IDEAS home Printed from https://ideas.repec.org/p/erg/wpaper/713.html
   My bibliography  Save this paper

Financial Guarantee as an Innovation Tool in Islamic Project Finance

Author

Listed:
  • Kabir Hassan

    (University of New Orleans,Department of Economics and Finance)

  • Issouf Soumaré

    (Department of Finance & Insurance, Faculty of Business Administration, Laval University)

Abstract

This paper proposes a model to study the arrangement of Islamic project finance with the participation of the government as a provider of loan guarantees. The owner-shareholders (musharaka certificate holders) initiate a project and raise funds by issuing Islamic profit-loss sharing mudaraba certificates. The government intervenes in providing financial guarantees in order to enhance the creditworthiness and increase the mudaraba capital capacity of the project. Our work raises several policy implications related to the structuring of Islamic project finance and the participation of both government and multilateral public agencies such as the Islamic Development Bank. It provides a unifying framework for the improvement of access to funds for Islamic projects and gives a rationale for government intervention in the arrangement of these projects.

Suggested Citation

  • Kabir Hassan & Issouf Soumaré, 2007. "Financial Guarantee as an Innovation Tool in Islamic Project Finance," Working Papers 713, Economic Research Forum, revised 01 Jan 2007.
  • Handle: RePEc:erg:wpaper:713
    as

    Download full text from publisher

    File URL: http://erf.org.eg/wp-content/uploads/2016/04/713.pdf
    Download Restriction: no

