## The Economics of Islamic Finance and Securitization

_IMF Working Papers, May 1, 2007_

## Source details

**Canonical URL:** [The Economics of Islamic Finance and Securitization](https://www.imf.org/en/publications/wp/issues/2016/12/31/the-economics-of-islamic-finance-and-securitization-20939)

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## Bibliographic details
- Authors: Andreas Jobst
- Published: May 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451866810.001

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### Main findings and scope
- 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.
- Islamic finance is predicated on asset backing and specific credit participation in identified business risk, making the structuring of shariah-compliant securitization appear straightforward.
- The paper explains the fundamental legal principles of Islamic finance and presents a valuation model that distils the essential economic characteristics of shariah-compliant synthetication of conventional finance.
- The paper includes a brief review of the current state of market development for Islamic securitization.
- The examination of legal and economic implications of shariah compliance informs a discussion of the most salient benefits and drawbacks of Islamic securitization.

### Analytical contributions
- Legal principles:
  - Shariah prohibition of interest and requirement that income derive from entrepreneurial investment.
  - Emphasis on asset backing and specific credit participation in identified business risk.
- Valuation model:
  - Presented to distil essential economic characteristics of shariah-compliant synthetication of conventional finance (model described in the paper).
- Market review:
  - Brief review of the current state of market development for Islamic securitization (details in the paper).
- Benefits and drawbacks:
  - Paper discusses the most salient benefits and drawbacks of Islamic securitization informed by legal and economic implications of shariah compliance.

### Subject areas and keywords
- Subjects: Credit, Islamic finance, Legal support in revenue administration, Securities, Securitization
- Keywords: capital market, Islamic law, present value, reserve account, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-economics-of-islamic-finance-and-securitization-20939_