New PDF release: Thirty Years of Islamic Banking: History, Performance and

By Munawar Iqbal, Philip Molyneux (auth.)

ISBN-10: 0230503225

ISBN-13: 9780230503229

ISBN-10: 1349521965

ISBN-13: 9781349521968

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They further point out that all risks that one faces in life are not of the same kind. They make a distinction between three types of risk. First, there is the risk that can be termed as ‘entrepreneurial risk’. This risk is part of the normal course of business. Every economic activity involves uncertainty which generates risks. Some agents, called entrepreneurs, take those risks. An enterprising person makes profit, and on occasions incurs losses. However, the fact that society always has such enterprising people is testimony to the fact that, by and large, profit outweighs loss.

A wide variety of Islamic modes of financing is possible, and is now available. Some of these are described below. Musharakah (partnership) Musharakah literally means sharing. In the Islamic finance literature it refers to a joint enterprise in which all the partners share the profit or loss of the joint venture. The financial term is derived from the Islamic legal term shirkah with the same literal meaning but having a broader application. In the Islamic fiqh literature shirkah is of two kinds: the first is shirkat-ul-milk, which means joint ownership of two or more persons of a particular property which may come into existence either through inheritance or joint purchase.

The main feature of the model described above is that it replaces interest by profit-sharing on both the liabilities and the assets side of the bank’s balance sheet. This change brings about a number of positive effects for the efficiency, equity and stability of the banking system. One-tier mudarabah combined with multiple investment instruments This model visualizes the mobilization of savings on the basis of mudarabah and the use of funds so acquired to earn profits through trade, commerce and industry.

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Thirty Years of Islamic Banking: History, Performance and Prospects by Munawar Iqbal, Philip Molyneux (auth.)

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