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Showing posts from April, 2017

How the jurists solve partnership problem in the agricultural activities??

Crafting agricultural product and loss sharing (aPLS) in the place of profit and loss for Islamic agricultural finance.             First and foremost, this article which was written by Muhammad Hakimi Bin Mohd Shafiai discussed about the principles used in financing the agricultural industries according to the Islamic jurisprudence. Consequently, in order to solve the riba-based financial issues, partnership contract is commonly introduced and used by the jurists as it proposed an equitable risks and profits sharing. In addition, partnership contract is based on some principle such as mudharabah, musharakah and etc.             The author focussed on al-mudaraba, al-musharaka, al-muzara’a and al-musaqa concept with a brief explanation on the definition and practices in economy activities based on Islam. Furthermore, we will be exposed on a several example of partnership contract implemented on agricultural activities and some of inappropriate practices by financial institutions on thi…

How does Islam view profit maximization?

Islamic teaching generally approves lawful earnings and profit levels which do not lead to exploitation. Thus, profit maximization is accepted in Islam with certain conditions. The article of ‘Islamic Perspectives on Profit Maximization’ discussed the Islamic prescriptions on profit maximization into two major discussions; i.Islamic Ethics and Business Conduct Businesses should prioritize ethical value and conduct in earning profits. Thus it is expected for the business to apply and create an ethical environment in the business by referring to Islamic ethics. Four foundations of Islamic ethics[1] is emphasized is ihsan, relationship with others, equity, and accountability. Ihsan means goodness and generosity in business activities or management. Ihsan also includes the values of mercy, justice, forgiveness, tolerance and attentiveness. These values are interconnected with the second foundation which is relationship with people which is succinctly related by the Prophet’s saying: “Al-Din…

Profitability of Islamic Bank

Islamic bank was established based on interest-free institution. The objective of this institution is to issue financial facilities by providing financial instruments that comply and in line with the revelations in the Quran and the Hadith. It’s to render socio-economic benefits to the Muslim communities.     The operation of Islamic banks and the conventional banks are totally different. Islamic banks promote profit and loss sharing (PLS) between investors and entrepreneurs. It is guided by the shariah principles. Since the Islamic banks do not charge interest and therefore do not lend money, they have developed some techniques such as murahabah contract, musharakah, and mudharabah to invest money and gain profit.     In conventional banks, the depositors will be informed exactly about the amount of the returns from their deposits while in Islamic banks this information will not be provided. Basically, we can determine it based on assumption and historical fact.      As we know, …

Article Review: The Effect of Conventional Interest Rates and Rate of Profit of Funds Deposited with Islamic Banking System in Malaysia

By Dr Sudin Haron & Norafifah Ahmad
            In conventional banks, the depositors will be informed exactly about the amount of the returns from their deposits while in Islamic banks this information will not be provided. Basically we can determine it based on assumption and historical fact.             As we know, most of the banks get their major funds from depositor’s money including Islamic banks. The factors that influenced the depositor’s decision making in depositing their money with the Islamic banks need to be determined by the management of Islamic banks clearly. For instance, religion as a factor for the customers to choose the Islamic banks in Bahrain. However, in Turkey and Sudan a study shows religion is not the main reason for depositor choosing Islamic banks. While in Malaysia and Singapore both religion and profit are the factors.             It has been pointed out that both the rate of profit applied in Islamic banking system and the rate of interest have solid…