Perception of islamic bankers towards the use of Karachi inter-bank offer rate (KIBROR)

Shahjahan Alamgir

Perception of islamic bankers towards the use of Karachi inter-bank offer rate (KIBROR)

Date

2013

Authors

Shahjahan Alamgir

Publisher

University of Management and Technology

Abstract

Islamic finance and banking industry have rapidly flourished in current years. The importance of this industry as a substitute method of investment can no longer be refused. Recent international economic and financial crisis has exposed the methodical problems and failures of conventional finance and highlighted the strength and stability of Islamic financial system. Anyhow, Islamic finance has been practicing conventional benchmark, such as Karachi Inter- Bank Offer Rate (KIBOR), to determine its own cost of funds, to price their Shariah-compliant products and services, and hence getting returns on their financial investments. This is so because Islamic finance has always dealt as a financial mediator for surplus and deficit units. This study documents the perception of key players i.e., Islamic Bankers working with Islamic banks, to highlight the issue directly responsible for slower-than-potential growth and expansion of this industry. Findings suggest that the industry could not perceive Islamic banking correctly, because professionals did not feel satisfied with the use of KIBOR as a benchmark.