Islamic Banking and Finance in Theory and Practice

This paper’s primary objective is to identify the relative importance of various Islamic financial products, in theory and in practice, by examining the financing records of the Bank Islam Malaysia (Berhad) and the Bahrain Islamic Bank. Currently, seven available Islamic financing products are cons...

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Autores principales:	Abdus Samad, Norman D. Gardner, Bradley J. Cook
Formato:	article
Lenguaje:	EN
Publicado:	International Institute of Islamic Thought 2005
Materias:	Islam BP1-253
Acceso en línea:	https://doaj.org/article/1a38329ccd084f41a26da699e98844ed
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spelling	oai:doaj.org-article:1a38329ccd084f41a26da699e98844ed2021-12-02T17:26:06ZIslamic Banking and Finance in Theory and Practice10.35632/ajis.v22i2.4582690-37332690-3741https://doaj.org/article/1a38329ccd084f41a26da699e98844ed2005-04-01T00:00:00Zhttps://www.ajis.org/index.php/ajiss/article/view/458https://doaj.org/toc/2690-3733https://doaj.org/toc/2690-3741 This paper’s primary objective is to identify the relative importance of various Islamic financial products, in theory and in practice, by examining the financing records of the Bank Islam Malaysia (Berhad) and the Bahrain Islamic Bank. Currently, seven available Islamic financing products are considered viable alternatives to interest-based conventional contracts: mudarabah (trust financing), musharakah (equity financing), ijarah (lease financing), murabahah (trade financing), qard al-hassan (welfare loan), bay` bi al-thaman al-ajil (deferred payment financing), and istisna` (progressive payments). Among these financial products, mudarabah and musharakah are the most distinct. Their unique characteristics (at least in theory) make Islamic banks and Islamic financing viable alternatives to the conventional interest-based financial system. The question before us is to determine the extent of mudarabah and musharakah in Islamic financing in practice. The data are as follows: the average mudarabah is 5% of total financing, and the average musharakah is less than 3%. The combined average of mudarabah and musharakah for the two Islamic banks is less than 4% of the total finance and advances. The average qard al- hassan is about 4%, while istisna` does not yet exist in practice. Murabahah is the most popular and dominates all other modes of Islamic financing. The average use of murabahah is over 54%. When the bay` bi al-thaman al-ajil is added to the murabahah, the percentage of total financing is shown to be 2.68%. This paper also explores some possible reasons why these two Islamic banks appear to prefer murabahah to mudarabah and musharakah. Abdus SamadNorman D. GardnerBradley J. CookInternational Institute of Islamic ThoughtarticleIslamBP1-253ENAmerican Journal of Islam and Society, Vol 22, Iss 2 (2005)
institution	DOAJ
collection	DOAJ
language	EN
topic	Islam BP1-253
spellingShingle	Islam BP1-253 Abdus Samad Norman D. Gardner Bradley J. Cook Islamic Banking and Finance in Theory and Practice
description	This paper’s primary objective is to identify the relative importance of various Islamic financial products, in theory and in practice, by examining the financing records of the Bank Islam Malaysia (Berhad) and the Bahrain Islamic Bank. Currently, seven available Islamic financing products are considered viable alternatives to interest-based conventional contracts: mudarabah (trust financing), musharakah (equity financing), ijarah (lease financing), murabahah (trade financing), qard al-hassan (welfare loan), bay` bi al-thaman al-ajil (deferred payment financing), and istisna` (progressive payments). Among these financial products, mudarabah and musharakah are the most distinct. Their unique characteristics (at least in theory) make Islamic banks and Islamic financing viable alternatives to the conventional interest-based financial system. The question before us is to determine the extent of mudarabah and musharakah in Islamic financing in practice. The data are as follows: the average mudarabah is 5% of total financing, and the average musharakah is less than 3%. The combined average of mudarabah and musharakah for the two Islamic banks is less than 4% of the total finance and advances. The average qard al- hassan is about 4%, while istisna` does not yet exist in practice. Murabahah is the most popular and dominates all other modes of Islamic financing. The average use of murabahah is over 54%. When the bay` bi al-thaman al-ajil is added to the murabahah, the percentage of total financing is shown to be 2.68%. This paper also explores some possible reasons why these two Islamic banks appear to prefer murabahah to mudarabah and musharakah.
format	article
author	Abdus Samad Norman D. Gardner Bradley J. Cook
author_facet	Abdus Samad Norman D. Gardner Bradley J. Cook
author_sort	Abdus Samad
title	Islamic Banking and Finance in Theory and Practice
title_short	Islamic Banking and Finance in Theory and Practice
title_full	Islamic Banking and Finance in Theory and Practice
title_fullStr	Islamic Banking and Finance in Theory and Practice
title_full_unstemmed	Islamic Banking and Finance in Theory and Practice
title_sort	islamic banking and finance in theory and practice
publisher	International Institute of Islamic Thought
publishDate	2005
url	https://doaj.org/article/1a38329ccd084f41a26da699e98844ed
work_keys_str_mv	AT abdussamad islamicbankingandfinanceintheoryandpractice AT normandgardner islamicbankingandfinanceintheoryandpractice AT bradleyjcook islamicbankingandfinanceintheoryandpractice
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Islamic Banking and Finance in Theory and Practice

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