THE ALTERNATIVE ISLAMIC PRICING BASED ON NATURE OF BUSINESS

Abstract

The contradictive of using interest rate as Islamic Pricing Benchmark (IPB) has been discussed among scholars. A lot of alternatives has been offer by scholars but the implementation is based on market choice which are the competitive pricing of interest rate and the advantage of majority share of conventional financing.  In this paper there will be 3 objectives; first to give information of literatures review for some alternatives that already offer by scholars, second is to give information about pro and cons of using interest rates as the benchmark of cost of fund for Islamic Financial Institutions and the final objective is what author’s opinion and what kind alternative that author will provide based on literature review and author’s logic sense.

The alternative IPB will be explained in this paper is based on nature of business, which will be categorized as IPB for debt financing, equity financing and combine financing. To implement IPB there are some infrastructure that will need to adjust in order to create fair environment such as educate customer and change the behaviour of customer to choose financing product, to change the role of bank and to see the paradigm of cost of statuary reserve requirement in central bank.