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Alternative Pricing Mechanisms for Islamic Financial Instruments: Economic Perspective

Author

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  • Saba, Irum
  • Alsayyed, Nidal

Abstract

The Islamic banking industry has been trying for the last two decades to extend its outreach to expand its operation business and services in a comparable zone to conventional banking. This paper discusses one of the important hurdles in the growth of Islamic banking which is the use of KIBOR as benchmark for pricing the Islamic banking products. Muskun home financing product of BankIslami Pakistan Limited is used in this paper to elaborate the pricing and benchmarking of product, spread between the conventional interest rate and Islamic profit rate as well as the alternative product pricing mechanism to be used by Islamic banks for this product. Details of Muskun home financing product are discussed in this paper in addition to the marketing strategy, market approach, product development, and all other relevant processes.

Suggested Citation

  • Saba, Irum & Alsayyed, Nidal, 2010. "Alternative Pricing Mechanisms for Islamic Financial Instruments: Economic Perspective," MPRA Paper 20683, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20683
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    File URL: https://mpra.ub.uni-muenchen.de/20683/1/MPRA_paper_20683.pdf
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    References listed on IDEAS

    as
    1. Alsayyed, Nidal, 2010. "Sukukization: Islamic Economic Risk Factors in Shari’ah View," MPRA Paper 20489, University Library of Munich, Germany, revised 15 Feb 2010.
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    More about this item

    Keywords

    Islamic Economics; KIBOR; Benchmarking; Pricing; Riba based system; Confidence;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • A10 - General Economics and Teaching - - General Economics - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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