Continuation
Banks may set the penalties on conventional loans lower than
those for Islamic financing.
By this way they attract fees from borrowers that are
expected to be only temporarily unable to repay their financing commitments.
Islamic financing contracts may further result in a swifter
loss of access for the borrower to the financed object (e.g. a car) than a
conventional loan contract.
It will happen particularly when the latter is
uncollateralised.
In both cases, the probability of default of an Islamic
financing may again be lower.
In addition, banks may be more concerned about judicial risk
when granting Islamic financing.
(Jobst,
2007).
Not only can Islamic borrowers turn to Shari’ah courts, which
rule on a case-by-case basis.
They can also seek redress in regular courts.
From the research
paper of European Central Bank
(Authors:
F.Mauro, P.Caristi, S.Couderc, A.D.Maria, L.Ho, B.K.Grewal, S.Masciantonio, S. Ongena and S.Zaher)
No comments:
Post a Comment