Alternatives for Repurchase Agreement in Participation Financial Institutions Cover Image

Katılım Finans Kurumlarında Repo Alternatifleri
Alternatives for Repurchase Agreement in Participation Financial Institutions

Author(s): Zeynelabidin Hayat, Eser Aksu
Subject(s): Business Economy / Management, Islam studies, Sharia Law
Published by: Tekirdağ Namık Kemal Üniversitesi İlahiyat Fakültesi
Keywords: Repurchase agreement; SBBA; sale with repurchase promise; tawarruq; taqaruz;

Summary/Abstract: The need to provide short-term liquidity as well as the need for short term evaluation of excess liquidity are common problems of financial institutions. Conventional financial institutions meet most of these needs with reverse repurchase agreements, while Participation Financial Institutions encounter problems in meeting these needs because repurchase agreements are against participation banking principles due to their interest suspicion. This condition works against Participation Financial Institutions that are in competition with the conventional financial institutions. Just after describing the repurchase agreement and explaining its meaning in Islamic jurisprudence, this article aims to deal with transactions that are currently implemented as alternatives to repurchase agreements by Participation Financial Institutions in the Muslim world; such as Sell and Buy Back Agreement in Malaysia (SBBA), sale with repurchase promise in Turkey, organized tawarruq (bank tawarruq), chattel mortgage and loaning agreement with scoring system. On the other hand, this article examines proposals that are considered as alternatives to repurchase agreement for Participation Financial Institutions; such as sale of lease certificates with the promise of repurchase, mutual funds, establishment of a market in accordance with participation finance principles for the purchase and sale of lease certificates, tawarruq transactions and establishment of state-sponsored Goodwill loans funds.

  • Issue Year: 6/2020
  • Issue No: 2
  • Page Range: 1189-1236
  • Page Count: 48
  • Language: Turkish