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The Economics of Islamic Finance and Securitization

Andreas (Andy) Jobst

International Monetary Fund (IMF) - European Department

May 2007

IMF Working Paper No. 07/117

Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring shariah-compliant securitization seems straightforward. This paper explains the fundamental legal principles of Islamic finance, which includes the presentation of a valuation model that helps distil the essential economic characteristics of shariah-compliant synthetication of conventional finance. In addition to a brief review of the current state of market development, the examination of pertinent legal and economic implications of shariah compliance on the configuration of securitization transactions informs a discussion of the most salient benefits and drawbacks of Islamic securitization.

Number of Pages in PDF File: 37

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Date posted: May 16, 2007  

Suggested Citation

Jobst, Andreas (Andy), The Economics of Islamic Finance and Securitization (May 2007). IMF Working Papers, Vol. , pp. 1-35, 2007. Available at SSRN: http://ssrn.com/abstract=986814

Contact Information

Andreas A. Jobst (Contact Author)
International Monetary Fund (IMF) - European Department ( email )
700 19th Street NW
Washington, DC 20431
United States
+1-202-623-6362 (Phone)
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