 Role of Central Bank in Islamic FinanceMPRA Paper from University Library of Munich, Germany Abstract: The rapid growth in Islamic finance industry urges us to not only look for alternatives in the Islamic commercial banking, but also focus on the regulator and its role and functions to enable it to work in conformity with Islamic principles. This study reviews limited, but precious academic literature on central banking and monetary management in an environment where Islamic finance is in vogue. Refinance ratio and Qard-e-Hasan ratio and Mudarabah between central bank and Islamic commercial banks are in line with Islamic principles and helps meet liquidity requirements in the banking sector. Mudarabah can be done with profit sharing ratio benchmarked on economy’s nominal income growth. We have presented the evidence on statistical equivalence of nominal Interest rates (being used in conventional banking) and Nominal GDP growth rate (we are recommending to use). The nominal GDP growth linked rate of remuneration can be used to benchmark for external loan arrangements including those from IMF, WB and IDA etc. We suggest central banks particularly in Muslim countries to use nominal income targeting as a rule for the conduct of monetary policy. Keywords: Islamic Finance; Islamic Banking; Central Bank; Nominal Income Targetting; Inflation Targetting. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26702 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.