Scribd Logo
Upload

Welcome to Scribd!

  • 322 views

    Running Musharakah' by Islamic Banks in Pakistan: Running From Musharakah or Moving Back To Square One

    Uploaded by

    Aqeel Raza
    The document discusses "Running Musharakah" financing models used by Islamic banks in Pakistan. It notes that while Islamic banks are meant to avoid interest and involve profit/loss sharing, many current models like murabahah and leasing replicate conventional interest-based financing. The document then describes how one bank implemented a "Running Musharakah" model starting in 2008 based on the idea of Mufti Taqi Usmani, which grew to become the bank's top financing product by 2015. However, critics argue it has been treated like conventional overdraft borrowing rather than true musharakah partnership. The document explains how the Running Musharakah model works, calculating financing limits and profit/loss sharing

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Running Musharakah' by Islamic Banks in Pakistan: Running From Musharakah or Moving Back To Square One

    Uploaded by

    Aqeel Raza
    322 views2 pages
    The document discusses "Running Musharakah" financing models used by Islamic banks in Pakistan. It notes that while Islamic banks are meant to avoid interest and involve profit/loss sharing, many current models like murabahah and leasing replicate conventional interest-based financing. The document then describes how one bank implemented a "Running Musharakah" model starting in 2008 based on the idea of Mufti Taqi Usmani, which grew to become the bank's top financing product by 2015. However, critics argue it has been treated like conventional overdraft borrowing rather than true musharakah partnership. The document explains how the Running Musharakah model works, calculating financing limits and profit/loss sharing

    Original Description:

    Running Musharakah

    Original Title

    Running Musharakah

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses "Running Musharakah" financing models used by Islamic banks in Pakistan. It notes that while Islamic banks are meant to avoid interest and involve profit/loss sharing, many current models like murabahah and leasing replicate conventional interest-based financing. The document then describes how one bank implemented a "Running Musharakah" model starting in 2008 based on the idea of Mufti Taqi Usmani, which grew to become the bank's top financing product by 2015. However, critics argue it has been treated like conventional overdraft borrowing rather than true musharakah partnership. The document explains how the Running Musharakah model works, calculating financing limits and profit/loss sharing

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    322 views2 pages

    Running Musharakah' by Islamic Banks in Pakistan: Running From Musharakah or Moving Back To Square One

    Uploaded by

    Aqeel Raza
    The document discusses "Running Musharakah" financing models used by Islamic banks in Pakistan. It notes that while Islamic banks are meant to avoid interest and involve profit/loss sharing, many current models like murabahah and leasing replicate conventional interest-based financing. The document then describes how one bank implemented a "Running Musharakah" model starting in 2008 based on the idea of Mufti Taqi Usmani, which grew to become the bank's top financing product by 2015. However, critics argue it has been treated like conventional overdraft borrowing rather than true musharakah partnership. The document explains how the Running Musharakah model works, calculating financing limits and profit/loss sharing

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 2

    1

    ‘Running Musharakah’ by Islamic Banks in Pakistan: Running from Musharakah or

    Moving back to Square One

    People consider Islamic banking as interest free and lender share the profit or loss with

    borrower. Profit and loss sharing are fundamental principle of Islamic banking. Currently,

    Islamic banking are criticized for replicating the conventional product that carry fixed interest

    rate and do not purely using Musharakah and Mudarabah for financing of operations. Net result

    of the using modes like murabahah and leasing are often the same as that of interest-based

    financing despite the fact they are backed by asset financing.

    Mufti Taqi Usmani presented the idea of running musharakah based on shirkah al-‘aqd

    (operated firstly in 2008-09). RM turned out to be the number one mode of financing by the

    Bank in 2015 being 25 % of its financing portfolio from just 2 % in 2012), while murabahah

    came down only to 10% of its total portfolio. Criticism is that the market is taking it as an

    alternative to OD based borrowing, while musharakah can never be borrowing. Therefore, it can

    not be termed as Musharakah in real sense.

    RM offers an alternative for running finance to corporate customer who want luxury of

    drawing cash any time and paying at any time for one year or agreed term. Profit sharing ratio

    (PSR) is agreed with two tiers. Corporate sector prefers RM because they can get huge sum and

    have to pay a fixed rate without any juristic requirement in case of murabahah and ijarah. Just

    like the OD limit, RM Limit is calculated as (80) % of the average value of Stock-in-Trade and

    Trade Receivables appearing in the preceding financial years’ statement of the applicant

    company.

    Average Musharakah Investment

    1. (Adjusted COGS x Inventory turnover in days)/ Musharakah period in days.


    2

    2. Adjusted COGS x Average collection period in days /Musharakah period in days

    The cost of sale item is included in Musharakah capital while rents, tax, insurance are excluded.

    Regarding the profit above the agreed profit ceiling, bank agreed to decrease its

    share to as low as 0.01 giving 99.99 % to the client. In case of loss, will be shared between the

    parties in proportion to their respective investment ratio.

    Regards,

    Syed Aqeel Raza

    04151613073

    BSBA-6A

    You might also like