Cooperative and Islamic Banks: What can they Learn from Each Other?

August 26, 2013

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 and cooperative banks such as credit unions are broadly similar in that they both share some risk with savers. However, risk sharing goes along with ownership control in cooperatives, whilst Islamic banks share risk with borrowers and downside risk with depositors. Islamic banking is consistent with mutual ownership, which may ease some of the governance and efficiency concerns implied by Shari’ah constraints. Greater risk sharing among cooperative bank stakeholders, using mechanisms embedded in Islamic financial products, may strengthen cooperatives’ financial resilience.

Subject: Bank credit, Banking, Cooperative banks, Credit bureaus, Financial institutions, Financial markets, Financial services, Islamic banking, Money

Keywords: adverse selection, bail in, Bank credit, bank financing, bank management, capital structure, central bank, Cooperative Banks, Credit bureaus, credit union customer account, Credit Unions, Europe, Global, Islamic bank, Islamic banking, Islamic Banks, Mutualization, physical asset, Profit and Loss Sharing, profit-maximizing bank, region bank, return on equity, total return, WP

Pages:
31
Volume:
2013
DOI:
https://doi.org/10.5089/9781484380833.001
Issue:
184
Series:
Working Paper No. 2013/184
Stock No:
WPIEA2013184
ISBN:
9781484380833
ISSN:
1018-5941

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