancy. The payoffs in such agreements are favorable for the entrepreneurs because they are partially or fully insured against losses. In addition, the profit and loss sharing contracts are subject to market inefficiencies caused by asymmetric information distribution. Adverse selection might lead to poor quality of the projects that are sought to be funded Islamic, whereas moral hazard might lead to lower recovery rates of failing projects than what would be expected if entrepreneurs provided full effort. The conclusion is that the paradigmatic version of Islamic banking would likely imply more expensive funding than conventional banking.

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