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Islamic Financial Intermediation Compared to Ribaoui Financial Intermediation: A Theoretical and Mathematical Analysis

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  • Khadidja Khaldi

    (Department of Finance and Investment, College of Economics and Administrative Sciences, Al-Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia,)

  • Amina Hamdouni

    (Department of Finance and Investment, College of Economics and Administrative Sciences, Al-Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia.)

Abstract

The present research uses mathematical analysis instruments for a comparative study between the Islamic financing system and the Ribaoui financing system usually called the classical financing scheme. The former system deals with contracts based on variable returns while the second i-e the ribaoui system is based on fixed return contracts. Using the principles of partial equilibrium theory for risk adverse investors, the study demonstrates that returns are higher with contracts based on profit and loss sharing.

Suggested Citation

  • Khadidja Khaldi & Amina Hamdouni, 2018. "Islamic Financial Intermediation Compared to Ribaoui Financial Intermediation: A Theoretical and Mathematical Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 8(3), pages 268-283.
    • Handle: RePEc:eco:journ1:2018-03-33
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Interest Rate; Classic Bank; Islamic Bank; Profit Sharing System; Return; Speculation; Mathematical Modelling.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G3 - Financial Economics - - Corporate Finance and Governance

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