Comparing the concept of Rahn and debenture in Islamic finance perspective
Debenture is one type of security adopted by Islamic bank in Malaysia for commercial and corporate customers. Same as rahn, debenture as security is not a stand-alone product but it is a supporting contract linked to financing contract. This paper aims to compare the concept of rahn and debenture...
| Main Authors: | , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
International Research Centre of Islamic Economics and Finance (IRCIEF)
2018
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/67125/ http://irep.iium.edu.my/67125/ http://irep.iium.edu.my/67125/1/67125_Comparing%20the%20Concept%20of%20Rahn%20and%20Debenture.pdf |
| Summary: | Debenture is one type of security adopted by Islamic bank in Malaysia for commercial and
corporate customers. Same as rahn, debenture as security is not a stand-alone product but it is
a supporting contract linked to financing contract. This paper aims to compare the concept of
rahn and debenture in Islamic finance perspective. This paper adopted qualitative paper that
adopts Shariah resolutions of Bank Negara Malaysia (BNM) and Accounting and Auditing
Organization of Islamic Financial Institution (AAOIFI) as references. However, this paper
does not conduct a specific case from any Islamic bank which only focusing on library
research. This paper found that, debenture as security is one type of modern security
instrument which is based on rahn contract where the similarity rate between rahn and
debenture is 77% (10 out of 13 elements). From the analysis, it shows that AAOIFI Shariah
Standard No. (39) on Mortgage and Its Contemporary Applications is more comprehensive
than BNM Policy Document of Rahn. Out of 13 Shariah requirements, AAOIFI manage to
have clear resolution on 85% (11 requirements) while BNM only highlighted 69% (9
requirements). Therefore, industry player should ensure that product structure and legal
documentations of debenture are in compliance with rahn Shariah as highlighted by BNM
and AAOIFI. |
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