Debt-based financing: a case study of Malaysian Islamic banks

Abdul Muneem, Nor Fahimah Binti Mohd Razif, Abdul Karim Bin Ali and Muhammad Ikhlas Rosele

Global Business and Economics Review, 2024, vol. 30, issue 1, 39-55

Abstract: The present study aims to address the concept of debt-based financing from the Sharīʿah perspective and to analyse the current practice of debt-based financing by the Islamic banks in Malaysia. A qualitative research approach is adopted using an in-depth study of the literature through classical and contemporary books to address the concept of debt-based financing. The practice of debt-based financing in Islamic banking is studied through the Islamic banks' official websites. The present study reveals that the current Islamic banking system offers debt-based financing to the customers where the customers are liable to pay the debt through monthly instalments. However, the concept of dayn and the rights and responsibilities of a debtor is not clear to many customers, and the failure of fulfilling the obligation by the customers hinders the smooth operation of the Islamic banks. Moreover, debt-based financing is drawing more attention and interest among most Islamic banks as compared to equity-based financing which is creating more debt.

Keywords: dayn; debt; debt-based contract; creditor; debtor; Islamic bank; Shariah. (search for similar items in EconPapers)
Date: 2024
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