Tag: Time Preference in Islamic Finance

Zakat Rate as Base Risk Free Rate in Post-LIBOR Era

A key maxim of Islamic jurisprudence suggests that in the matter of commercial transactions, everything is deemed permissible unless explicitly stated otherwise. As long as the transacting parties adhere to the principles of Islamic jurisprudence while applying the benchmark to their transaction, it is acceptable to utilize a consensus methodology. In place of risk free rate or base rate of expected return on investment, some thinkers in Islamic finance suggest the possible use of Zakat rate.

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