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Islamic Financial Intermediation: Equity, Efficiency and Risk

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Islamic Financial Intermediation: Equity, Efficiency and Risk
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 65 (2011) © EuroJournals Publishing, Inc. 2011 http://www.eurojournals.com/finance.htm

Islamic Financial Intermediation: Equity, Efficiency and Risk1
Khadidja khaldi Department of Economics, College of Economics and Administrative Sciences Al-Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia E-mail: khadidja_kh2000@yahoo.fr Amina Hamdouni Department of Finance and Investment, College of Economics and Administrative Sciences Al-Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia E-mail: aminahamdouni@yahoo.fr Abstract The aim of this research project lies on the study of principles and activities that define the Islamic banking system, allowing the latter to be more efficient and more equitable. The performance evaluation is made on the basis of four models that govern the activities of the Islamic banks. The first model is based on the Mudharabah (deposit, investment funds); the second concerns the Mudharabah for the deposit only while for the investment we need the Musharakah; The third model is based on the Mudharabah for deposits but introduces the debt and quasi-debt instruments (Murabahah, Istisna, Salam, Ijara ...); The fourth model is based on Mudharabah for deposits and Mutajarah on the assets side. Results show that the first model is more efficient than the others, particularly the third which is paradoxically largely adopted. The fourth is not recommended for its negative impact on trade.

Keywords: Islamic banking, Islamic finance, musharakah, ijara, murabahah, riba.

Sharia

compliance,

mudharabah,

1. Introduction
Islamic finance covers the whole of the financial and legal techniques allowing the financing with goods or services in accordance with Shariah requirements. Islamic finance is provision of financial services under Islamic law (or Shariah) principles. It was established as an alternative to conventional financial


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