Faculty / School
Faculty of Business Administration (FBA)
Was this content written or created while at IBA?
Yes
Document Type
Book Chapter
Publication Date
11-4-2013
Book or Conference Proceedings Title
Islamic Finance for Asia: Development, Prospects and Inclusive Growth
First Page
107
Last Page
114
Publisher
Co-publication of the Asian Development Bank and the Islamic Financial Services Board
Keywords
Finance,islamic finance,Asia,challenges
Abstract / Description
The Islamic financial system is built-in with principles of Sharī`ah that naturally incorporate several factors promoting market discipline, stability, resilience, and overall ethical practices that instill prudence and soundness in transactions. An Islamic banking system promotes a unique underlying relationship between the depositors and shareholders; by use of partnership and risk-sharing contracts such as Muḍārabah, deposits structured as special accounts have the propensity to absorb losses as opposed to passing them in entirety to shareholders alone. This enables the capital adequacy ratios of Islamic banks to be at comparatively higher levels than those of conventional banks as the loss-absorbing properties of special investment accounts reduce the burden on the equity capital.
Recommended Citation
Husain, D. (2013). The way forward: key islamic finance challenges and road map for Asia. Islamic Finance for Asia: Development, Prospects and Inclusive Growth, 107-114. Retrieved from https://ir.iba.edu.pk/faculty-research-series/135