Prinicipal-Agent Approach to Financial Inter mediation-Mudaraba Agreement

Borislav Radevic and Ahmedin Lekpek

Ekonomika, Journal for Economic Theory and Practice and Social Issues, 2011, vol. 57, issue 4

Abstract: The financial crisis that has engulfed the world three years ago and whose effects we feel today, has prompted public and professional financial market participants to seek new solutions to existing problems. Given that one of the generators of the crisis was high volatility in market interest rates, which endangered a payment of large number of credits, notably increased analysis of Islamic banking, as a last bumper of the concept of interest-free business. One of the most important instruments of this type of banking activity is mudaraba contract, which is completely principal-agent based approach in the banking business. The work presents the essential elements, key features, characteristics, and advantages and disadvantages of one of the oldest financial instruments, aimed at giving a modest contribution in responding to the question of applicability of interest-free Islamic banking in the current conditions.

Keywords: Financial; Economics (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:ags:sereko:289249

DOI: 10.22004/ag.econ.289249

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