Publication:
Are deposit and investment accounts in Islamic banks in Malaysia interest-free?
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Date
2014
SDG:
Abstract
Islamic banking and Finance (IBF) provides products and services guided by the Shariah. Therefore, they are supposed to be different from their conventional counterparts. Islamic deposit rates should be different from conventional deposit rates. Islamic banking profit rates are supposedly less risky due to risksharing attribute embedded in their structure as compared to the conventional banking interest rates on similar-risk investment products. This paper addresses this concern by examining the differences in the monthly fixed deposit rates of conventional and investment deposit rates of Islamic banks and finance companies in Malaysia for the period from January 1994 to December 2012 and determines the causality relationship between profit rates and interest rates on these investments. The findings suggest that profit rates of Islamic banks are significantly linked with interest rates of conventional banks.
Keywords
Islamic finance , Conventional rates of return compared to Islamic profit rates , Islamic finance companies , Shariah compliance of Islamic banks and finance companies
Citation
Ramadili Mohd, Shamsher Mohamad and Mohd Rasid, Mohamed Eskandar Shah. (2014). Are deposit and investment accounts in Islamic banks in Malaysia interest free? Journal of King Abdulaziz University: Islamic Economics, 27 (2), pp: 27-55.
Publisher
King Abdulaziz University