Showing posts from March, 2017

Article Review: A Study on Conventional Banking, Islamic Banking and its Treatment of Profit and Loss

By Asst. Prof. Sameena Begum
        Justice is the unique law of Islamic banking, a basic requirement for all sort of Islamic financing. Profits or loss are being shared with the investor and receiver rather than putting the entire burden to the entrepreneur. When the investor shares the profit, he will also has to bear the loss in accordance with proportional share. The principle of fairness and justice is important between two parties in order to have a fair distribution of output. Because of profit sharing, Islamic banks gives a higher rate of returns as oppose to conventional banking that gives a fixed return to the depositors without looking at the performance of banks.               Islamic banks are offers the contract of Mudarabah. In Mudarabah partnership, Rabbul Mal[1] and Mudarib[2] are to agree on the proportion of profit sharing between them with mutual consent. The profit ratio has to be decided at the time of contract. They can agree on equal sharing or different proport…

Article Review: Riba and Islamic banking

by Ahmad, A. U. F., & Hassan, M. K.
The responsibility of a Muslim towards another Muslim are many, including to learn about Islamic transaction when they are dealing with business trade, finance and buying and selling transaction. This kind of knowledge will avoid them from being trapped/involved with riba transaction and other prohibited elements in Islam             Riba is derived from an Arabic word ‘raba’ that literally means ‘to grow’ or ‘expand’ or ‘increase’. Technically, riba could be defined as ‘premium’ that must be paid by the borrower to the lender along with the principal as a condition for a loan or for an extension in its maturity. Riba has been classified into two categories according to the transaction which give rise to riba: Riba al-nasiah (delayed payment interest) which involves lending and borrowing,Riba al-fadhl (increase interest) which involves buying and selling.
            The main hadith with reference to the comprehensive meaning of riba is one which wa…

Article Review: Conventional Bank Interest and the Murabahah (cost-plus-profit) Contract in Islamic Finance: Two sides of a Coin or two Coins of different Sides?

By Abdullahi Saliu Ishola & Isa Olawale Solahudeen 
Murabahah is commonly used for financing the purchase of raw materials, machinery, equipment, and consumer durables. Because of the trust involved in the transaction and the aspiration of people that Murabahah is able to meet, it has been widely used and customers of Islamic banks all over the world have been making a preferred choice over other contracts. Murabahah contract is legal in accordance to the Shariah law and it had been practised by the early generations of Muslims. However, in the modern days, there are criticism and condemnation of some contemporary jurists. One of the argument is that Murabahah is too close to bank interest (Riba), or even the same as bank interest, but just called or being ‘legalised’ with other name or brand. “Murabahah may be defined as a sale in which the margin of profit is mutually agreed upon between the buyer and the seller. The payment of sale price, inclusive of the agreed profit margin, ma…

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