Abdul Karim Abdullah
Abdul Karim Abdullah @ Leslie Terebessy is an Assistant Research Fellow at IAIS Malaysia.
Economic instability invariably causes hardship and moreover reduces the efficiency, in one way or another, with which resources are allocated. A significant degree of instability, as is widely believed, is caused by fluctuations in aggregate demand. However, much instability is also caused by interest-based financing. Economic instability commonly causes a range of inefficiencies, in one form or another............. Download the full article in pdf attachment (below)
The modern banking system is known as the “fractional reserve system.” The reason is that in this system, financial institutions are legally permitted to take a certain amount of risk with their depositors’ funds. This risk arises from lending the vast majority of deposits out at interest to various parties willing to borrow. The shareholders of financial institution earn interest income by making loans using depositors’ savings to borrowers at rates higher than those they pay to depositors............. Download the full article in pdf attachment (below)
Unemployment is a condition of idleness, whereby the unemployed person can find no work, and may thus become a burden on his family or society, or even turn to crime to survive. Contrary to a popular but misleading notion, there is no “natural” unemployment. All unemployment is unnatural, as it is hardly natural for a healthy human being capable of work to remain idle for any length of time............. Download the full article in pdf attachment (below)
“Finance” has both a theoretical and a practical meaning. In the theoretical sense, finance is the knowledge of acquiring and allocating (utilising) funds, public as well as private. In the practical sense, finance is the management (earning and spending) of funds to achieve specific objectives, personal or social............ Download the full article in pdf attachment (below)
Sukuk are Islamic certificates of investment. They signify co-ownership of productive resources, known as the “underlying assets.” Because income to sukukholders is generated by trading or real investment rather than mere lending, sukukholders earn profit rather than interest. As co-owners of productive assets, sukukholders face the risks of ownership. In particular, they face the risk that their assets may not generate profits or that may even incur losses. They also face the risk that the assets may be damaged or destroyed completely........... Download the full article in pdf attachment (below)
Raising funds through profit and loss sharing (PLS) has a number of advantages over borrowing at interest. Some of these benefit entrepreneurs; others benefit society. We first look at benefits to entrepreneurs.
Perhaps the most important strength of raising capital on the basis of PLS is that rewards to investors are linked to the performance of the businesses they finance. In profits and loss sharing contracts, dividends to investors depend directly on the profitability (efficiency) of the enterprise they finance............ Download the full article in pdf attachment (below)
Securitisation is an integral part of financing or the process of funding public or private expenditure. Securities are typically issued in the form of (common) shares, sukuk or bonds. Different types of securities reflect different relationships – or contracts – between counterparties. Some signify creditor/debtor relationships, such as conventional bonds, while others reflect partnership relationships, such as Islamic sukuk or common shares. The former type reward lenders with interest, while the latter reward investors with profits........... Download the full article in pdf attachment (below)