    File URL: http://bit.ly/2ox3ls0
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:hrv:faseco:33077889 is not listed on IDEAS
    2. Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance," Journal of Financial Economics, Elsevier, vol. 53(3), pages 353-384, September.
    3. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-1437, November.
    6. repec:hrv:faseco:30747188 is not listed on IDEAS
    7. Rene M. Stulz, 1999. "Globalization of Equity Markets and the Cost of Capital," NBER Working Papers 7021, National Bureau of Economic Research, Inc.
    8. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    9. Jayati Sarkar & Subrata Sarkar, 2000. "Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India," International Review of Finance, International Review of Finance Ltd., vol. 1(3), pages 161-194, September.
    10. Gorton, Gary & Schmid, Frank A., 2000. "Universal banking and the performance of German firms," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 29-80.
    11. Ang, James S. & Ding, David K., 2006. "Government ownership and the performance of government-linked companies: The case of Singapore," Journal of Multinational Financial Management, Elsevier, vol. 16(1), pages 64-88, February.
    12. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    13. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
    14. Fadzlan Sufian, 2006. "Size And Returns To Scale Of The Islamic Banking Industry In Malaysia: Foreign Versus Domestic Banks," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 14(2), pages 147-175, December.
    15. Smith, Brian F. & Amoako-Adu, Ben, 1999. "Management succession and financial performance of family controlled firms," Journal of Corporate Finance, Elsevier, vol. 5(4), pages 341-368, December.
    16. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(3), pages 377-397, September.
    17. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
    18. Bhattacharya, Prasad S. & Graham, Michael A., 2009. "On institutional ownership and firm performance: A disaggregated view," Journal of Multinational Financial Management, Elsevier, vol. 19(5), pages 370-394, December.
    19. Lang, Larry H P & Stulz, Rene M, 1994. "Tobin's q, Corporate Diversification, and Firm Performance," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1248-1280, December.
    20. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    21. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September.
    22. Martin Hovey & Larry Li & Tony Naughton, 2003. "The Relationship Between Valuation and Ownership of Listed Firms in China," Corporate Governance: An International Review, Wiley Blackwell, vol. 11(2), pages 112-122, April.
    23. repec:hrv:faseco:30747162 is not listed on IDEAS
    24. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 08-96, Wharton School Rodney L. White Center for Financial Research.
    25. Lin, Xiaochi & Zhang, Yi, 2009. "Bank ownership reform and bank performance in China," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 20-29, January.
    26. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mertzanis, Charilaos & Basuony, Mohamed A.K. & Mohamed, Ehab K.A., 2019. "Social institutions, corporate governance and firm-performance in the MENA region," Research in International Business and Finance, Elsevier, vol. 48(C), pages 75-96.
    2. Wiem Elmanaa Madani & Wafa Khlif, 2005. "Effets De La Structure De Propriete Sur La Performance Comptable : Etude Empirique Sur Les Entreprises Tunisiennes Indistruelles Non Cotees," Post-Print halshs-00581192, HAL.
    3. Seifert, Bruce & Gonenc, Halit & Wright, Jim, 2005. "The international evidence on performance and equity ownership by insiders, blockholders, and institutions," Journal of Multinational Financial Management, Elsevier, vol. 15(2), pages 171-191, April.
    4. Hamadi, Malika & Heinen, Andréas, 2015. "Firm performance when ownership is very concentrated: Evidence from a semiparametric panel," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 172-194.
    5. Kun Wang & Greg Shailer, 2015. "Ownership Concentration And Firm Performance In Emerging Markets: A Meta-Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 199-229, April.
    6. Bjuggren, Per-Olof & Eklund, Johan & Wiberg, Daniel, 2008. "Institutional Ownership and the Returns on Investment," Ratio Working Papers 128, The Ratio Institute.
    7. Jean-Christophe Duhamel & Réda Sefsaf, 2017. "Valeur de la gouvernance d'entreprise et gouvernance des valeurs de l'entreprise. Recherche sur les effets des codes de gouvernance et les stratégies de communication en matière de gouvernance," Working Papers halshs-01633982, HAL.
    8. Luis H. Gutiérrez & Carlos Pombo, 2005. "Corporate Valuation and Governance: Evidence from Colombia," Research Department Publications 3216, Inter-American Development Bank, Research Department.
    9. Carlos Pombo & Luis H. Gutiérrez, 2007. "Corporate Governance and Firm Valuation in Colombia," Research Department Publications 4470, Inter-American Development Bank, Research Department.
    10. Marc Goergen & Christine A. Mallin & Eve Mitleton-Kelly & Ahmed Al-Hawamdeh & Iris H-Y Chiu, 2010. "Corporate Governance and Complexity Theory," Books, Edward Elgar Publishing, number 13927, November.
    11. Christoph Kaserer & Benjamin Moldenhauer, 2008. "Insider ownership and corporate performance: evidence from Germany," Review of Managerial Science, Springer, vol. 2(1), pages 1-35, March.
    12. Aziz Jaafar & Lynn Hodgkinson & Mao-Feng Kao, 2019. "Ownership Structure, Board of Directors and Firm Performance: Evidence from Taiwan," Working Papers 19011, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    13. Benson, Bradley W. & Chen, Yu & James, Hui L. & Park, Jung Chul, 2020. "So far away from me: Firm location and the managerial ownership effect on firm value," Journal of Corporate Finance, Elsevier, vol. 64(C).
    14. Villalonga, Belen & Amit, Raphael, 2006. "How do family ownership, control and management affect firm value?," Journal of Financial Economics, Elsevier, vol. 80(2), pages 385-417, May.
    15. Chi, Jianxin Daniel & Scott Lee, D., 2010. "The conditional nature of the value of corporate governance," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 350-361, February.
    16. Saito, Takuji, 2008. "Family firms and firm performance: Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 620-646, December.
    17. Chen, Ming-Yuan, 2005. "Group affiliation, identity of managers, and the relation between managerial ownership and performance," International Review of Financial Analysis, Elsevier, vol. 14(5), pages 533-558.
    18. Luis H. Gutiérrez & Carlos Pombo, 2005. "Valuación y gobierno corporativo: elementos de juicio de Colombia," Research Department Publications 3217, Inter-American Development Bank, Research Department.
    19. Omar Al Farooque & Tony van Zijl & Keitha Dunstan & Akm Waresul Karim, 2010. "Co-deterministic relationship between ownership concentration and corporate performance: Evidence from an emerging economy," Accounting Research Journal, Emerald Group Publishing, vol. 23(2), pages 172-189, September.
    20. Cueto, Diego C., 2013. "Substitutability and complementarity of corporate governance mechanisms in Latin America," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 310-325.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:erg:wpaper:713. 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: . General contact details of provider: https://edirc.repec.org/data/erfaceg.html .

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sherine Ghoneim (email available below). General contact details of provider: https://edirc.repec.org/data/erfaceg.html .

    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.