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Islamic Finance in the Light of Modern Economic Theory

  • Suren Basov
  • M. Ishaq Bhatti

Table of contents

  1. Front Matter
    Pages i-xiii
  2. Islamic Finance: Rationale, History, Instruments and the Legal Framework

    1. Front Matter
      Pages 1-2
    2. Suren Basov, Ishaq Bhatti
      Pages 3-29
    3. Suren Basov, Ishaq Bhatti
      Pages 31-47
  3. The Law of Unexpected Consequences

    1. Front Matter
      Pages 53-54
    2. Suren Basov, Ishaq Bhatti
      Pages 55-59
  4. Game Theory and Mechanism Design

    1. Front Matter
      Pages 73-74
    2. Suren Basov, Ishaq Bhatti
      Pages 75-82
    3. Suren Basov, Ishaq Bhatti
      Pages 83-84
    4. Suren Basov, Ishaq Bhatti
      Pages 85-101
    5. Suren Basov, Ishaq Bhatti
      Pages 103-109
  5. Mechanism Design Applications to Islamic Finance

    1. Front Matter
      Pages 111-111
    2. Suren Basov, Ishaq Bhatti
      Pages 133-143
    3. Suren Basov, Ishaq Bhatti
      Pages 153-156
    4. Suren Basov, Ishaq Bhatti
      Pages 157-163
    5. Suren Basov, Ishaq Bhatti
      Pages 165-168
  6. Back Matter
    Pages 169-173

About this book

Introduction

This book provides researchers and students with an understanding of the basic legal tenets of the Islamic finance industry, studying the real economic effects of those tenets using the tools of the modern economic theory. Split into four parts, the book begins with an introduction to the history and a legal framework for Islamic banking, covering typical Islamic financial products such as Sukuk and Takaful and examining the structure of Islamic financial institutions. It then analyzes and discusses the Miller-Modigliani Theorem, which is of direct relevance to Islamic banks which are prohibited to charge interest and often have to rely of profit-loss sharing agreements. Part III of the book introduces the reader to modern mechanism design theory, paying particular attention to optimal contracting under hidden action and hidden information, and final part  of the book applies the tools of economic theory to understand performance of Islamic financial institutions such as Islamic banks and Takaful operators.

Islamic Finance in Light of Modern Economic Theory brings together all the necessary technical tools for analyzing the economic effects of Islamic frameworks and can be used as an advanced textbook for graduate students who wish to specialize in the area, as a reference for researchers and as a tool to help economists improve the design of Islamic financial institutions. 

Keywords

Miller-Modigliani Theorem Normal form game Nash equilibrium Mechanism design Profit-loss sharing (PLS) Orthodox religious communities Hamiltonian Approach Spence-Mirrlees condition social norms Takaful incentives Islamic business Muslim countries economic theory economics finance Islamic finance

Authors and affiliations

  • Suren Basov
    • 1
  • M. Ishaq Bhatti
    • 2
  1. 1.University of Melbourne and Deakin UniversityVictoriaAustralia
  2. 2.La Trobe Business SchoolLa Trobe University, Department of Economics and FinanceMelbourneAustralia

Bibliographic information

  • DOI https://doi.org/10.1057/978-1-137-28662-8
  • Copyright Information The Editor(s) (if applicable) and The Author(s) 2016
  • Publisher Name Palgrave Macmillan, London
  • eBook Packages Economics and Finance
  • Print ISBN 978-1-137-28661-1
  • Online ISBN 978-1-137-28662-8
  • Buy this book on publisher's site