A major difference between mainstream and Islamic debt looks set to be removed. There will be significant winners and losers – consumers and investors, respectively – but also, possibly, a structural shift within debt markets.
Malaysia’s central bank is drafting rules to regulate the use of ibra*, Islamic rebate, which will affect $95bn Islamic finance assets (a fifth of total banking assets or roughly half of GDP).
In Western banking, someone taking a loan is liable for the principal and the interest as it is accrued. If the loan ends early – through default or early payment – that person is typically liable for the interest accrued to date.
Not so in Islamic financing. Read more