Suggesting a Sukuk-based banking model within the law for usury (interest) free banking

In this paper, a Sukuk-based model for banking is proposed within the law for usury (interest) free banking. According to the proposed model, a typical Islamic bank should provide loans, especially the long term based on the Sukuk distribution instead of providing loans by following the Islamic contracts. The expected direct implications of the model can be mentioned as follows: reduction in the credit risk, enhancing the liquidation of bank assets (decreasing the liquidity risk), improving the ability of bank to change its asset combination (decreasing the market risk) stablishing new channels for provision of bank resources, and enhancing the volume of financing made through the bank. By comparing the properties of the proposed Sukuk-based model whit the current conventional Islamic banking via CAMELS approach, it is expected that the proposed model has better performance. Furthermore, at macro level, enhancing the performance of the money and capital markets and improvement the capability of monetary authority in policy making (for example, decrease in the money creation for a given loan payments, providing the opportunity for setting up interbank based on Sukuk,...) can be occurred. Subject to specific considerations, our investigation also confirms that proposed model offer better performance than a model introduced in prevised research based on securitization of bank asset.