The Benchmark Issue in the Islamic Financial System
This paper identifies a major lacuna in the conceptual development of Islamic financial market operations. It argues that in the absence of a well developed benchmark that would facilitate macro- and micro-level decision making with regards to cost of capital and opportunity cost of investments in...
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International Institute of Islamic Thought
1999
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| Acceso en línea: | https://doaj.org/article/20e5bfe08f6444b8b9ddc2f6c9b3faca |
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oai:doaj.org-article:20e5bfe08f6444b8b9ddc2f6c9b3faca2021-12-02T19:22:41ZThe Benchmark Issue in the Islamic Financial System10.35632/ajis.v16i2.21282690-37332690-3741https://doaj.org/article/20e5bfe08f6444b8b9ddc2f6c9b3faca1999-07-01T00:00:00Zhttps://www.ajis.org/index.php/ajiss/article/view/2128https://doaj.org/toc/2690-3733https://doaj.org/toc/2690-3741 This paper identifies a major lacuna in the conceptual development of Islamic financial market operations. It argues that in the absence of a well developed benchmark that would facilitate macro- and micro-level decision making with regards to cost of capital and opportunity cost of investments in comparative projects of similar risk, Islamic financial institutions are relying on interest rate-based indices such as the London Inter-Bank Offer Rate (LIBOR) to make lending decisions. The author contends that this is clearly unacceptable since Islam disallows a predetermined or fixed rate of capital. The paper then proposes a benchmark based on Tobin’s q theory of investment. The author further maintains that unlike existing alternatives which are limited to macro-level applications only, the q-based benchmark would be useful for firms and banks (micro-decisions) as well as governments and institutions (macro-planning). Zamir IqbalInternational Institute of Islamic ThoughtarticleIslamBP1-253ENAmerican Journal of Islam and Society, Vol 16, Iss 2 (1999) |
| institution |
DOAJ |
| collection |
DOAJ |
| language |
EN |
| topic |
Islam BP1-253 |
| spellingShingle |
Islam BP1-253 Zamir Iqbal The Benchmark Issue in the Islamic Financial System |
| description |
This paper identifies a major lacuna in the conceptual development of
Islamic financial market operations. It argues that in the absence of a
well developed benchmark that would facilitate macro- and micro-level
decision making with regards to cost of capital and opportunity cost of
investments in comparative projects of similar risk, Islamic financial
institutions are relying on interest rate-based indices such as the London
Inter-Bank Offer Rate (LIBOR) to make lending decisions. The author
contends that this is clearly unacceptable since Islam disallows a predetermined
or fixed rate of capital. The paper then proposes a benchmark
based on Tobin’s q theory of investment. The author further maintains
that unlike existing alternatives which are limited to macro-level
applications only, the q-based benchmark would be useful for firms and
banks (micro-decisions) as well as governments and institutions
(macro-planning).
|
| format |
article |
| author |
Zamir Iqbal |
| author_facet |
Zamir Iqbal |
| author_sort |
Zamir Iqbal |
| title |
The Benchmark Issue in the Islamic Financial System |
| title_short |
The Benchmark Issue in the Islamic Financial System |
| title_full |
The Benchmark Issue in the Islamic Financial System |
| title_fullStr |
The Benchmark Issue in the Islamic Financial System |
| title_full_unstemmed |
The Benchmark Issue in the Islamic Financial System |
| title_sort |
benchmark issue in the islamic financial system |
| publisher |
International Institute of Islamic Thought |
| publishDate |
1999 |
| url |
https://doaj.org/article/20e5bfe08f6444b8b9ddc2f6c9b3faca |
| work_keys_str_mv |
AT zamiriqbal thebenchmarkissueintheislamicfinancialsystem AT zamiriqbal benchmarkissueintheislamicfinancialsystem |
| _version_ |
1718376663029383168 |