Musharaka & Mudarabah - As Modes of Financing

In case their negligence is proved in terms of

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In case their negligence is proved, in terms of mishandling the transaction or relaxed due diligence they will have to bear all the losses. Santro & Askari Leasing. Current problems with car leasing. Musharakah on Real Estate - Bank Al Salam Presentation. 17
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Some Objections on Musharakah Diversified Portfolio of Musharakahs The profitable Musharakahs are expected to give more return than the interest-based loans, because the actual profit is supposed to be distributed between the client and the bank. This theoretical possibility of loss in a financial institution is much less than the possibility of loss in a joint stock company whose business is restricted to a limited sector of commercial activities Can we create a “Mutual Fund of Musharakahs” Private Equity? 18
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Some Objections on Musharakah Al Kharaj Bid Daman Risks can be identified and minimized through diversification etc., where it becomes a hypothetical or theoretical risk only. However, these cannot be bundled and passed on to someone else. Systematic Vs Unsystematic Risks Diversifiable Vs Non-Diversifiable Risks Creating a mentality which believes that any profit earned on money is the reward of bearing risks of the business basically believing in Tawhid. 19
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Some Objections on Musharakah With you in my mind? The problem is created by the system which separates the banking and financing from the normal trade activities, and which has compelled the people to believe that banks and financial institutions deal in money and papers only, and that they have nothing to do with the actual results emerging in trade and industry. Islam has its own values and principles which do not believe in separation of financing from trade and industry. 20
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Some Objections on Musharakah Dishonesty Dishonest clients may exploit the instrument of Musharakah by not paying any return to the financiers. They can always show that the business did not earn any profit. Code of Corporate Governance. Auditing Standards. Monitoring & Inspection. Most of the Mudarabahs have been looted by their sponsors than their clients. 21
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Some Objections on Musharakah Secrecy of the Business Our social culture to explore personal lives of others may have a reflection here. Trade secrets. Insider Trading is already there in conventional system. Condition can be imposed so as not to interfere with the management of Musharakah. 22
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Some Objections on Musharakah Client’s Unwillingness to Share Profits In some instances, the clients would like to give a ‘fixed’ return to the financing institution. e.g., Real Estate Transactions. Why should profits be shared when all the bank has done is provide money? A Muslim or a Good Human Being? Pre-agreed profit rate can be varied. 23
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