Mudaraba as a mode of finance in Islamic banking: theory, practice and problems

Zubair Hasan

MPRA Paper from University Library of Munich, Germany

Abstract: This paper seeks to analyze some of the aspects of mudarabah as a mode of financing business both from the theoretical and operational angles. At the theoretical plane the paper tackles the issue of the determination of the sharing of profit ratio for the outside financier in a competitive setting i.e. where the interest-free and interest-based systems operate side by side. It would show in a micro framework that the determination of this ratio would be a function of profit expectations, leverage ratio, rate of interest, and the risk factor. On the operational side, the paper analyzes the reasons of the unpopularity of the instrument not only with the financiers but also with the borrowers, and suggests some organizational arrangements to overcome the difficulties. The argument has a historical perspective.

Keywords: Islamic; banking; Mudarabah; Agency; problem (search for similar items in EconPapers)
JEL-codes: G2 G21 G24 (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-ban
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Middle East Business and Economics 2.14(2002): pp. 41-53

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/2951/1/MPRA_paper_2951.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2951

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).