Islamic Banks as Catalyst Of Economic Development

Islamic Banks as Catalyst Of Economic Development

DRAGANOVĠC, Velid

This paper discusses the current murabaha oriented practice of Islamic banks in the light of rules of Islamic law. Special attention is given to the issue of return rate to a depositor. That rate may be variable or fixed depending on contract. In both cases, analysis will focus on increasing return rate as a technique to mobilize deposits, increasing investment, and boast economic development. Mentioned issues will be related to benchmark models like LIBOR (London Interbank Offered Rate) in a case of fixed return rate and a question of risk management possibilities in Islamic finance in cases of profit-loss sharing products. Finally, a possibility of use of some forms of financial derivatives is analyzed in order to safeguard depositors from loss on profit-loss sharing deposits.

Conference or Workshop Item
PeerReviewed

2010-06

185