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Towards an Economic Theory of Islamic Finance Regulation

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Abstract

Islamic finance has several comparative advantages over conventional finance. Since they are related to efficiency, stability and other macroeconomic benefits, they cannot be easily internalized by Islamic bankers. Islamic bankers have no incentive to stick to the Islamic finance paradigm and instead tend to mimic conventional finance. Regulation is therefore required to modify their behavior in order to allow the Islamic finance industry to enjoy its advantages. This paper attempts to modify the economic theory of bank regulations towards that aim.

Suggested Citation

  • Al-Jarhi, Mabid, 2014. "Towards an Economic Theory of Islamic Finance Regulation," MPRA Paper 66744, University Library of Munich, Germany, revised 2014.
    • Handle: RePEc:pra:mprapa:66744
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    File URL: https://mpra.ub.uni-muenchen.de/66744/1/20.pdf
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    References listed on IDEAS

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    1. Boot, Arnoud W A & Thakor, Anjan V, 1993. "Self-Interested Bank Regulation," American Economic Review, American Economic Association, vol. 83(2), pages 206-212, May.
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    7. Campbell, Tim S & Kracaw, William A, 1980. "Information Production, Market Signalling, and the Theory of Financial Intermediation," Journal of Finance, American Finance Association, vol. 35(4), pages 863-882, September.
    8. Al-Jarhi, Mabid, 2013. "Gaps in the Theory and Practice of Islamic Economics," MPRA Paper 66716, University Library of Munich, Germany, revised 2013.
    9. Jorge Tovar & Christian Jaramillo & Carlos Hernández, 2007. "Risk, Concentration and Market Power in the Banking Industry: Evidence from the Colombian System (1997-2006)," Documentos CEDE 4385, Universidad de los Andes, Facultad de Economía, CEDE.
    10. Al-Jarhi, Mabid Ali, 2005. "The Case For Universal Banking As A Component Of Islamic Banking," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 13, pages 2-65.
    11. Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
    12. Mabid Ali Al-Jarhi, 2013. "Gaps in the Theory and Practice of Islamic Economics فجوات في نظرية وتطبيق الاقتصاد الإسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 26(1), pages 237-248, January.
    13. Chang, Ha-Joon, 1997. "The Economics and Politics of Regulation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(6), pages 703-728, November.
    14. George G. Kaufman, 1996. "Bank Failures, Systemic Risk, and Bank Regulation," Cato Journal, Cato Journal, Cato Institute, vol. 16(1), pages 17-45, Spring/Su.
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    Cited by:

    1. Mabid Ali al-Jarhi, 2016. "The Nature of Money in Modern Economy – Implications and Consequences: Stephen Zarlenga and Robert Poteat طبيعة المال في الاقتصاد الحديث - الآثار والتبعات: ستيفن زارلينجا وروبرت بوتيت," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 29(2), pages 75-79, January.
    2. Al-Jarhi, Mabid, 2016. "An economic theory of Islamic finance," MPRA Paper 72698, University Library of Munich, Germany.
    3. Al-Jarhi, Mabid, 2016. "The Nature of Money in Modern Economy – Implications and Consequences," MPRA Paper 72238, University Library of Munich, Germany, revised 15 Jun 2016.

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    More about this item

    Keywords

    Islamic banking; Islamic finance; Islamic monetary and financial economics; regulations banking; finance;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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