Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia

Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks should be involved more in equity-based financing which rely on the concept of risk and profit sharing as compared to debt-based financing which is similar to conventional banks. As such, financing instrum...

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Main Authors:	Mohd. Ariffin, Noraini, Kassim, Salina, Abdul Razak, Dzuljastri
Format:	Conference or Workshop Item
Language:	English English
Published:	2013
Subjects:	HG4001 Financial management. Business finance. Corporation finance.
Online Access:	http://irep.iium.edu.my/37443/ http://irep.iium.edu.my/37443/1/Mindanou_conference_paper_-_21.10.13.pdf http://irep.iium.edu.my/37443/2/Cagayan.pdf

id	iium-37443
recordtype	eprints
spelling	iium-374432015-01-08T02:27:31Z http://irep.iium.edu.my/37443/ Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia Mohd. Ariffin, Noraini Kassim, Salina Abdul Razak, Dzuljastri HG4001 Financial management. Business finance. Corporation finance. Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks should be involved more in equity-based financing which rely on the concept of risk and profit sharing as compared to debt-based financing which is similar to conventional banks. As such, financing instruments such as Mudarabah and Musharakah supposedly become the major financing instruments offered by the Islamic banks. However, as argued in the literature, the Islamic banks today concentrate more on the debt-based financing, in particular Murabahah and Ijarah contracts compared to equity based financing (Mohd. Ariffin et. al.2009; Khan and Ahmed, 2001; Al-Omar and Iqbal, 2000; and Al-Omar and Abdel Haq, 1996). Thus, the objectives of this study is firstly to analyse the use of various modes of financing by several Islamic banks in Malaysia and Bahrain, in particular the extent of equity-based financing, secondly, to assess the perceptions of the bankers with regard to issues on concept, pricing and compliance of Shari’ah for the use of equity-based financing in Islamic banks in Malaysia, thirdly, to investigate the most critical challenges for equity-based financing in Islamic banks in Malaysia, and lastly, to examine the current practice of Musharakah Mutanaqisah that has been applied by few Islamic banks in Malaysia. By undertaking this study, it is expected to shed the lights on the extent of involvement of the Islamic banks in Malaysia in equity-based financing. More importantly, findings of this study would enable us to make some recommendations on the possible ways to shift from debt-based financing to equity-based financing in the Islamic banks as well as the needed financial infrastructure to support the adoption of the equity-based financing by the Islamic banks. 2013 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/37443/1/Mindanou_conference_paper_-_21.10.13.pdf application/pdf en http://irep.iium.edu.my/37443/2/Cagayan.pdf Mohd. Ariffin, Noraini and Kassim, Salina and Abdul Razak, Dzuljastri (2013) Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia. In: International Conference on Islamic Finance Muamalat and Financial Criminology (IFMFC), 23-24 Oct 2013, Cagayan de Oro City, Philippines. (Unpublished)
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HG4001 Financial management. Business finance. Corporation finance.
spellingShingle	HG4001 Financial management. Business finance. Corporation finance. Mohd. Ariffin, Noraini Kassim, Salina Abdul Razak, Dzuljastri Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia
description	Due to the prohibition of interest in the Islamic banking transactions, ideally, Islamic banks should be involved more in equity-based financing which rely on the concept of risk and profit sharing as compared to debt-based financing which is similar to conventional banks. As such, financing instruments such as Mudarabah and Musharakah supposedly become the major financing instruments offered by the Islamic banks. However, as argued in the literature, the Islamic banks today concentrate more on the debt-based financing, in particular Murabahah and Ijarah contracts compared to equity based financing (Mohd. Ariffin et. al.2009; Khan and Ahmed, 2001; Al-Omar and Iqbal, 2000; and Al-Omar and Abdel Haq, 1996). Thus, the objectives of this study is firstly to analyse the use of various modes of financing by several Islamic banks in Malaysia and Bahrain, in particular the extent of equity-based financing, secondly, to assess the perceptions of the bankers with regard to issues on concept, pricing and compliance of Shari’ah for the use of equity-based financing in Islamic banks in Malaysia, thirdly, to investigate the most critical challenges for equity-based financing in Islamic banks in Malaysia, and lastly, to examine the current practice of Musharakah Mutanaqisah that has been applied by few Islamic banks in Malaysia. By undertaking this study, it is expected to shed the lights on the extent of involvement of the Islamic banks in Malaysia in equity-based financing. More importantly, findings of this study would enable us to make some recommendations on the possible ways to shift from debt-based financing to equity-based financing in the Islamic banks as well as the needed financial infrastructure to support the adoption of the equity-based financing by the Islamic banks.
format	Conference or Workshop Item
author	Mohd. Ariffin, Noraini Kassim, Salina Abdul Razak, Dzuljastri
author_facet	Mohd. Ariffin, Noraini Kassim, Salina Abdul Razak, Dzuljastri
author_sort	Mohd. Ariffin, Noraini
title	Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia
title_short	Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia
title_full	Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia
title_fullStr	Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia
title_full_unstemmed	Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia
title_sort	exploring the need to shift from debt-based to equity-based financing in islamic banks: the case of malaysia
publishDate	2013
url	http://irep.iium.edu.my/37443/ http://irep.iium.edu.my/37443/1/Mindanou_conference_paper_-_21.10.13.pdf http://irep.iium.edu.my/37443/2/Cagayan.pdf
first_indexed	2023-09-18T20:53:43Z
last_indexed	2023-09-18T20:53:43Z
_version_	1777410164618428416

Exploring the need to shift from debt-based to equity-based financing in Islamic banks: the case of Malaysia

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