Assignment on Islamic Banking System Analysis

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Added on 2021-06-30

Assignment on Islamic Banking System Analysis

Added on 2021-06-30

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MUSHARAKAH AS AMODE OF FINANCE INISLAMIC BANKING:HIGHLIGHTSTHEORETICAL ASPECTSAND ITS PROBLEMS[Document subtitle]

Assignment on Islamic Banking System Analysis_1

Table of ContentIntroduction.................................................................................................................................................1Musharakah................................................................................................................................................2Literature review.........................................................................................................................................4Objectives of the study................................................................................................................................6Application of Musharakah.........................................................................................................................7Significance of Musharakah.........................................................................................................................8Conditions for Musharakah.........................................................................................................................9Problems regarding Musharakah in Islamic financing...............................................................................10Musharakah and Islam..............................................................................................................................11Critical Analysis of Musharakah.................................................................................................................12Conclusion.................................................................................................................................................13References.................................................................................................................................................141

Assignment on Islamic Banking System Analysis_2

IntroductionIslamic finance is currently practiced round the world. It launches officially in 1970s, since thenIslamic finance departments have observed fast growth worldwide in Islamic and Non-Islamiccountries (Dudley,2001). Though the idea of Islamic finance has present for many centuries, butit came into practice in last centurial (De Jonge,1996). The Mit Ghamr Savings Banks of Egypt successfully practiced the Islamic finance for the firsttime in 1993 (Algaoud & Lewis, 2001). By 1970s the practice of Islamic finance has increasedrapidly. In an international conference of Muslim countries set to introduced an IslamicDevelopment Bank, the purpose of which was to increase the progress and economic growth inthe Muslim countries according to the principles of Shariah (Saeed,1996). This show the majoraction taken by the governments of Muslim countries in promoting Islamic banking. Law of Shariah forbid the Muslims to conduct any business which involves interest. It impliesthat followers of Islam neither can pay nor can receive interest, so they cannot conductbusinesses by taking money from conventional banking. So, the Islamic banks was establishedto service the economy (Jaffe, 2002).2

Assignment on Islamic Banking System Analysis_3

To compete or participate with the typical modes of finance which is based on interest, Islamicbanking institutions established the product which may fulfill the obligation of Shariah andprovide the values same as the values provided by the conventional banks. The main Islamicbanking products include profit and loss sharing (Musharakah and Mudarabah), and leasing(Rammal, 2004). MusharakahThe literal meaning of the word Musharakah is “sharing.” The root of this works, musharakah, isShirkah. Meaning of the word Shirkah is being a partner Musharakah is defined as the type ofpartnership in which two or more than two people combine or join each other labor andcapital. In this type of business all individual or investors share profit or loss according to theircontributions. One can registered this type of business in the category of partnership with thelimited liabilities and can also registered under the category of companies with the limitedliabilities (Ahmad, 2006).In this article we will discussed about Musharakah in detail. First, we will discuss that what ismeant by the term Musharakah and its types. Then this article provides the application ofmusharakah and problems of Musharakah will also discussed in this study. Musharakah (partnership) is the type of business which Islam introduced in its early period. TheHoly Quran and Apostle of Allah (S. A. W) approved musharakah or partnership. Last Prophet ofAllah, Muhammad (S. A. W), conducted himself business in the partnership with the others.3

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Assignment on Islamic Banking System Analysis