The Cost of Receiving Funds in Islamic Banks

Abstract

This study aims at identifying the nature of the cost of receiving funds in Islamic banks. The research examines the concept of cost in the Islamic economic doctrine and its determinants as well as roots from the Qur’an and Sunnah. Moreover, the study includes methods of measuring the cost of receiving funds in Islamic banks, such as the capital, retained earnings, deposits, and financing from other banks, and then applying the cost of both retained earnings and deposits to Jordan Islamic Bank and Arab International Islamic Bank. One of the most important findings of the research is that the cost of Islamic Economic Doctrine has a special nature, which is reflected in the amendment of the methods of measuring the cost of receiving funds to Islamic banks in accordance with the provisions of Islamic law. Finally, it is possible to apply the cost of retained earnings through the Capital Asset Pricing Model (CAPM) for the capital and the cost of deposits through the required rate of return and the risk premium on the research sample.