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Islamic Finance and Financial Stability: A Review of Theoretical Literature التمويل الإسلامي والاستقرار المالي: مراجعة الأدبيات النظرية

Author

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  • Ahmed Belouafi

    (Islamic Economics Institute King Abdulaziz University, Jeddah, Saudi Arabia)

Abstract

This paper provides an analytical review of about fifteen theoretical investigations that had examined the stability of the Islamic Financial System (IFS) vis-à-vis its conventional interest-based counterpart. The research aims at discussing the main findings and conclu-sions that the reviewed literature arrived at. A brief account of how financial stability has been defined, in the conventional literature, has also been explored. The results indicate that there is an almost general ‘consensus’ among these treatises on the ‘superiority’ of an Islamic financial system based on equity and participatory modes of financing with respect to financial stability. To what extent are these claims robust? And what are the underlying assumptions behind the development of such syntheses? These and other important related questions form the basis of the discussion and analysis in this study.

Suggested Citation

  • Ahmed Belouafi, 2014. "Islamic Finance and Financial Stability: A Review of Theoretical Literature التمويل الإسلامي والاستقرار المالي: مراجعة الأدبيات النظرية," Papers or presentations in the in-house seminars conducted by the Islamic Economics Institute, KAAU. 45, Islamic Economics Institute, King Abdulaziz University.
    • Handle: RePEc:abd:ieiwps:45
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    References listed on IDEAS

    as
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    2. Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January.
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    4. Allen, William A. & Wood, Geoffrey, 2006. "Defining and achieving financial stability," Journal of Financial Stability, Elsevier, vol. 2(2), pages 152-172, June.
    5. Muhammad Anas ZARQA, 1983. "Stability In An Interest-Free Islamic Economy: A Note," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 2(2), pages 181-188.
    6. Omar Masood & Ghulam Shabbir Khan Niazi & Noryati Ahmad, 2011. "An analysis of the growth and rise of smaller Islamic banks in last decade," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 3(2), pages 105-116, June.
    7. Blaise Gadanecz & Kaushik Jayaram, 2009. "Measures of financial stability - a review," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring financial innovation and its impact", Basel, 26-27 August 2008, volume 31, pages 365-380, Bank for International Settlements.
    8. Serena Fatica & Thomas Hemmelgarn & Gaëtan Nicodème, 2013. "The Debt-Equity Tax Bias: Consequences and Solutions," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 5-18.
    9. Ruud A. De Mooij, 2012. "Tax Biases to Debt Finance: Assessing the Problem, Finding Solutions," Fiscal Studies, Institute for Fiscal Studies, vol. 33(4), pages 489-512, December.
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    Cited by:

    1. Taoual, Safiyah, 2016. "Sukuk: a potential for stability and development in the GCC," Economics Discussion Papers 2016-7, School of Economics, Kingston University London.

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