Credit Control Instruments in a Dual Banking System: Leverage Control Rate (LCR) – a Proposal
Journal Title: Türkiye islam iktisadı dergisi - Year 2016, Vol 3, Issue 1
Abstract
Islam banishes interest. This raises two questions contextual to Central Banking. First, can Islamic banks create credit like the conventional? We shall argue that Islamic banks cannot avoid credit creation; an imperative for staying in the market where they operate in competition with their conventional rivals. Evidently, the interest rate policy would not be applicable to them as a control measure. This leads us to the second question: What could possibly replace the interest rate for Islamic banks? In reply, the paper suggests what it calls a leverage control rate (LCR) as an addition to Central Banks’ credit control arsenal. The proposed rate is derived from the sharing of profit ratio in Islamic banking. It is contended that the new measure has an edge over the old fashioned interest rate instrument which it can in fact replace with advantage. It can possibly be a common measure in a dual system.
Authors and Affiliations
Zubair Hasan
Keywords
Related Articles
- EP ID EP301313
- DOI 10.15238/tujise.2016.3.1.1-15
- Views 101
- Downloads 0
Shari’ah Governance in Islamic Finance and an Overview of the Debates
Shari’ah governance are internal mechanisms that allow and control Islamic financial institutions and their activities to act in accordance with Islamic principles and rules. This system, the most important distinctive f...
ISLAMIC BANKING AND SHARĪ‘AH SCHOLARS IN NIGERIA
Compliance with sharī‘ah - rules is compulsory for all Islamic banks; and such compliance is monitored by sharī‘ah scholars. Therefore, the paper examines and gauges the level of understanding of Nigerian sharī‘ah schola...
Does Consumer Innovativeness Matter? Predicting Customer Behaviour of A New Financial Architecture
Although the benefits of the marriage between Islamic principles of Shari’ah and financial services as a new financial architecture have been well documented, however, its adoption within the industry’s core markets was...
Service Quality, Shariah Compliance and Customer Satisfaction of Islamic Banking Services in Malaysia
The present study investigates the level of service quality and customer satisfaction of Islamic banks in Malaysia based on demographics such as gender, nationality, experience with the bank and income. This study survey...
Does Islamic Banking convey more financial transparency than conventional banking?
This study examines the criteria of transparency and disclosure in Islamic banking and compares them to conventional banking. By examining the traditional accounting standards for transparency, namely IAS 1, IAS 24, IFRS...