Institutional Development to Facilitate Mushārakah and Muḍārabah Mode of Financing

  • Khalid Rashid Shibli Islam Rehan & Co. (Chartered Accountants), Islamabad, Pakistan
Keywords: Islamic economics, Profit/Loss sharing, Mushārakah financing, Institutional development, Research in Islamic finance

Abstract

This paper is based on the premise that it is not workable for the banks in their existing form, whether as conventional banks or as Islamic banks, to implement the profit and loss sharing mode of financing such as Mushārakah and Muḍārabah. The purpose of this paper is to make some practical suggestions for facilitating and promoting the use of Mushārakah and Muḍārabah mode of financing. Rather than focusing on the Sharīʿah compliance of existing banking instruments, a detailed research and development work needs to be carried out to develop completely a new form of institution outside the realm of the conventional banking system, which provides more workable and sustainable systems for implementing an alternate mode of financing consistent with the Sharīʿah objectives. This paper presents a conceptual framework of the functioning of these institutions and presents an outline of a sample research and development project to set up one such institution. The institutional concept and the sample project presented in this paper will contribute significantly to the existing literature by providing an alternative approach to address the scarcity of Mushārakah and Muḍārabah financing. It is anticipated that with implementation of the sample project presented in this paper, the pilot operations of the proposed institution can be started within six to eight years.

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Published
2018-06-29
How to Cite
Rashid, K. (2018). Institutional Development to Facilitate Mushārakah and Muḍārabah Mode of Financing. International Journal of Economics, Management and Accounting, 26(1), 91-108. Retrieved from https://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/593
Section
Articles