Debt-based financing: A case study of Malaysian Islamic banks

• Main Authors: Muneem, Abdul, Mohd Razif, Nor Fahimah, Ali, Abdul Karim, Rosele, Muhammad Ikhlas
• Format: Article
• Published: Inderscience Publishers 2024
• Subjects: Islam; Banking
• Online Access: http://eprints.um.edu.my/45057/
• Institution: Universiti Malaya

The present study aims to address the concept of debt-based financing from the Sharī‘ah perspective and to analyse the current practice of debt-based financing by the Islamic banks in Malaysia. A qualitative research approach is adopted using an in-depth study of the literature through classical and contemporary books to address the concept of debt-based financing. The practice of debt-based financing in Islamic banking is studied through the Islamic banks’ official websites. The present study reveals that the current Islamic banking system offers debt-based financing to the customers where the customers are liable to pay the debt through monthly instalments. However, the concept of dayn and the rights and responsibilities of a debtor is not clear to many customers, and the failure of fulfilling the obligation by the customers hinders the smooth operation of the Islamic banks. Moreover, debt-based financing is drawing more attention and interest among most Islamic banks as compared to equity-based financing which is creating more debt. Copyright © 2024 Inderscience Enterprises Ltd.