Business Finance Homework Help

Chapter 16 reviews Iran’s banking system, which is partly based on the mudarabah concept from Islamic economics discussed in Chapter 4.The authors explain that banks operating under this system act more like business partners than lenders to their business customers.The banks earn a share of the profits from the borrower rather than collecting interest payments.Versions of this approach can also be found in other economic systems.For example, some European banks and their borrowers invest in each other to form closer business relationships.

Consumer loans can be arranged in a similar fashion if the lender collects a share of future income instead of interest payments.For example, some people are eligible to arrange for income-based repayment of federal student loans.If the borrower has relatively low income after they graduate, their initial loan payments are reduced, and their monthly payments increase over time as their income grows.The repayment term may extend longer than the usual 10 years under this system, but some of the debt may be forgiven if the borrower’s income remains relatively low over time.

Suppose banks extend this approach to other forms of consumer credit like home loans.Would this be a reasonable way to help homeowners handle temporary income disruptions like lay-offs?Do you see any potential problems with this system?Refer to the textbook below to complete the assignment.

Text Book: Title: Comparative Economics in a Transforming World Economy

ISBN: 9780262037334

Edition: Third