Abstract
The risk-sharing concept remains an elusive phenomenon in the Islamic financial sphere. It is often mistaken as a position of taking on risk as opposed to dissipating risk. This has led to misinterpretation and perhaps was the reason for the lukewarm response from the banking fraternity to consider risk-sharing as a viable model for Islamic finance. The challenge however centres on ‘how’ to overcome the impediments that hinder its adoption, especially in a dual financial system in which risk-transfer paradigm is so well entrenched. This chapter discusses some of the misconceptions of risk-sharing and provides an argument from economic perspective as to why risk-sharing should be the business model for Islamic finance. This study recommends for the development of technology-enabled virtual marketplace as a means to facilitate the adoption of risk-sharing concept taking into account the low level of trust in the society. This study proposes for the development of digital platform/marketplace as the delivery channel for risk-sharing-based financial intermediation, social finance, trade finance and discretionary mutual Takaful. The digital platforms should aim towards providing trust and reliability, lower operating costs and support financial inclusion.
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Notes
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World Bank Annual Report 2015, p. 22.
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See, for example, Kumhof et al. (2015) as well as relevant entries in this chapter’s lists of references. See also, de Soto, J. H. (2009). Money, Bank Credit and Economic Cycles (2nd ed.). Auburn: Ludwig Von Mises Institute.
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Affin Islamic Bank Berhad, Bank Islam Malaysia Berhad, Bank Muamalat Malaysia Berhad, Maybank Islamic Berhad, Bank Kerjasama Rakyat Malaysia Berhad and Bank Simpanan Nasional.
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Elgari, M. A. (2007). A Position Paper Presented at a Workshop on Tawarruq: A Methodological Issue in Shariah-Compliant Finance.
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Lajis, S.M. (2019). Fintech and Risk-Sharing: A Catalyst for Islamic Finance. In: Zulkhibri, M., Abdul Manap, T. (eds) Islamic Finance, Risk-Sharing and Macroeconomic Stability. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-05225-6_12
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