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Portfolio Determination of A Zero-Interest Financial System Entity

Author

Listed:
  • KHALED, SHAFI A.

    () (Metropolitan State University)

  • KHANDKER, A. WAHHAB

    () (University of Wisconsin - La Crosse,)

Abstract

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
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    References listed on IDEAS

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    1. Ahmed, Habib, 2002. "A Microeconomic Model of an Islamic Bank (Research Paper)," Occasional Papers 54, The Islamic Research and Teaching Institute (IRTI).
    2. 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.
    3. 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.
    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.
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