Hasan, Zubair,(2015), RISK SHARING VERSUS RISK TRANSFER IN ISLAMIC FINANCE: A CRITICAL APPRAISAL. , ISRA International Journal of Islamic Finance, UNSPECIFIED
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Abstract
Some writers on Islamic finance have recently resuscitated the old
‘no risk, no gain’ precept from the earlier literature in the wake of
the 2007-2008 financial crisis. They argue that the basic reason
for the recurrence of such crises is the conventional interest-based
financial system that subsists purely based on the transfer of risks.
In contrast, Islam shuns interest and promotes the sharing of risks,
not their transfer. The distinction is used to make a case for replacing
the conventional system with the Islamic; for that alone is thought
as the way to ensuring the establishment of a just, stable and crisisfree
financial system. In support of this thesis is cited the evidence
that Islamic banks have faced the current crisis better than their
conventional counterparts. The present paper is a critique of this line
of thought. It argues that risk sharing is not basic to Islam. Islam
approves profit-and-loss sharing; sharing of risk is a consequence of
that, not its cause. There is no such thing as a risk sharing contract
per se in Islamic finance that, when entered into, gives rise to profitand-
loss sharing. The paper concludes that while there is a case for
encouraging participatory finance in Islam, there is none for treating
risk sharing as its inviolable principle. What really requires emphasis
is the need for transparent moral conduct and commitment to Islamic
ethical norms.
Keywords : | Islamic finance, Financial crisis, Kuala Lumpur Declaration, Risk sharing, Risk transfer, UNSPECIFIED |
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Journal or Publication Title: | ISRA International Journal of Islamic Finance |
Volume: | 7 |
Number: | 1 |
Item Type: | Article |
Subjects: | Ekonomi Islam |
Depositing User: | Users 15 not found. |
Date Deposited: | 26 Dec 2019 04:50 |
Last Modified: | 26 Dec 2019 04:50 |
URI: | https://repofeb.undip.ac.id/id/eprint/820 |