IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/58006.html
   My bibliography  Save this paper

Risk-sharing versus risk-transfer in finance: A critique

Author

Listed:
  • Hasan, Zubair

Abstract

Some recent writings on Islamic finance have resuscitated the old ‘no risk, no gain’ precept from the earlier literature in the wake of current financial crisis. They argue that the basic reason for the recurrence of such crises is the conventional interest-based financial system that rests purely on transfer of risks. In contrast, Islam shuns interest and promotes 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 the way to ensuring the establishment of a just and stable crisis free economic system. Islamic banks have faced the current crisis better than the conventional is cited as evidence. This paper is a critique of this line of argument and concludes that the case is for reform not for replacement of the current system marked with increasing duality.

Suggested Citation

  • Hasan, Zubair, 2014. "Risk-sharing versus risk-transfer in finance: A critique," MPRA Paper 58006, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58006
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/58006/1/MPRA_paper_58006.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hasan, Zubair, 2014. "Islamic Banking and Finance: An Integrative Approach," OUP Catalogue, Oxford University Press, number 9789834710453.
    2. Mohammad Umer Chapra, 2009. "The Global Financial Crisis: Can Islamic Finance Help? الأزمة المالية العالمية: هل يساعد التمويل الإسلامي؟," Chapters of books published by the Islamic Economics Institute, KAAU or its faculty members., in: Islamic Economics Institute (ed.),Issues in the International Financial Crisis from an Islamic Perspective-05 قضايا في الأزمة المالية العالمية من منظور إسلامي, edition 1, chapter 2, pages 11-18, King Abdulaziz University, Islamic Economics Institute..
    3. Muhammad Umer Chapra, 2014. "Morality and Justice in Islamic Economics and Finance," Books, Edward Elgar Publishing, number 15817.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hasan, Zubair, 2014. "Risk-sharing versus risk-transfer in Islamic finance: An evaluation," MPRA Paper 58059, University Library of Munich, Germany.
    2. Zubair Hasan, 2016. "Risk-Sharing: The Sole Basis of Islamic Finance? Time for a Serious Rethink المشاركة في المخاطر: الأساس الوحيد للتمويل الإسلامي؟ حان الوقت لإعادة التفكير الجدي في الموضوع," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 29(2), pages 23-36, January.
    3. Hasan, Zubair, 2016. "Risk-sharing the sole basis of Islamic finance? time for a serious rethink," MPRA Paper 72252, University Library of Munich, Germany, revised 15 Apr 2018.
    4. Abdul Azim Islahi, 2014. "Muhammad Hamidullah and his Pioneering Works on Islamic Economics محمد حميد الله وأعماله الرائدة في الاقتصاد الإسلامي," Books published by the Islamic Economics Institute, KAAU., King Abdulaziz University, Islamic Economics Institute., edition 1, number 36, July.
    5. Ahmed Mahdi Belouafi & Chaouki Bourakba & Karima Saci, 2015. "Islamic Finance and Financial Stability: A Review of the Literature التمويل الإسلامي والاستقرار المالي: مراجعة الأدبيات النظرية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 28(2), pages 3-42, July.
    6. Mesbahi Moghadam , Gholamreza & Asadi , Gholamhosein & Sajadi , Seyed Ali, 2015. "Conceptual Model of Islamic Commercial Paper for Banks and Credit Institutions on the Basis of Murabaha Sukuk," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(3), pages 73-85, July.
    7. Hasan, Zubair, 2014. "Risk sharing versus risk transfer in islamic finance," MPRA Paper 62810, University Library of Munich, Germany, revised Mar 2015.
    8. Oláh, Dániel, 2016. "Ibn Khaldún helye és szerepe a közgazdasági elmélettörténetben. Didaktikai lehetőségek a középkori iszlám gondolkodásban [The place and role of Ibn Khaldun in the history of economic thought]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 819-837.
    9. Ghassan, Hassan B., 2015. "A Consumer Model and Social Welfare Based on the Writings of Shibani (750-805 AD, 131-189 AH)," MPRA Paper 72441, University Library of Munich, Germany, revised 05 Mar 2016.
    10. Mzoughi, Hela & Ben Amar, Amine & Belaid, Fateh & Guesmi, Khaled, 2022. "The Impact of COVID-19 pandemic on Islamic and conventional financial markets: International empirical evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 303-325.
    11. Muhammad Hanif & Kiran Zafar, 2020. "Developments in Islamic Finance Literature: Evidence from Specialized Journals التطورات في أدبيات التمويل الإسلامي: أدلة من دوريات متخصصة," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 3-23, July.
    12. Shah, Syed Munawar & Abdul-Majid, Mariani, 2019. "Reciprocity, self-interest and reputation: debt vs equity contracts," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 27, pages 53-64.
    13. Mohd Afandi Abu Bakar* & Noormahayu Mohd Nasir & Farrah Dina Abd Razak & Nor Samsinar Kamsi & Asmalia Che Ahmad, 2018. "Provision for Bad & Doubtful Financing and Contingency Reserve Management: Assessing Resilient and Stable Islamic Banks," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 621-627:6.
    14. Islahi, Abdul Azim, 2017. "The Legacy of Muhammad Hamidullah in Islamic Economics," MPRA Paper 80149, University Library of Munich, Germany.
    15. Zaman, Qamar Uz & Hassan, M. Kabir & Akhter, Waheed & Meraj, M.A., 2018. "From interest tax shield to dividend tax shield: A corporate financing policy for equitable and sustainable wealth creation," Pacific-Basin Finance Journal, Elsevier, vol. 52(C), pages 144-162.
    16. Hasan, Zubair, 2015. "Risk sharing versus risk transfer in islamic finance," MPRA Paper 62847, University Library of Munich, Germany, revised Mar 2015.
    17. Islahi, Abdul Azim, 2014. "Muhammad Hamidullah and His Pioneering Works on Islamic Economics," MPRA Paper 75286, University Library of Munich, Germany, revised 2015.
    18. Mollah, Sabur & Zaman, Mahbub, 2015. "Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 418-435.
    19. Cedrix Ngandop Djeutcheu, 2019. "Ownership Structure and Islamic Banks Performance: An Empirical and Multiregional Tests Before, During and after the Last Global Financial Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 202-218.
    20. Hussien, Mohammed Ebrahim & Alam, Md. Mahmudul & Murad, Wahid & , Abu N.M. Wahid, 2019. "The Performance of Islamic Banks during the 2008 Global Financial Crisis: Evidence from the Gulf Cooperation Council Countries," SocArXiv vahtz, Center for Open Science.

    More about this item

    Keywords

    Financial crisis; Risk-Sharing; Risk-Transfer; Islamic system; KL Declaration;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G2 - Financial Economics - - Financial Institutions and Services
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:58006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.