IDEAS home Printed from
   My bibliography  Save this article

Portfolio Determination of A Zero-Interest Financial System Entity



    () (Metropolitan State University)


    () (University of Wisconsin - La Crosse,)


Beginning in the 1930s and increasing significantly post-colonialism, some Muslims scholars have wondered about the divine edict of interest-free nominal sector and how to realize it in the context of modern mass deposit institution and wide, concentrated financing demand for trade, entrepreneurship and consumption ends. This undertaking has faced challenges posed by the interest-based nominal sector. Evidence has mounted about the limitations of interest-free banks in the way they are organized and, of late, the largely a theoretical way they do business and their business and political operative environment. For explaining the phenomenon and predicting events, a risk-discounted, expected profit objective function produces rules for inter and intra-sectoral allocation of funds. The nonhomogeneity of mark-up and profit-loss-sharing products leads to adopting the average sizes of outlays in the two sectors as the choice variables. Identifying allocation rules for resources will benefit empirical analysis, banking policy and the central bank’s monitoring effor.

Suggested Citation

  • Khaled, Shafi A. & Khandker, A. Wahhab, 2014. "Portfolio Determination of A Zero-Interest Financial System Entity," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 22, pages 217-232.
  • Handle: RePEc:ris:isecst:0008

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
    2. Khan, Tariqullah, 1995. "Demand For And Supply Of Mark-Up And Pls Funds In Islamic Banking: Some Alternative Explanations," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 3, pages 1-46.
    3. Ahmed, Habib, 2002. "A Microeconomic Model of an Islamic Bank (Research Paper)," Occasional Papers 54, The Islamic Research and Teaching Institute (IRTI).
    4. DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-636, November.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:isecst:0008. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IRTI Staff) or (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.