Title: Debt-based financing: a case study of Malaysian Islamic banks

Authors: Abdul Muneem; Nor Fahimah Binti Mohd Razif; Abdul Karim Bin Ali; Muhammad Ikhlas Rosele

Addresses: Department of Fiqh and Usul, Academy of Islamic Studies, Universiti Malaya, Kuala Lumpur, 50603, Malaysia ' Department of Fiqh and Usul, Academy of Islamic Studies, Universiti Malaya, Kuala Lumpur, 50603, Malaysia ' Department of Fiqh and Usul, Academy of Islamic Studies, Universiti Malaya, Kuala Lumpur, 50603, Malaysia ' Department of Fiqh and Usul, Academy of Islamic Studies, Universiti Malaya, Kuala Lumpur, 50603, Malaysia

Abstract: The present study aims to address the concept of debt-based financing from the Sharīʿah 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.

Keywords: dayn; debt; debt-based contract; creditor; debtor; Islamic bank; Shariah.

DOI: 10.1504/GBER.2024.135289

Global Business and Economics Review, 2024 Vol.30 No.1, pp.39 - 55

Received: 22 Mar 2022
Accepted: 15 Aug 2022

Published online: 04 Dec 2023 *

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