THE USE OF ASSETS IJARA BONDS FOR BRIDGING THE BUDGET GAP

Monzer Kahf
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Monzer Kahf: Islamic Research & Training Institute, Postal: IDB, Jeddah, Saudia Arbia

Islamic Economic Studies, 1997, vol. 04-2, 75-92

Abstract: A shari‘ah compatible fixed-return financial instrument is needed in an Islamic economy. This paper explores the potential of ijara (renting)-based financial instruments to meet this need. The paper proposes ijara-bonds as marketable Islamic financial instruments for resource mobilization in the public sector as well as an instrument for monetary policy. Private companies can equally use the ijarabonds for resource mobilization. This paper aims at presenting the idea of assets ijara bonds (AIBs)1 and how such bonds can be used by governments as an alternative means of borrowing funds from the public. The paper consists of four sections. Section one deals with the assumptions under which the AIBs shall be discussed. Section two will analyze the ijara contract and discuss the shari‘ah foundation of the AIBs. The third section defines AIBs and studies their different forms. Finally, section four will discuss the characteristics and economics of AIBs and compare them with other securities.

Date: 1997
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