Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives

The profit sharing ratio in equity financed projects is decided by Islamic banks mainly through applying the relevant rate of return on capital. After first determining the return sought by the bank, the remainder of the expected profit is usually taken as the share of the joint partner, and the pr...

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Main Author:	Sadique, Muhammad Abdurrahman
Format:	Article
Language:	English
Published:	King Abdulaziz University 2009
Subjects:	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects
Online Access:	http://irep.iium.edu.my/4337/ http://irep.iium.edu.my/4337/ http://irep.iium.edu.my/4337/1/22-1-Sadique_07.pdf

id	iium-4337
recordtype	eprints
spelling	iium-43372011-09-21T00:57:48Z http://irep.iium.edu.my/4337/ Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives Sadique, Muhammad Abdurrahman HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects The profit sharing ratio in equity financed projects is decided by Islamic banks mainly through applying the relevant rate of return on capital. After first determining the return sought by the bank, the remainder of the expected profit is usually taken as the share of the joint partner, and the proportion adopted as the profit sharing ratio. Ideally, the profit sharing ratio should be decided through a mutual process considering the contributions of both partners, with due recognition of the level of liability each had borne. The period, as a factor common to the joint venture, could be redundant. Hence, the profit sharing ratio should be reflective of the capital and labour outlay of both the bank and the client, to the extent possible. In view of the socio-economic function expected of Islamic banks, the method for profit ratio calculation adopted should adequately consider the actual contributions of both the partners. Two bases possible are giving capital and labour of both partners equal weightage, and giving capital a weightage different from labour. King Abdulaziz University 2009 Article PeerReviewed application/pdf en http://irep.iium.edu.my/4337/1/22-1-Sadique_07.pdf Sadique, Muhammad Abdurrahman (2009) Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives. Journal of King Abdulaziz University Islamic Economics, 22 (1). pp. 27-52. ISSN 7383-1018 http://islamiccenter.kau.edu.sa/english/Journal/Issues/List.htm
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects
spellingShingle	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects Sadique, Muhammad Abdurrahman Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives
description	The profit sharing ratio in equity financed projects is decided by Islamic banks mainly through applying the relevant rate of return on capital. After first determining the return sought by the bank, the remainder of the expected profit is usually taken as the share of the joint partner, and the proportion adopted as the profit sharing ratio. Ideally, the profit sharing ratio should be decided through a mutual process considering the contributions of both partners, with due recognition of the level of liability each had borne. The period, as a factor common to the joint venture, could be redundant. Hence, the profit sharing ratio should be reflective of the capital and labour outlay of both the bank and the client, to the extent possible. In view of the socio-economic function expected of Islamic banks, the method for profit ratio calculation adopted should adequately consider the actual contributions of both the partners. Two bases possible are giving capital and labour of both partners equal weightage, and giving capital a weightage different from labour.
format	Article
author	Sadique, Muhammad Abdurrahman
author_facet	Sadique, Muhammad Abdurrahman
author_sort	Sadique, Muhammad Abdurrahman
title	Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives
title_short	Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives
title_full	Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives
title_fullStr	Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives
title_full_unstemmed	Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives
title_sort	profit and loss allocation among islamic bank and client partner in equity financing: practice, precepts and alternatives
publisher	King Abdulaziz University
publishDate	2009
url	http://irep.iium.edu.my/4337/ http://irep.iium.edu.my/4337/ http://irep.iium.edu.my/4337/1/22-1-Sadique_07.pdf
first_indexed	2023-09-18T20:12:30Z
last_indexed	2023-09-18T20:12:30Z
_version_	1777407571786727424

Profit and loss allocation among Islamic bank and client partner in equity financing: practice, precepts and alternatives

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