A Model of Demand for Islamic Banks’ Debt-based Financing Instruments

Mansor Jusoh, Norlin Khalid

Abstract


ABSTRACT

This paper presents a theoretical analysis of the demand for debt-based financing instruments of the Islamic banks. Debt-based financing, such as through bai bithaman ajil and al-murabahah, is by far the most prominent of the Islamic bank financing system and yet it has been largely ignored in Islamic economics literature. Most studies instead have been focusing on equity-based financing of al-mudarabah and al-musyarakah. Islamic banks offer debt-based financing through various instruments derived under the principle of exchange or more specifically, the deferred contract of exchange. In this paper we set an analytical framework that is based on an infinitely lived representative agent model to analyze the demand for goods to be purchased by deferred payments. The resulting demand will then be used to derive the demand for Islamic debt. We also investigate theoretically, factors that may have an impact on the demand for Islamic debt.

Keywords: Debt-based financing; Islamic debt; deferred contract of exchange; inter-temporal utility maximizing model; Islamic banking.

ABSTRAK

Makalah ini secara teori menganalisis permintaan untuk instrumen pembiayaan berasas hutang yang ditawarkan oleh perbankan Islam. Pembiayaan berasaskan hutang misalnya, bai bithaman ajil dan al-murabahah adalah komponen terpenting pembiayaan perbankan Islam, namun sering diabaikan dalam pustaka ekonomi Islam. Sebaliknya, kebanyakan kajian bidang ini lebih tertumpu kepada pembiayaan beasaskan ekuiti menerusi al-mudarabah dan al-musharakah. Perbankan Islam menawarkan pembiayaan berasas hutang melalui pelbagai instrumen yang dicipta menggunakan prinsip kontrak pertukaran, atau lebih khusus, kontrak jual-beli tangguh. Dalam makalah ini dipaparkan satu kerangka analisis berasaskan model agen perwakilan berkehidupan infinit untuk menganalisis permintaan untuk pembelian barang secara tangguh. Seterusnya, permintaan yang terhasil digunakan untuk menerbitkan permintaan untuk hutang perbankan Islam. Kajian ini juga secara teori menyelidik faktor-faktor yang boleh memberi kesan terhadap permintaan hutang perbankan Islam.

Kata kunci: Pembiayaan berasas hutang; hutang perbankan Islam; kontrak jual-beli tangguh; model agen perwakilan berkehidupan infiniti; perbankan Islam


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