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The Economics of Islamic Finance and Securitization

Author/Editor: Jobst, Andreas
Authorized for Distribution: May 1, 2007
Electronic Access: Free Full Text (PDF file size is 519KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring shariah-compliant securitization seems straightforward. This paper explains the fundamental legal principles of Islamic finance, which includes the presentation of a valuation model that helps distil the essential economic characteristics of shariah-compliant synthetication of conventional finance. In addition to a brief review of the current state of market development, the examination of pertinent legal and economic implications of shariah compliance on the configuration of securitization transactions informs a discussion of the most salient benefits and drawbacks of Islamic securitization.
 
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Series: Working Paper No. 07/117
Subject(s): Islamic banking | Bank credit | Loan guarantees | Financial institutions
Author's keyword(s): Securitization | ABS | MBS | structured finance | Islamic banking | Islamic finance | Islamic securitization | sovereign securitization | shariah compliance | sukuk | mudharaba | ijara | murabaha
 
English  
    Published:   May 1, 2007        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2007117   Pages:   35
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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