"Mudarabah" Trading Models: Global Perspectives and Applications in Islamic Banking
Keywords:
Interest-Free Banking, Islamic Finance Principles, Profit and Loss Sharing, Shariah Compliance, Ethical Investment, Islamic Economic System, Risk Sharing, Financial InnovationAbstract
Adopting various Islamic financing methods has undeniably enabled Islamic banks to demonstrate to people how to eliminate interest, marking a significant achievement. Nevertheless, it is essential for Islamic banks to also focus on partnership-based financing models like 'Shirkah' and 'Modaraba'. A close analysis of Shariah's objectives highlights a major shortcoming in Islamic banks: they have yet to invest in or attempt to invest through 'Shirkah' and 'Modaraba'. The term 'Islamic banking' encompasses not only transitional financing methods but also ideal ones. This article delves into the potential and practical investment methods based on 'Modaraba'. There are existing financing modes that resemble the Islamic model 'Modaraba', such as 'Venture Capital', 'Merchant Banking', and 'Holding Company'. With modifications in line with Shariah, these models could be adapted for partnership-based financing, thereby fulfilling Shariah's objectives. Should Islamic banks embrace these modes, they could see substantial growth in their sector.
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