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PHILOSOPHY OF ISLAMIC BUSINESS
AND BANKS
Based on the principles of mudharabah.
Embezzlement
Larceny
]gambling
Ancillary principles
Wadiah
Rahn
PRINCIPLES OF SYARIAH IN IB
Mudharabah
An agreement whereby the owner of some property (the
financier) gives a specified amount of capital to another
person (the entrepreneur).
The profit will be shared between both parties according
to the terms of their agreement.
Losses will be borne by the financiers.
However if the losses is due to the negligence of the
entrepreneur, he must be responsible for the loss.
PRINCIPLES OF SYARIAH IN IB
Al-musyarakah
A joint venture agreement between two parties to engage
in a specific business activity with an aim of making
profit.
Both parties will provide capital and they will participate
in the management.
In the event of loss, all parties bear the loss in proportion
to their share in the financing.
PRINCIPLES OF SYARIAH IN IB
Murabahah
The sale of goods at a price covering the purchase price
plus a profit margin agreed upon by both parties.
The lender buys goods wanted by borrower for resale to
the borrower at a higher price, agreed upon by both
parties.
PRINCIPLES OF SYARIAH IN IB
Bai-mua’zzal
The borrower is allowed to defer settlement of payment
for goods purchased within the period, and in a manner
determined and agreed by both parties.
Al-ijarah
The bank purchases the asset required by the customer
and then leases the asset to the customer for a fixed
period on a lease rental basis, agreed by both parties.
PRINCIPLES OF SYARIAH IN IB
Ijarah wa-iktina
The bank purchases an asset for the purpose of renting
the same to the customer against the agreed rental.
Involves agreement that the client will make payment
which eventually lead to the transfer of ownership from
bank to customer.
PRINCIPLES OF SYARIAH IN IB
Qard hassan
Borrower is obligated to repay the lender the principal
sum borrowed on maturity of the loan.
Al-wadiah
The owner of funds will deposit and give consent to the
custodian to make use of their funds as long as these
assets remain in the custodian’s hands.
PRINCIPLES OF SYARIAH IN IB
Rahn
A contract of pledging a security and becomes binding
when possession of the pledge has taken place.
The ownership of the security is not transferred to the
pledgee.