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Empirical analysis of alternative pricing benchmarks for Islamic home financing product

Currently, major interest rates, such as the Base Lending Rate (BLR) and Kuala Lumpur Interbank Offered Rate (KLIBOR) are widely used as reference rates by the Islamic financial institutions to benchmark a broad range of financial products and contracts. This study aims to compare the viability of s...

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Main Authors: Redzuan, Nur Harena, Kassim, Salina
Format: Conference or Workshop Item
Language:English
English
Published: 2015
Subjects:
HG3368 Islamic Banking and Finance
Online Access:http://irep.iium.edu.my/69559/1/69559-empirical%20analysis%20of%20alternative%20pricing.pdf
http://irep.iium.edu.my/69559/2/69559-programme.pdf
http://irep.iium.edu.my/69559/
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spelling my.iium.irep.695592019-02-12T03:18:57Z http://irep.iium.edu.my/69559/ Empirical analysis of alternative pricing benchmarks for Islamic home financing product Redzuan, Nur Harena Kassim, Salina HG3368 Islamic Banking and Finance Currently, major interest rates, such as the Base Lending Rate (BLR) and Kuala Lumpur Interbank Offered Rate (KLIBOR) are widely used as reference rates by the Islamic financial institutions to benchmark a broad range of financial products and contracts. This study aims to compare the viability of several alternative pricing mechanisms for the Islamic home financing products. By comparing the interest-based benchmark with the non-interest benchmark, this study attempts to highlight the sensitivity and fragility of the Islamic home financing product to financial market volatility. The study focuses on Malaysia as a case study and uses quarterly data frequency covering the period from 2009 to 2014. Specifically, the study compares lending rate and three alternative benchmark rate, namely Base Financing Rate (BFR), Housing Price Index (HPI) and KL Purpose-Build Office Rent Index (KL-PBO RI) with selected macroeconomic variables that could have related to the economic activities. Through the correlation analysis, the study finds that the non-interest benchmark has better relationships with selected macroeconomic variables compared to the interest-based benchmarks. It shows that these alternative benchmarks have the connection to the economic movements that lead to the stability of the non-interest financing instruments. The findings of this study would provide important insights into the viability of house price index and rental index as the alternatives to the benchmark of the equity financing home financing product. This study contributes to the empirical evidence for the feasibility of adopting the interest-free benchmark to price Islamic home financing product. 2015 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/69559/1/69559-empirical%20analysis%20of%20alternative%20pricing.pdf application/pdf en http://irep.iium.edu.my/69559/2/69559-programme.pdf Redzuan, Nur Harena and Kassim, Salina (2015) Empirical analysis of alternative pricing benchmarks for Islamic home financing product. In: 9th International Conference Journal of Monetary Economics and Banking (Buletin Ekonomi Moneter dan Perbankan BEMP-2015, 6 August 2015, Jakarta Indonesia. (Unpublished)
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
English
topic HG3368 Islamic Banking and Finance
spellingShingle HG3368 Islamic Banking and Finance
Redzuan, Nur Harena
Kassim, Salina
Empirical analysis of alternative pricing benchmarks for Islamic home financing product
description Currently, major interest rates, such as the Base Lending Rate (BLR) and Kuala Lumpur Interbank Offered Rate (KLIBOR) are widely used as reference rates by the Islamic financial institutions to benchmark a broad range of financial products and contracts. This study aims to compare the viability of several alternative pricing mechanisms for the Islamic home financing products. By comparing the interest-based benchmark with the non-interest benchmark, this study attempts to highlight the sensitivity and fragility of the Islamic home financing product to financial market volatility. The study focuses on Malaysia as a case study and uses quarterly data frequency covering the period from 2009 to 2014. Specifically, the study compares lending rate and three alternative benchmark rate, namely Base Financing Rate (BFR), Housing Price Index (HPI) and KL Purpose-Build Office Rent Index (KL-PBO RI) with selected macroeconomic variables that could have related to the economic activities. Through the correlation analysis, the study finds that the non-interest benchmark has better relationships with selected macroeconomic variables compared to the interest-based benchmarks. It shows that these alternative benchmarks have the connection to the economic movements that lead to the stability of the non-interest financing instruments. The findings of this study would provide important insights into the viability of house price index and rental index as the alternatives to the benchmark of the equity financing home financing product. This study contributes to the empirical evidence for the feasibility of adopting the interest-free benchmark to price Islamic home financing product.
format Conference or Workshop Item
author Redzuan, Nur Harena
Kassim, Salina
author_facet Redzuan, Nur Harena
Kassim, Salina
author_sort Redzuan, Nur Harena
title Empirical analysis of alternative pricing benchmarks for Islamic home financing product
title_short Empirical analysis of alternative pricing benchmarks for Islamic home financing product
title_full Empirical analysis of alternative pricing benchmarks for Islamic home financing product
title_fullStr Empirical analysis of alternative pricing benchmarks for Islamic home financing product
title_full_unstemmed Empirical analysis of alternative pricing benchmarks for Islamic home financing product
title_sort empirical analysis of alternative pricing benchmarks for islamic home financing product
publishDate 2015
url http://irep.iium.edu.my/69559/1/69559-empirical%20analysis%20of%20alternative%20pricing.pdf
http://irep.iium.edu.my/69559/2/69559-programme.pdf
http://irep.iium.edu.my/69559/
_version_ 1643619109814927360
score 13.211869

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