Choice of Efficient Islamic Financial Instruments and Asymmetric Information

Sadr, Seyed Kazem

Choice of Efficient Islamic Financial Instruments and Asymmetric Information

Document Type : Original Article

Author

Seyed Kazem Sadr

Professor, Faculty of Economics and Political Science, Shahid Beheshti University

Abstract

Islamic bankers use a combination of equity and non-equity financial instruments for financial investment purposes. Choice of an efficient portfolio of financial assets requires direct functional relationship between the supply of fund via each instrument with its rate of return and a negation relationship with its risk. Asymmetric information hinders selection of efficient equity instruments, unless Islamic bankers monitor the implementation of contracts with their partners. Although romitoring is a costly operation for bankers it is at the sante time an investment for obtaining new information which will he used for the choice of efficient equity tools and their super, ision. The performance of 24 regional supervisory units of Agricultural Bank all over the country during a five-year period of this study verifies this hypothesis. That is. the allocation of financial resources among equity and non equity instruments has been found to have a significant positive relationship with the rate of recovery and a negative relationship with the risk of selected instruments. It is, therefore, concluded that monitoring services of the bank is instrumental in the choice of an efficient selection of equity and non equity financial tools in Islamic banking

Keywords

Islamic banking

Islamic financial tools

asymmetric information

Agricultural Bank

agricultural credit (finance)

منابع

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