From the Islamic finance industry perspective, an important criterion for the industry wide adoption of any benchmark, particularly one that is published every business day, is the simplicity, reliability and robustness of its methodology.
Schools of Thoughts in Methodology of Islamic Economics
There are many methodological approaches put forward by esteemed economists in Islamic economics. These approaches include the circular economy approach, moral economy approach, institutional approach, assimilative approach and pure transformative approach.
Output Price Index as a Pricing Alternative in Islamic Finance
Repo transactions are not compliant with Islamic principles due to the buyback nature of transaction plus the use of interest based securities as underlying assets. However, in commercial contracts where Islamic banks would like to earn return, there is need for a pricing benchmark to mitigate risk as well as ensure transparency in the contract.