THE IMPLEMENTATION PROFIT AND LOSS SHARING IN ISLAMIC BANKING IN MALAYSIA.docx - THE IMPLEMENTATION PROFIT AND LOSS SHARING IN ISLAMIC BANKING IN

THE IMPLEMENTATION PROFIT AND LOSS SHARING IN ISLAMIC BANKING IN MALAYSIA.docx

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THE IMPLEMENTATION PROFIT AND LOSS SHARING IN ISLAMIC BANKING IN MALAYSIA Profit and Loss Sharing is another mechanism of finance used by Islamic financial to comply with the religious prohibition on interest on loans that many Muslims subscribe to. There are two type of Profit and Loss Sharing used by Islamic banks which are Mudarabah ( ةبراضم ) and Musharakah ( ةكراشم or ةكرش ) . The business enterprise or person who has borrowed money from the Islamic bank shared profits and losses in Profit and Loss Sharing . When the loan is repaid, the lender collects some agreed upon percentage of the profits or deducts if there are losses along with the principal of the loan .This is different from conventional bank which collects some fixed rate of interest with the principal of the loan. In Islamic banking, the Profit and Loss Sharing bank acts as a capital partner in the mudarabah form of PLS and serving as an intermediary between the depositor on one side and the entrepreneur or borrower.
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