Why Islamic Banks Focus More on Debt-Based Financing Than Equity-Based Which Is More Shariah Compliant?

5 Pages Posted: 12 Dec 2019

See all articles by Abdullateef Abdulqadir Maikabara

Abdullateef Abdulqadir Maikabara

Institute of Islamic Banking and Finance, International Islamic University Malaysia

Date Written: October 5, 2019

Abstract

Financing is an integral part of banking system to consolidate operational activities. Small and medium enterprises (SMEs) are one of the backbones for socio-economic development as it require sufficient financial stand in order to implement several business plans. However, Islamic bank plays a prominent role just like its conventional counterpart by providing financing through two modes which are: debt and equity based although the latter seems to be the lesser mode being applied due to several issues in spite being more Shariah compliant. This paper objects to address the issues and challenges behind reluctance of Islamic banks on equity based mode. The paper also provides some suggestions for the promotion of equity based mode for socio-economic development and sustainability.

Keywords: Debt, Equity, Financing, Islamic bank

JEL Classification: G00, G20, G21

Suggested Citation

Maikabara, Abdullateef Abdulqadir, Why Islamic Banks Focus More on Debt-Based Financing Than Equity-Based Which Is More Shariah Compliant? (October 5, 2019). Available at SSRN: https://ssrn.com/abstract=3492835 or http://dx.doi.org/10.2139/ssrn.3492835

Abdullateef Abdulqadir Maikabara (Contact Author)

Institute of Islamic Banking and Finance, International Islamic University Malaysia ( email )

53100 Gombak
iium
Kuala Lumpur, WY Kuala Lumpur 53100
Malaysia
+601127039425 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
42
Abstract Views
197
PlumX Metrics