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Models of Islamic Banking: The Role of Debt and Equity Contracts نماذج الأعمال المصرفية الإسلامية: دور عقود الدين وحقوق الملكية

Author

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  • Mervyn K. Lewis

    (professor at the University of South Australia Business School.)

Abstract

In itself, debt is innocuous. In accounting terms, it simply signifies an inter-personal or inter-entity relationship that is a liability of one party, the debtor, and an asset to the other, the creditor. Admittedly, Muslims have distinctive views on the acceptability of interest-bearing debt. Yet, one does not need to be a Muslim economist to attribute interest-based debt financing a major role in the global financial crisis and its aftermath (in fact in most financial crises in the past). Speaking in Hong Kong on 19 March 2012, IMF Deputy Director Zhu Min observed that if one adds together the household debts, the corporate debts, the financial sector debts and the government debts, the total debts among the developed countries vary between 300 per cent and 600 per cent of GDP. Dr. Zhu went on to add that debts are ‘way too high’ and that in this respect the world economy is not experiencing a classic financial crisis but a ‘deleveraging process’, moreover one in which economies are seeking to engineer growth while also deleveraging (Garvey, 2012). In the ‘great slump’ of the 1930s, the United States underwent ‘debt deflation’, in the words of Irving Fisher (1933), with the epicentre being the United States and its banking system. In the current situation, the epicentre of the crisis and downturn was again the United States and its banking system, but the pain of ‘too high’ debt has been borne across the developed world (Iley and Lewis, 2013). --

Suggested Citation

  • Mervyn K. Lewis, 2015. "Models of Islamic Banking: The Role of Debt and Equity Contracts نماذج الأعمال المصرفية الإسلامية: دور عقود الدين وحقوق الملكية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 28(1), pages 151-164, January.
    • Handle: RePEc:abd:kauiea:v:28:y:2015:i:1:no:6:p:151-164
    DOI: 10.4197/Islec.28-1.6
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    References listed on IDEAS

    as
    1. M. Kabir Hassan & Mervyn K. Lewis (ed.), 2014. "Handbook on Islam and Economic Life," Books, Edward Elgar Publishing, number 16009.
    2. Mervyn K. Lewis & Mohamed Ariff & Shamsher Mohamad (ed.), 2014. "Risk and Regulation of Islamic Banking," Books, Edward Elgar Publishing, number 15843.
    3. Kevin Dowd, 1996. "Competition and Finance," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-24856-8.
    4. Hossein Askari, 2015. "Severe Financial Crises and Fundamental Reforms: The Benefits of Risk-Sharing الأزمات المالية الخطيرة والإصلاحات الأساسية: فوائد تقاسم المخاطر," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 28(1), pages 93-128, January.
    5. Abdul Azim Islahi, 2014. "Muslim contributions to economics science," Chapters, in: M. Kabir Hassan & Mervyn K. Lewis (ed.), Handbook on Islam and Economic Life, chapter 2, pages iii-iii, Edward Elgar Publishing.
    6. Muhammad Umer Chapra, 2014. "Morality and Justice in Islamic Economics and Finance," Books, Edward Elgar Publishing, number 15817.
    7. Kareken, John H, 1986. "Federal Bank Regulatory Policy: A Description and Some Observations," The Journal of Business, University of Chicago Press, vol. 59(1), pages 3-48, January.
    8. Mervyn K. Lewis & Kevin T. Davis, 1987. "Domestic and International Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121263, December.
    9. Richard A. Iley & Mervyn K. Lewis, 2013. "Global Finance After the Crisis," Books, Edward Elgar Publishing, number 15075.
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    Cited by:

    1. Resul Aydemir & Huzeyfe Zahit Atan & Bulent Guloglu, 2022. "How do the global equity and bond markets affect Islamic and conventional banks? A comparative cross-country analysis using multivariate regression quantiles," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 95-114, March.

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