A new generation of non-debt fixed-income finance

Richard A. Graff

International Journal of Islamic and Middle Eastern Finance and Management, 2013, vol. 6, issue 4, 267-277

Abstract: Purpose - – The development of standardized fixed-income securities and organized secondary markets in which to price and trade the securities is a widely recognized factor in the emergence of modern developed economies. However, the ongoing global financial crisis has exposed the existence of a fundamental and costly conflict between lender and borrower property rights when debt is securitized that has imperiled some fixed-income markets in their present form. This paper aims to suggest a new non-debt concept for fixed-income finance that avoids the conflict inherent in securitized debt. Design/methodology/approach - – The paper considers how to build the foundation of non-debt fixed-income technology on property law instead of contract law. Findings - – Fixed-income products based on the new technology expose investors to lower loss risk than investors incur with analogous debt-based products. Such products could lower the cost of fixed-income finance and contribute to the global restoration of fixed-income market liquidity. Research limitations/implications - – Variations in property law across venues imply that the new financial technology is not implementable in all legal systems. Originality/value - – The new financial technology could represent an opportunity for the Islamic financial industry to expand its fixed-income horizons in the global financial markets. The upside both within and beyond the Islamic community could be dramatic.

Keywords: Capital structure; Islamic finance; All-equity; Lease-based; Ownership interest; Property rights (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:v:6:y:2013:i:4:p:267-277

DOI: 10.1108/IMEFM-05-2013-0062

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