Publication:
Islamic deposit insurance for Islamic financial institutions
Abstract
Banks keep only the required reserves and lend out or invest the rest of the deposits made by the depositors. In a fractional-reserve banking system, the loan of one bank becomes the deposit of another bank. This will allow the second bank to lend out all the deposits less the required reserves. In this way, the total money created is the reverse of the reserve ratio. If the reserve requirement is 10%, then the total money created will be 10 times the deposit.
Keywords
Islamic Deposit Insurance|Takaful , Islamic banking
Citation
Alhabshi, Syed Othman. (2011, March 8-9). Islamic deposit insurance for Islamic financial institutions. Paper presented at the Foundations of Islamic Finance Conference Series (II), at Intercontinental Hotel, Kuala Lumpur, Malaysia.