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Without having to re-iterate the description and characteristics of the Islamic financial contracts, as they have become a public knowledge for all people in the field, their risk profile can be described as being based or the axiom of realism. What goes on in real life is what is accepted in Shari’ah without any additives or assumptions. In other words, the nature of these contracts defines their risk profile. The fundamental financing elements in the Islamic financial contracts are:

1. There must asset basis to justify earning: Assets are either handed over to a manager (entrepreneur) or returned for leasing or obtained for resale.

2. The asset base of financing must be the kind that produces increments either by its very nature (e.g., fruits or usufruct) or by the effect of real market forces (e.g., goods and services).5

5 How about money, can it be a principal in a sharing finance? One may quickly say no because money does not grow. The classical Islamic literature on finance contracts recognizes this apparent fact but adds that money can be exchanged for other goods, assets and factors of production; it can, therefore, be used as a principal in sharing finance provided that the first step of using it (the step of buying goods and factors of production) is founded on the basis of agency contract. In other words, by virtue of the agency contract, that is implicit in all sharing-based finances, money becomes amenable to grow and hence can be used as a principal in sharing finance.

Debt is another real, though intangible, asset that cannot be used as a principal in sharing because it is not amenable to growth. It is not treated like money, in the Shari’ah literature,

3. The investor (property provider) earns by virtue of ownership of an asset that grows. This is apparent in sale and lease financing and implied in the agency content of sharing.

4. Moral and Shari’ah screening is essential for Shari’ah compatible investment and all financial contracts.

These characteristics have their own risk profile. The basic point that Islamic products are essentially based on real market transactions, i.e., assets, goods and/or services requires that we deal with the real risk of owning goods, services and productive assets. Hence, we have a combination of price risk and an opportunity cost risk, the latter is usually expressed as interest rate risk. As the Islamic finance accounts for only a small fraction of the interest-dominated conventional finance market, Islamic finance products and dealers are price takers, not price setters, in this market. The credit risk or risk of default always exists whenever a contract creates a debt and the moral hazard risk crops up in any inter本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。