Islamic banking: Interest-free or interest-based?
AbstractA unique feature of Islamic banking, in theory, is its profit-and-loss sharing (PLS) paradigm. In practice, however, we find that Islamic banking is not very different from conventional banking. Our study on Malaysia shows that only a negligible portion of Islamic bank financing is strictly PLS based and that Islamic deposits are not interest-free, but are closely pegged to conventional deposits. Our findings suggest that the rapid growth in Islamic banking is largely driven by the Islamic resurgence worldwide rather than by the advantages of the PLS paradigm and that Islamic banks should be subject to regulations similar to those of their western counterparts.
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Bibliographic InfoArticle provided by Elsevier in its journal Pacific-Basin Finance Journal.
Volume (Year): 17 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/pacfin
Islamic banking Interest-free Profit-and-loss sharing Mudarabah Bank financing Bank deposits;
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