Participating mortgages and the efficiency of financial intermediation

Ebrahim, M. Shahid; Shackleton, Mark B.; Wojakowski, Rafał M.

doi:10.1016/j.jbankfin.2011.04.008

Cited by 18 publications

(4 citation statements)

References 47 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Real Estate Investment Trust (REITs) are listed on the stock market, which not only increase their liquidity and lower the investment costs but also reduce the agency conflicts. Ebrahim et al (2011) explain the critical role played by PMs (Participating Mortgages) in reconciling the conflict of interest of financiers and investors especially in the case of construction loans. Real estate investment should rely heavily on equity not debt as it is ribawi and not permitted under Islamic finance principle.…”

Section: Foreign Equitymentioning

confidence: 96%

Can Yale Endowment Model Be Applied for Islamic Pension Fund?

Tumewang

2018

JIMF

View full text Add to dashboard Cite

This paper examines Yale Endowment model and proposes a modified investment model to achieve an investment objective of mainstream investors and to comply with Sharia principle. The proposed model utilizes Islamic CAPM to formulate the optimal asset allocation for Islamic pension fund's portfolio. It will offer a strong investment strong which could be adopted by government to manage the Islamic pension fund and raise the awareness of society to see the great potential of Islamic pension fund in the future. Promoting an efficient and productive investment of pension-fund assets acts as the catalyst for achieving Sustainable Development Goals (SDGs) by providing important sources of long-term finance for development, supporting financial inclusion and ensuring that poverty among the elderly is alleviated by a strong growth and resilience of income in retirement through pension systems that have broad coverage. Keywords

show abstract

Section: Foreign Equitymentioning

confidence: 96%

Can Yale Endowment Model Be Applied for Islamic Pension Fund?

Tumewang

2018

JIMF

View full text Add to dashboard Cite

show abstract

“…This author has struggled to find papers analytically scrutinising the economic merits of DM. Some that were found are Bashir et al (1993) on the optimal level of equity to invest into a DM arrangement and several papers on how to implement a similar arrangement into mortgages (Ebrahim 1996;Ebrahim et al 2011;Wojakowski et al 2016). Several other papers explicitly invoke contract theory so they shall be discussed in the next literature review section.…”

Section: Diminishing Mushārakah (Dm)mentioning

confidence: 99%

A Contract Theory Approach to Islamic Financial Securities with an Application to Diminishing Mushārakah

Arbi

2021

JRFM

View full text Add to dashboard Cite

This paper demonstrates how the contract theory framework can and should complement standard financial mathematics for analysing Islamic financial securities (IFSs). It is motivated by the perception that most valuations of IFSs are rather simplistic and are as simple as risk and reward, leading to very simplistic investment strategies, especially by buyers. In fact, there are more dimensions to IFSs and IF in general which can only be properly analysed with more advanced approaches, such as contractual issues which are well-recognised and discussed in the fields of Islamic commercial law and contract theory but not always considered in valuation models. Contract theory can bring together financial mathematics and contractual issues, providing a more sophisticated framework for analysing IFSs. This paper aims to demonstrate this by providing a brief outline of the contract theory approach, followed by a simple demonstration of its use in the analysis of diminishing mushārakah (DM) contracts. The resulting model led to three main conclusions regarding DM contracts: That (i) finance seekers have no ready incentive to spend on asset maintenance, (ii) finance seekers will only spend on asset maintenance if their marginal benefit from the asset’s appreciation is greater than the financier’s share of the asset, and (iii) if the magnitude of asset appreciation and depreciation is equal, an increase in either will also increase the optimal level of spending on asset maintenance.

show abstract

“…Depending on the value of participation rates, various kinds of agreements can be arranged between the borrower and the lender. Three common types of participating mortgages are defined in Ebrahim and Hussain (2010) and Ebrahim, Shackleton, and Wojakowski (2011). These are shared income (SIM), shared appreciation (SAM), and shared equity mortgages (SEM).…”

Section: Typesmentioning

confidence: 99%

“…Ebrahim (1996) demonstrates that participating mortgages improve social welfare, which implies that they are Pareto superior to conventional mortgages. Ebrahim, Shackleton, and Wojakowski (2011) establish a basic framework of participating mortgages and describe a facility to the mortgage system. However, they use constant riskfree interest rate as a discount rate in their model.…”

Section: History and Literaturementioning

confidence: 99%

Chapter 9 Participating Mortgages: An Alternative to Housing Finance

Varlı¹

2018

Management of Islamic Finance: Principle, Practice, and Performance

View full text Add to dashboard Cite

Since the 2007-2008 financial crisis, the markets related to housing finance have been restoring their tools and instruments in order to avoid a new crisis. In this period, while attempting to eliminate structural problems in existing housing finance instruments, on the other hand new products were tried to figure out. In particular, products based on risk sharing have frequently come to the forefront, both in the academia and the industry. In this direction, one such innovative product is the participating mortgage, in which the borrower obtains below-market interest rates in return for a percentage of the property's future appreciation and/or net operating income. Particularly used in conventional markets, participating mortgage can also be applied within the Islamic finance thanks to the model it is based on. This chapter attempts to introduce the method of participating mortgage with detailed background and intellectual investigation. Including the modeling of participating mortgage, this study also shows how this method can be designed under Islamic finance. Furthermore, implications and fields of application are explored with a discussion of challenges. In this chapter, considering the achievements of participating mortgage method, it is asserted that it can enable the product diversity of the Islamic banks, thereby increasing the share in the global banking sector.

show abstract

Participating mortgages and the efficiency of financial intermediation

Cited by 18 publications

References 47 publications

Can Yale Endowment Model Be Applied for Islamic Pension Fund?

Can Yale Endowment Model Be Applied for Islamic Pension Fund?

A Contract Theory Approach to Islamic Financial Securities with an Application to Diminishing Mushārakah

Chapter 9 Participating Mortgages: An Alternative to Housing Finance

Contact Info

Product

Resources

About