Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?

According to Islamic guidelines on partnership ventures, the profit sharing ratio is determined at the outset, and the actual return to the partners is ascertained at the end on the basis of realised profits. In financing partnership ventures, Islamic banking usually fix the profit sharing ratio th...

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Main Author:	Sadique, Muhammad Abdurrahman
Format:	Conference or Workshop Item
Language:	English English English
Published:	2008
Subjects:	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects KBP639 Muʻāmalāt
Online Access:	http://irep.iium.edu.my/7254/ http://irep.iium.edu.my/7254/ http://irep.iium.edu.my/7254/1/Paper_4.pdf http://irep.iium.edu.my/7254/4/Support_docs_Intac_iv_Conf_M_A_Sadique.docx http://irep.iium.edu.my/7254/5/INTAC_iv.pdf

id	iium-7254
recordtype	eprints
spelling	iium-72542013-03-26T08:32:59Z http://irep.iium.edu.my/7254/ Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible? Sadique, Muhammad Abdurrahman HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects KBP639 Muʻāmalāt According to Islamic guidelines on partnership ventures, the profit sharing ratio is determined at the outset, and the actual return to the partners is ascertained at the end on the basis of realised profits. In financing partnership ventures, Islamic banking usually fix the profit sharing ratio through applying the relevant rate of return on capital, taking into consideration the size of the bank’s investment and the period of the exposure. After first determining the return sought by the bank on its capital outlay, the remainder of the expected profit is usually taken as the share of the client / joint partner, and the proportion adopted as the ratio of profit sharing. Profit sharing ratio agreed in an ideal environment should bring about a fair share of the proceeds to each partner and adequately consider, among other factors, their actual contributions and the level of liability borne. The period, as a factor common to the joint venture and thus affecting both partners, could be redundant, and should not significantly influence the process. In the case of Islamic banks, in view of the socio-economic function they are supposed to perform, fixing the profit sharing ratio in joint ventures could not be regarded solely a business decision. As such, Islamic banks should be persuaded to adopt a method for profit ratio calculation that adequately considers the actual contributions of both the partners. Two bases possible are giving capital and labour equal weightage, considering profit to result from both equally, and giving each a weightage different from the other, considering the relative importance of each in the venture concerned. 2008-06-24 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/7254/1/Paper_4.pdf application/pdf en http://irep.iium.edu.my/7254/4/Support_docs_Intac_iv_Conf_M_A_Sadique.docx application/pdf en http://irep.iium.edu.my/7254/5/INTAC_iv.pdf Sadique, Muhammad Abdurrahman (2008) Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible? In: IIUM International Accounting Conference IV (INTAC IV), 24-26 June, 2008, Marriot Putrajaya Hotel. http://www.iium.edu.my/intac4
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English English
topic	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects KBP639 Muʻāmalāt
spellingShingle	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects KBP639 Muʻāmalāt Sadique, Muhammad Abdurrahman Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?
description	According to Islamic guidelines on partnership ventures, the profit sharing ratio is determined at the outset, and the actual return to the partners is ascertained at the end on the basis of realised profits. In financing partnership ventures, Islamic banking usually fix the profit sharing ratio through applying the relevant rate of return on capital, taking into consideration the size of the bank’s investment and the period of the exposure. After first determining the return sought by the bank on its capital outlay, the remainder of the expected profit is usually taken as the share of the client / joint partner, and the proportion adopted as the ratio of profit sharing. Profit sharing ratio agreed in an ideal environment should bring about a fair share of the proceeds to each partner and adequately consider, among other factors, their actual contributions and the level of liability borne. The period, as a factor common to the joint venture and thus affecting both partners, could be redundant, and should not significantly influence the process. In the case of Islamic banks, in view of the socio-economic function they are supposed to perform, fixing the profit sharing ratio in joint ventures could not be regarded solely a business decision. As such, Islamic banks should be persuaded to adopt a method for profit ratio calculation that adequately considers the actual contributions of both the partners. Two bases possible are giving capital and labour equal weightage, considering profit to result from both equally, and giving each a weightage different from the other, considering the relative importance of each in the venture concerned.
format	Conference or Workshop Item
author	Sadique, Muhammad Abdurrahman
author_facet	Sadique, Muhammad Abdurrahman
author_sort	Sadique, Muhammad Abdurrahman
title	Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?
title_short	Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?
title_full	Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?
title_fullStr	Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?
title_full_unstemmed	Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?
title_sort	equity partnership in joint enterprises by islamic banks: is a more equitable approach to sharing profit and loss possible?
publishDate	2008
url	http://irep.iium.edu.my/7254/ http://irep.iium.edu.my/7254/ http://irep.iium.edu.my/7254/1/Paper_4.pdf http://irep.iium.edu.my/7254/4/Support_docs_Intac_iv_Conf_M_A_Sadique.docx http://irep.iium.edu.my/7254/5/INTAC_iv.pdf
first_indexed	2023-09-18T20:16:34Z
last_indexed	2023-09-18T20:16:34Z
_version_	1777407827042631680

Equity Partnership in joint enterprises by Islamic banks: Is a more equitable approach to sharing profit and loss possible?

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