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Group launches first Islamic Interchange Benchmark
A sharia-compliant alternative to LIBOR and formed through collaboration of 16 firms, IIBR may be used to price range of Islamic instruments although widespread use may not be so easy.
November 22, 2011 3:13 by Reuters
“For a fixed-price contract, such as murabaha, I think we’ll see people using IIBR immediately,” he said. “For floating-rate agreements, such as in some lease (ijara) contracts, the adoption may take a little longer as people would need to build the confidence and the comfort level for fixing the cost of financing on future dates. It is natural.”
A banker attending the launch of IIBR, who asked not to be named, said: “It has good potential but we have to see how the enforceability works. This benchmark is always going to be at a premium to the conventional rate. As a borrower, I would prefer the lower rate.”
IIBR was launched by Thomson Reuters Corp , which publishes this news service, in cooperation with the Islamic Development Bank, AAOIFI, the Association of Islamic Banking Institutions Malaysia, the Bahrain Association of Banks, the Hawkamah Institute for Corporate Governance, the Statistical Economic and Social Research Center for Islamic Countries, and 19 Islamic banks, most of them based in the Gulf. (Additional reporting by Andrew Hammond; Editing by Andrew Torchia)
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