Enhancing the application of musharakah through blockchain
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Islamic banks are still relying on debt-like modes of financing since most equity based finances need long term commitment. The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (interest).Additionally, PLS arrangements have been specifically acknowledged as ideal modes of financing in Islamic finance. But to date, the actual practice of Islamic banking has been far removed from these models. Nearly all Islamic banks, investment companies, and investment funds offer trade and project finance based on mark-up, commissioned manufacturing, or on leasing bases. There is not much difference in substance between IFIs and conventional financial institutions as IFIs offer products and services that are only legally Islamic or Shariah compliant. Musharakah for instance is venture capital funding provided by parties and both profit and risk are shared. Such participatory arrangements between capital and labor reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy.
Musharakah , Blockchain
Muneeza, Aishath and Jin, Zichu and Abdul Razak, Iman Najwa. (2018). Enhancing the application of musharakah through blockchain. Wahed Invest, (July 2018). Retrieved from https://journal.wahedinvest.com/enhancing-the-application-of-musharakah-through-blockchain/