Islamic Cost of Capital by Jilal Alvi

Top 20 FREQUENT WORDS

islamic 18 rate 12 development 10 return 10 financial 8 iifm 7 alternative 6 areas 6 profit 6 shari 6 approach 5 calculation 5 distribution 5 libor 5 liquidity 5 management 5 priority 5 benchmark 4 equity 4 focus 4 framework 4 issues 4 trading 4 units 4

DOCUMENT KEY POINTS

conventional � present market focus � high priority development areas � cost of capital of ifsi � libor as a reference rate � alternatives to libor
islamic cost of capital ijlal alvi ceo iifm contents � current state analysis of islamic capital markets vs

� iifm s principal objective is to establish develop and promote the islamic capital and money market on the principles of shari ah � iifm s role is that of a developer and catalyst of the islamic financial market encompassing both the short term money market and the long term capital market iifmvision mission � vision active and well regulated trading and capital flows across the full spectrum of shari a compliant financial instruments internationally � mission to achieve the vision by catalyzing both national and international trading infrastructure product innovation and information flow within strong transparent and well regulated standards and guidelines
iifm � the iifm is an international infrastructure nonprofit organization established through the collective efforts of five countries and one multilateral institution bahrain brunei indonesia malaysia sudan and islamic development bank

iifm a areas of immediate focus � standardization of market related issues such as contracts and products � guidelines and procedures relating to primary and secondary market � international islamic trading and liquidity management system covering aspects such as trading infrastructure clearing and settlement � research and development and specialized events and forums to disseminate information and create awareness on islamic capital and short term financial market � development of templates for capital market segment of the islamic financial services industry current state analysis of islamic capital markets vs
conventional developed but not accepted under development negotiable acceptances commodity futures equity commercial paper financial futures emerging non existent bonds preferred stocks floating rate bonds primes scores warrants securitized loans synthetics index linked securities swaps convertibles options

liquidity management issues � under developed or non existent islamic money market � lack of adequate shari a complaint money market instruments � risk management techniques � availability of quality assets � lender of last resort llr privileges for day today liquidity management
present market focus product innovation � sukuks and new structures � islamic asset backed mortgage backed securities � islamic funds a mutual and specific � islamic real estate and reits � hedge techniques and derivatives high priority development areas i

standardization � standardization of products contracts and related issues need to identified and developed perhaps on a self regulatory basis � development of guidelines and templates � regulatory framework enforceability up to regulators

an alternative to liborabbas mirakhor approach � proposes that cost of capital can be measured without resort to a fixed and predetermined interest rate � the benchmark could be created based on tobin q theory � main assumption a c in the absence of a fixed and predetermined rate of interest equity financing becomes the only source of financial capital and as such the economy s financial system becomes equity based and hence the equity market would provide a measure of the cost of capital an alternative to liborsheikh taqi usmani approach � a benchmark can be achieved by creating a common pool which invests in asset backed instruments like musharakah ijarah etc
� if majority assets are in tangible form its units can be sold and purchased on the basis of their net asset value determined on periodical basis � these units may be negotiable and maybe used for overnight financing � the banks having surplus liquidity can purchase these units and when they need liquidity they can sell them � this arrangement may create inter bank market and the value of the units may serve as an indicator for determining the profit

an alternative to libormalaysian approach example mudarabah inter bank investments mii � the rate of return is based on the rate of gross profit before distribution for investments of one year of the investee bank � the profit sharing ratio is negotiable among both parties � the investor bank at the time of negotiation would not know what the return would be as the actual return will be crystallized towards the end of the investment period � the principal invested shall be repaid at the end of the period together with a share of the profit arising from the used funds by the investee bank phone no fax email iifm bateclo dot com
box manama kingdom of bahrain

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\sukuk islamic

KeyWords

sukuk islam asset finance issu certifi financi contract bankable bond ijarah leas structur profit holder rate developed purchase risk investor

DOCUMENT REFERENCES

Number of Pages

9

Published Date

2006-12-03 17:46:32

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Islamic Cost of Capital by Jilal Alvi

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Top 20 FREQUENT WORDS

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DOCUMENT WORD ANALYSIS

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