Читать книгу Introduction to Islamic Banking and Finance - M Kabir Hassan - Страница 15

Financial institutions provide facilitation in intertemporal exchange of funds between saving-surplus and saving-deficient units by providing delegated monitoring and investment management services efficiently.⁴⁰ In the direct potential exchange between saving-surplus and saving-deficient units, there is a double coincidence problem in terms of (i) matching cash flow needs and availability and (ii) the preference for maturity in investment and financing. Unlike in spot exchange, information asymmetry between the counterparties in an intertemporal exchange of funds requires diligent monitoring and enforcement of contract terms. Financial institutions provide intermediation services to reduce these transaction costs for both counterparties.

Figure 1.1. Islamic finance architecture.

From the Islamic viewpoint, the critical element is that the intertemporal exchange of funds shall not include any increase over the principal amount of the loan. There are two alternatives to meet this restriction. One alternative is that if a money loan is provided, then no increase over the principal amount is charged. The second option is to provide financing for the acquisition of an asset by either selling it or providing it on lease. In both cases, the financial institution has to own, possess, and bear the risk of an asset in possession before selling it or providing it on lease. In such a way of financing, the Islamic financial institution can earn a profit on credit sale or rents on providing the usufruct of an asset in its ownership to the client.

To enable households and firms to meet various financial goals in conformity with Shari’ah principles, Islamic finance was theorized and then practically implemented as an alternative financial system in the twentieth century. The first modern Islamic commercial bank, Dubai Islamic Bank, was established in 1975. Since the year 1975, several Islamic financial institutions have been established in different financial sectors like banking, insurance, and asset management.

According to some scholars, there are some distinctive features inbuilt in Islamic banking which link it automatically with the real sectors of the economy. The necessary requirement of only providing funds for assets that are produced in the real sector of the economy links the financial payoffs with the real assets. Since the returns for the financial institution are linked with the performance of the asset, it ensures more prudence in monitoring and risk management by the financial institution and hence safeguards the investments of depositors.⁴¹ Furthermore, asset-backed financing ensures that the size of the financial sector does not exceed the real size of the economy by necessitating the provision of finance only for the genuine purchase of assets.⁴²