An Islamic pricing benchmark

The Islamic finance and banking industry has developed tremendously in recent years.The viability of this industry as an alternative method of investment can no longer be denied. As the current global economic and financial crisis laid bare the systemic problems of conventional finance, the Islamic...

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Main Authors:	Mydin Meera, Ahamed Kameel, Omar, Mohd. Azmi, Mohd Noor, Azman
Format:	Article
Language:	English
Published:	International Shari’ah Research Academy for Islamic Finance (ISRA) 2010
Subjects:	HJ Public Finance
Online Access:	http://irep.iium.edu.my/16770/ http://irep.iium.edu.my/16770/ http://irep.iium.edu.my/16770/1/Islamic_pricing_benchmarking.pdf

id	iium-16770
recordtype	eprints
spelling	iium-167702012-02-01T09:51:50Z http://irep.iium.edu.my/16770/ An Islamic pricing benchmark Mydin Meera, Ahamed Kameel Omar, Mohd. Azmi Mohd Noor, Azman HJ Public Finance The Islamic finance and banking industry has developed tremendously in recent years.The viability of this industry as an alternative method of investment can no longer be denied. As the current global economic and financial crisis laid bare the systemic problems of conventional finance, the Islamic financial system has been offered as a solution by its proponents. However, Islamic finance has been using conventional finance benchmarks, such as KLIBOR, COFI, LIBOR, etc. to determine its own cost of funds, and hence its return on financial investments. This is so because Islamic finance, if not part of the existing conventional finance, has always served as a financial intermediary for surplus and deficit units. Islamic banking, as the dominant institution in the Islamic finance industry, has gone beyond the function of a financial intermediary, for it also serves as a wakil, custodian, partner, entrepreneur, and guarantor. Nonetheless, Islamic finance has yet to come up with an alternative Islamic Pricing Benchmark (IPB) to determine its cost of capital. The need for having such an IPB for Islamic finance cannot be overemphasized; that would make it more comprehensive and independent from the conventional benchmarks that rely on interest rates, the very thing that Islamic finance abhors. Therefore, this project aims to develop an Islamic pricing benchmark model for the Islamic banking industry, more specifically for Malaysia, given its prominence in the Islamic finance industry. The project has reviewed the Shari'ah perspective on an Islamic pricing benchmark and has also examined the conventional pricing benchmark being used by banks. The paper further discusses the theoretical formulation of an Islamic benchmark. Thereafter, using sectoral industry and macroeconomic data, it tests the viability of the benchmark using simulation International Shari’ah Research Academy for Islamic Finance (ISRA) 2010 Article PeerReviewed application/pdf en http://irep.iium.edu.my/16770/1/Islamic_pricing_benchmarking.pdf Mydin Meera, Ahamed Kameel and Omar, Mohd. Azmi and Mohd Noor, Azman (2010) An Islamic pricing benchmark. ISRA Research Paper (17). pp. 1-78. http://www.isra.my/publications/research-paper/research-paper-2010.html
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HJ Public Finance
spellingShingle	HJ Public Finance Mydin Meera, Ahamed Kameel Omar, Mohd. Azmi Mohd Noor, Azman An Islamic pricing benchmark
description	The Islamic finance and banking industry has developed tremendously in recent years.The viability of this industry as an alternative method of investment can no longer be denied. As the current global economic and financial crisis laid bare the systemic problems of conventional finance, the Islamic financial system has been offered as a solution by its proponents. However, Islamic finance has been using conventional finance benchmarks, such as KLIBOR, COFI, LIBOR, etc. to determine its own cost of funds, and hence its return on financial investments. This is so because Islamic finance, if not part of the existing conventional finance, has always served as a financial intermediary for surplus and deficit units. Islamic banking, as the dominant institution in the Islamic finance industry, has gone beyond the function of a financial intermediary, for it also serves as a wakil, custodian, partner, entrepreneur, and guarantor. Nonetheless, Islamic finance has yet to come up with an alternative Islamic Pricing Benchmark (IPB) to determine its cost of capital. The need for having such an IPB for Islamic finance cannot be overemphasized; that would make it more comprehensive and independent from the conventional benchmarks that rely on interest rates, the very thing that Islamic finance abhors. Therefore, this project aims to develop an Islamic pricing benchmark model for the Islamic banking industry, more specifically for Malaysia, given its prominence in the Islamic finance industry. The project has reviewed the Shari'ah perspective on an Islamic pricing benchmark and has also examined the conventional pricing benchmark being used by banks. The paper further discusses the theoretical formulation of an Islamic benchmark. Thereafter, using sectoral industry and macroeconomic data, it tests the viability of the benchmark using simulation
format	Article
author	Mydin Meera, Ahamed Kameel Omar, Mohd. Azmi Mohd Noor, Azman
author_facet	Mydin Meera, Ahamed Kameel Omar, Mohd. Azmi Mohd Noor, Azman
author_sort	Mydin Meera, Ahamed Kameel
title	An Islamic pricing benchmark
title_short	An Islamic pricing benchmark
title_full	An Islamic pricing benchmark
title_fullStr	An Islamic pricing benchmark
title_full_unstemmed	An Islamic pricing benchmark
title_sort	islamic pricing benchmark
publisher	International Shari’ah Research Academy for Islamic Finance (ISRA)
publishDate	2010
url	http://irep.iium.edu.my/16770/ http://irep.iium.edu.my/16770/ http://irep.iium.edu.my/16770/1/Islamic_pricing_benchmarking.pdf
first_indexed	2023-09-18T20:25:30Z
last_indexed	2023-09-18T20:25:30Z
_version_	1777408389455806464

An Islamic pricing benchmark

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