DEVELOPMENT OF MUDARABAH INSTRUMENTS: UNDERSTANDING THEIR PROFITABILITY, SECURITIZATION AND NEGOTIABILITY ASPECTS

Muhammad Anwar ()

IIUM Journal of Economics and Management, 2001, vol. 9, issue 2, 165-186

Abstract: This paper attempts to examine the securitization, negotiability and profitability aspects of three types of muèOErabah instruments; namely, asset-enfaced muèOErabah instruments, currency-enfaced muèOErabah instruments representing monetary contributions and currency-enfaced muèOErabah instruments representing real assets. This paper begins with a distinction between ribOE (usury) and profit and concludes that an exchange of currencyenfaced muèOErabah instruments in varying amounts entails ribOE while an exchange of asset-enfaced muèOErabah instruments will generate legitimate profits. The current practice is to issue currency-enfaced muèOErabah instruments but treat them as asset-enfaced muèOErabah instruments. This position is analyzed and policy implications are drawn for future development of muèOErabah instruments.

Keywords: MuèOErabah instruments; Islamic finance; Financial instruments (search for similar items in EconPapers)
JEL-codes: G10 P43 Z12 (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ije:journl:v:9:y:2001:i:2:p:165-186

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