Analysing the Present State and Future Agenda
Studies in Islamic Finance, Accounting and Governance series
Chapter 18: Problems of profit–loss sharing
The theory of Islamic banking visualizes profit–loss sharing (PLS) as an ideal form for financing. Several Muslim scholars have expressed dissatisfaction in the contemporary practice of Islamic banks because they do not follow profit–loss sharing as a dominant mode of finance. They have adopted other modes of finance, like mark-up (murabaha), leasing (ijara), cash advances for the purchase of agricultural produce (salam) and cash advances for the manufacture of assets (istisna’). These modes of finance provide a fixed return on banks’ capital and are in compliance with Islamic law. We shall examine the practice of Islamic banks in the subsequent two chapters. In this chapter we aim to show that the pristine theory of Islamic banking that recommends PLS as an ideal form of financing has several insurmountable obstacles. Insistence on PLS may also defeat the very purpose for which Islamic banking was started in the first instance.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.