Challenges of Islamic debt restructuring in a multi creditor environment

The growth of Islamic Finance over the last few decades has brought Islamic Finance to a level where it co-exists hand in hand with conventional banking. It is now common for the same customer to take up both Islamic financing and conventional loans as opposed to only conventional loans in the past....

Full description

Bibliographic Details
Main Authors:	Abd Hafiz, Rozita, Abu Samah, Zariah, Hassan, Rusni
Format:	Article
Language:	English
Published:	IIUM Press 2017
Subjects:	HG3368 Islamic Banking and Finance
Online Access:	http://irep.iium.edu.my/61292/ http://irep.iium.edu.my/61292/ http://irep.iium.edu.my/61292/1/61292_Challenges%20of%20Islamic%20debt%20restructuring.pdf

id	iium-61292
recordtype	eprints
spelling	iium-612922019-12-03T10:11:21Z http://irep.iium.edu.my/61292/ Challenges of Islamic debt restructuring in a multi creditor environment Abd Hafiz, Rozita Abu Samah, Zariah Hassan, Rusni HG3368 Islamic Banking and Finance The growth of Islamic Finance over the last few decades has brought Islamic Finance to a level where it co-exists hand in hand with conventional banking. It is now common for the same customer to take up both Islamic financing and conventional loans as opposed to only conventional loans in the past. While such development is positive, there are inherent issues resulting from such co-existence. One notable issue is when default occurs due to non-payment by the customer, and when both the Islamic financier (Islamic creditor) and the conventional lender (conventional creditor) subsequently opt for debt restructuring instead of proceeding with insolvency action. Debt restructuring helps prevent further default, thus can assist in preserving the business value of the customer and the interests of the creditors as a whole. It is not a difficult task if a customer has one creditor only. However, the situation can become complex when the debt of both the Islamic and conventional creditor are to be restructured concurrently. This situation is referred to as Multi-Creditor debt restructuring. While the objective of a Multi-Creditor Debt Restructuring is beneficial to all creditors and the customer, there are challenges for Islamic debt restructuring in a Multi-Creditor situation such as differing creditor’ rights, multiple interpretation on Shari’ah contracts and lack of clarity in documentation of transactions. These could lead to difficulties, amongst others, in proving the right amount of debts due and owing as well as in ascertaining the priority of claims vis-a-vis conventional loans. This research discusses some of the key issues faced when restructuring Islamic debts in a Multi-Creditor situation and how those issues and gaps are to be addressed with some recommended process flow, procedures and guidelines. IIUM Press 2017-12-31 Article PeerReviewed application/pdf en http://irep.iium.edu.my/61292/1/61292_Challenges%20of%20Islamic%20debt%20restructuring.pdf Abd Hafiz, Rozita and Abu Samah, Zariah and Hassan, Rusni (2017) Challenges of Islamic debt restructuring in a multi creditor environment. Journal of Islamic Finance, 6 (Special Issue). pp. 54-72. ISSN 2289-2109 E-ISSN 2289-2117 http://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/256
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG3368 Islamic Banking and Finance
spellingShingle	HG3368 Islamic Banking and Finance Abd Hafiz, Rozita Abu Samah, Zariah Hassan, Rusni Challenges of Islamic debt restructuring in a multi creditor environment
description	The growth of Islamic Finance over the last few decades has brought Islamic Finance to a level where it co-exists hand in hand with conventional banking. It is now common for the same customer to take up both Islamic financing and conventional loans as opposed to only conventional loans in the past. While such development is positive, there are inherent issues resulting from such co-existence. One notable issue is when default occurs due to non-payment by the customer, and when both the Islamic financier (Islamic creditor) and the conventional lender (conventional creditor) subsequently opt for debt restructuring instead of proceeding with insolvency action. Debt restructuring helps prevent further default, thus can assist in preserving the business value of the customer and the interests of the creditors as a whole. It is not a difficult task if a customer has one creditor only. However, the situation can become complex when the debt of both the Islamic and conventional creditor are to be restructured concurrently. This situation is referred to as Multi-Creditor debt restructuring. While the objective of a Multi-Creditor Debt Restructuring is beneficial to all creditors and the customer, there are challenges for Islamic debt restructuring in a Multi-Creditor situation such as differing creditor’ rights, multiple interpretation on Shari’ah contracts and lack of clarity in documentation of transactions. These could lead to difficulties, amongst others, in proving the right amount of debts due and owing as well as in ascertaining the priority of claims vis-a-vis conventional loans. This research discusses some of the key issues faced when restructuring Islamic debts in a Multi-Creditor situation and how those issues and gaps are to be addressed with some recommended process flow, procedures and guidelines.
format	Article
author	Abd Hafiz, Rozita Abu Samah, Zariah Hassan, Rusni
author_facet	Abd Hafiz, Rozita Abu Samah, Zariah Hassan, Rusni
author_sort	Abd Hafiz, Rozita
title	Challenges of Islamic debt restructuring in a multi creditor environment
title_short	Challenges of Islamic debt restructuring in a multi creditor environment
title_full	Challenges of Islamic debt restructuring in a multi creditor environment
title_fullStr	Challenges of Islamic debt restructuring in a multi creditor environment
title_full_unstemmed	Challenges of Islamic debt restructuring in a multi creditor environment
title_sort	challenges of islamic debt restructuring in a multi creditor environment
publisher	IIUM Press
publishDate	2017
url	http://irep.iium.edu.my/61292/ http://irep.iium.edu.my/61292/ http://irep.iium.edu.my/61292/1/61292_Challenges%20of%20Islamic%20debt%20restructuring.pdf
first_indexed	2023-09-18T21:26:55Z
last_indexed	2023-09-18T21:26:55Z
_version_	1777412253005381632

Challenges of Islamic debt restructuring in a multi creditor environment

Similar Items