Securitizing Higher Educational Loans for Cheaper Cost of Financing and Higher Return on Investment in Malaysia

摘要

Research has shown that the default rate is higher for those countries that implement the mortgage-type loans. Many researchers have tried to address this issue, usually by analyzing the types of repayment collections such as income contingent loans that can minimize the default rate. However, Malaysia implements mortgage type funding to the student in order for them to continue studies and the default rate is high due to default on repayment. Therefore, this study particularly focuses on how to minimize default by introducing new framework, which has not yet been implemented as a securitization process in Malaysia. This work suggests a structure for Islamic student loan-backed securitization, and studies the potential of the Islamic student loan-backed securitization in resolving the educational loans problem. The main purpose of this research is to investigate the possibility to implement Islamic Student Loan-Backed Securitization that meets shariah-compliance in Malaysia. It is expected that the Islamic student loan-backed securitization that based on the Human Capital Theory become a cheaper cost of financing and higher return on investment in Malaysia. This work proposed a structure of highly graded and marketable sukuk that complies with global shariah principles that will help the Malaysian government to produce high income nation.