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Beyond DebtIslamic Experiments in Global Finance$
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Daromir Rudnyckyj

Print publication date: 2018

Print ISBN-13: 9780226551920

Published to Chicago Scholarship Online: May 2019

DOI: 10.7208/chicago/9780226552118.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 24 July 2021

Experimenting with Risk

Experimenting with Risk

(p.167) Chapter Seven Experimenting with Risk
Beyond Debt

Daromir Rudnyckyj

University of Chicago Press

This chapter addresses the question of what kind of alternative Islamic finance offers to its conventional counterpart. The chapter compares what experts called "debt based" Islamic finance with the version they referred to as "equity based." It argues that equity-based Islamic finance, which entails investment and profit- and risk-sharing, offered a distinct alternative to conventional finance because it put inherent limits on leveraging. The chapter documents how officials at Malaysia's Central Bank sought to encourage risk- and profit-sharing contracts and some of the technical problems experts had to overcome as they sought to replace debt-based devices with those based on equity instead.

Keywords:   alternative finance, leverage, risk sharing, financial experimentation, risk, mudaraba

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