Roles and functions of special purpose vehicles (SPV): A comparison between Islamic and conventional finance
DOI:
https://doi.org/10.24191/jeeir.v8i1.6219Keywords:
special purpose vehicle (SPV), risk-sharing, securitization, Islamic financeAbstract
The SPV (special purpose vehicle) is one of the key components of the securitization in both Islamic and conventional finance; however the details of how the transactions are implemented differ subject to the mode of securitization in Islamic and conventional finance. In conventional finance, the bank establishes a SPV and transfers its asset from its balance sheet to the SPV. The assets are used as the collateral for issuing securitized, debt-like instruments. Nevertheless, in Islamic finance mode of securitization, the SPV just services the cash flows for security holders and do participate in debt-issuance. This difference is originated from the risk-sharing principle in asset-based Islamic finance which contrasts with risk-transfer nature of an interest-based conventional finance and results in important differences in ownership right and valuation of SPVs in the two financial systems.
References
Abdullah, A. K. (2012). Asset-based vs Asset-backed Sukuk. Islam and Civilisational Renewal, 3(4).
Accounting And Auditing Organization For Islamic Financial Institutions (2007), Shari’ah Resolutions: Issues On Sukuk.
Acharya, V. V., & Richardson, M. (2009). Causes of the financial crisis. Critical Review, 21(2), 195-210.
Askari, H., Iqbal, Z., Krichene, N., & Mirakhor, A. (2012). Risk Sharing In Finance. The Islamic Finance Alternative. Wiley.
Askari, H.(2012), Islamic Finance, Risk-Sharing, And International Financial Stability. Yale Journal Of International Affairs,7, 1-8
Bank For International Settlements (2009). Report On Special Purpose Entities.
Board, V. & Santos, J. A. C. (2012). The Rise Of The Originate-To-Distribute Model And The Role Of Banks In Financial Intermediation. Economic Policy Review, 18(2), 21-34
Buchanan, B. G. (2016). Securitization: a financing vehicle for all seasons?. Journal of Business Ethics, 138(3), 559-577.
Chapra, M. U. (2008), The Global Financial Crisis: Can Islamic Finance Help Minimize The Severity And Frequency Of Such A Crisis In The Future? Forum On The Global Financial Crisis. Islamic Development Bank (IDB).
Farag, I. A. (2015). The Role Of Asset Securitization In 2008 Financial Crisis. Conference Paper: University Of Birmingham.
Federal Reserve System (1990). An Introduction To Asset Securitization, Supervision And Regulation Task Force On Securitization. Vol.1.
Fligstein, N., & Goldstein, A. (2011). Catalyst Of Disaster: Subprime Mortgage Securitization And The Roots Of The Great Recession. Institute For Research On Labor And Employment. UC Berkeley Working Paper.
Goldstein, A., & Fligstein, N. (2014). The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown. Reterived from http://sociology. berkeley. edu/sites/default/files/faculty/ fligstein/Rise% 20and% 20Fall% 20Revised% 20June, 202014.
Gan, Y.H. And Mayer, Christopher (2007), Agency Conflicts, Asset Substitution, And Securitization, Nber Working Paper No. 12359.
Gorton, Gary B. And Souleles, Nicholas S. (2007). Special Purpose Vehicles And Securitization. NBER Working Paper No. W11190.
Hasan, Z. (2015). Risk sharing versus risk transfer in Islamic Finance: A critical appraisal. ISRA International Journal of Islamic Finance, 195(2834), 1-14.
Hidayat, S. E. (2013). A comparative analysis between asset based and asset backed sukuk: which one is more shariah compliant. International SAMANM Journal of Finance and Accounting, 1(2), 24-31.
Hussain, Mumtaz (2015), An Overview Of Islamic Finance. IMF Working Paper, WP/15/120.
Iacobucci, E. M., & Winter, R. A. (2005). Asset securitization and asymmetric information. The Journal of Legal Studies, 34(1), 161-206.
Jobst, A. A. (2007), The Economics Of Islamic Finance And Securitization, IMF Working Paper, WP/07/117.
Jobst, A. A. (2010), Islamic Securitization After The Credit Crisis, International Monetary Fund.
Kosowski, Robert And Neftci, Salih (2015), Principles Of Financial Engineering, 3rd Edition, Elsevier
Kosowski, R. & Neftci, S. N. (2015). Principles of financial engineering (3rd Ed.). Burlington, MA: Academic Press.
Maghrebi, Nabil And Mirakhor, Abbas (2015). Risk Sharing And Shared Prosperity In Islamic Finance, Islamic Economic Studies Vol. 23, No. 2
Maghrebi, N., & Mirakhor, A. (2015). Risk sharing and shared prosperity in Islamic finance. Islamic Economic Studies, 23(2), 85-115.
Maghrebi, N., Mirakhor, A., & Iqbal, Z. (2016). Intermediate Islamic Finance. Hoboken, NJ.: John Wiley & Sons.
Mirakhor, Abbas And Krichene, Noureddine (2009), The Recent Crisis: Lessons For Islamic Finance, Ifsb Second Public Lecture On Financial Policy And Stability
Mirakhor, A., & Krichene, N. (2009). The recent crisis: lessons for Islamic finance. IFSB 2nd Public Lecture on Financial Policy and Stability. Kuala Lumpur: Islamic Financial Services Board. Retrieved from: https://mpra.ub.uni-muenchen.de/56022/.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261-297.
Mohamad, S., Othman, J., Lehner, O., & Muda, R. (2017). Social sukuk: A new mechanism to fund social services. Journal of Emerging Economies & Islamic Research, 5(1), 69-81.
Nadauld, T., & Sherlund, S. M. (2009). The role of the securitization process in the expansion of subprime credit. SSRN No: 1410264. Retrieved from https://www.federalreserve.gov/PUBS/FEDS /2009/200928/200928pap.pdf
Van Ngo, M. (2002). Agency costs and the demand and supply of secured debt and asset securitization. Yale Journal On Regulation, 19, 413.
Radzi, Rafisah And Nurul Aini Muhamed (2019), Are Sukuk Debt Or Equity? A Classification Of Sukuk By Regulatory Bodies And Credit Rating Agencies, Journal Of Emerging Economied And Islamic Research
Radzi, R. M., & Muhamed, N. A. (2019). Are sukuk debt or equity? A classification of sukuk by regulatory bodies and credit rating agencies. Journal of Emerging Economies & Islamic Research, 7(2), 72-81.
Riddiough, T. J. (2011). Can securitization work? Economic, structural, and policy considerations. The Journal of Portfolio Management, 37(5), 24-38.
Schwarcz, S. L. (2001). The Impact of Bankruptcy Reform on True Sale Determination in Securitization Transactions,7(2),353-365.
Schwarcz, S. L. (2013). Securitization, structured finance, and covered bonds. The Journal of Corporation Law, 39(1), 129-154.
Shin, H. S. (2009). Securitisation and financial stability. The Economic Journal, 119(536), 309-332.
Szabłowska, E. (2010). The financial crisis and securitization. The Journal of Education, Culture, and Society,1, 37-48.
Wang, A. (2016). To Securitize or Not? An Agency Cost Perspective. Department Of Economics, University Of Maryland. 1-57. Retrieved from http://econweb.umd.edu/~wang/Wang-JMP.pdf.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2020 Mohammad Soleimani , S. Mustafa Shadab
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
