ABSTRACT
The concept of benchmarking is used across different industries and jurisdictions, in both the conventional and Islamic financial institutions (IFIs). Presently, IFIs use the interest rate benchmarks like the LIBOR for pricing their products. This has raised several points of contention, given that IFIs have distinct features from their interest-based conventional financial institutions. These contentions have raised several pertinent questions. To what extent is the use of a conventional benchmark ideal? Have there been attempts to develop a pricing model for the products and services of Islamic financial institutions? What are the fiqhi issues that arise in the absence of a proper pricing model for the products and services of Islamic financial institutions? There are variations in the opinions of scholars on addressing some of these research questions. Furthermore, quite a few studies have made attempts to develop alternative benchmarks to price IFIs products and services, but with minimal acceptability from the industry players. Hence, IFIs continue to adopt the conventional interest rate benchmark. Studies on the fiqhi issues of this adoption remain inadequate. The present chapter has adopted a qualitative method in the form of bibliographic survey, meta-analysis, and thematic analysis of the fiqhi issues that arise in the use of conventional benchmark by the Islamic financial institutions. Major findings show that the IFIs remain unyielding to the use of the conventional benchmark due to mindset and lack of enforcements. The chapter suggests in the conclusion that efforts must be doubled towards developing a viable benchmark for IFIs, as a way forward for future research.
