Challenges of profit-and-loss sharing financing in Malaysian Islamic banking

There are challenges faced by the profit-and-loss sharing (PLS) financing in Islamic banking institutions in Malaysia. PLS financing is comprised of mudharabah and musharakah contracts. This study evaluated the application and modus operandi of mudharabah and musharakah contracts before dwelling i...

Full description

Bibliographic Details
Main Authors:	Aisyah Abdul-Rahman, Shifa Mohd Nor
Format:	Article
Language:	English
Published:	School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia 2016
Online Access:	http://journalarticle.ukm.my/9811/ http://journalarticle.ukm.my/9811/ http://journalarticle.ukm.my/9811/1/4x.geografia-si-feb16-aisyah-edam.pdf

id	ukm-9811
recordtype	eprints
spelling	ukm-98112016-12-14T06:50:54Z http://journalarticle.ukm.my/9811/ Challenges of profit-and-loss sharing financing in Malaysian Islamic banking Aisyah Abdul-Rahman, Shifa Mohd Nor, There are challenges faced by the profit-and-loss sharing (PLS) financing in Islamic banking institutions in Malaysia. PLS financing is comprised of mudharabah and musharakah contracts. This study evaluated the application and modus operandi of mudharabah and musharakah contracts before dwelling into the challenges. While musharakah contract involves contribution of capital and labor by both the investor and the entrepreneur, mudharabah contract allows the investor to provide the capital and only the entrepreneur operates the business. In terms of return on investment, both partners share the profit or loss based on the pre-agreed ratio for musharakah; but only the capital provider bears the loss for mudharabah as the entrepreneur already forgone his or her effort for the project. In examining the challenges, we had conducted several interview sessions with Malaysian Islamic banks that offer PLS financing. The findings showed that there were four major obstacles to PLS financing such as high risk of investment; difficulty in selecting appropriate partners; demand comes from low credit worthiness customers; and lack of capital security. School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia 2016-02 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/9811/1/4x.geografia-si-feb16-aisyah-edam.pdf Aisyah Abdul-Rahman, and Shifa Mohd Nor, (2016) Challenges of profit-and-loss sharing financing in Malaysian Islamic banking. Geografia : Malaysian Journal of Society and Space, 12 (2). pp. 39-46. ISSN 2180-2491 http://www.ukm.my/geografia/v2/index.php?cont=a&item=2&thn=2016&vol=12&issue=2&ver=loc
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	There are challenges faced by the profit-and-loss sharing (PLS) financing in Islamic banking institutions in Malaysia. PLS financing is comprised of mudharabah and musharakah contracts. This study evaluated the application and modus operandi of mudharabah and musharakah contracts before dwelling into the challenges. While musharakah contract involves contribution of capital and labor by both the investor and the entrepreneur, mudharabah contract allows the investor to provide the capital and only the entrepreneur operates the business. In terms of return on investment, both partners share the profit or loss based on the pre-agreed ratio for musharakah; but only the capital provider bears the loss for mudharabah as the entrepreneur already forgone his or her effort for the project. In examining the challenges, we had conducted several interview sessions with Malaysian Islamic banks that offer PLS financing. The findings showed that there were four major obstacles to PLS financing such as high risk of investment; difficulty in selecting appropriate partners; demand comes from low credit worthiness customers; and lack of capital security.
format	Article
author	Aisyah Abdul-Rahman, Shifa Mohd Nor,
spellingShingle	Aisyah Abdul-Rahman, Shifa Mohd Nor, Challenges of profit-and-loss sharing financing in Malaysian Islamic banking
author_facet	Aisyah Abdul-Rahman, Shifa Mohd Nor,
author_sort	Aisyah Abdul-Rahman,
title	Challenges of profit-and-loss sharing financing in Malaysian Islamic banking
title_short	Challenges of profit-and-loss sharing financing in Malaysian Islamic banking
title_full	Challenges of profit-and-loss sharing financing in Malaysian Islamic banking
title_fullStr	Challenges of profit-and-loss sharing financing in Malaysian Islamic banking
title_full_unstemmed	Challenges of profit-and-loss sharing financing in Malaysian Islamic banking
title_sort	challenges of profit-and-loss sharing financing in malaysian islamic banking
publisher	School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia
publishDate	2016
url	http://journalarticle.ukm.my/9811/ http://journalarticle.ukm.my/9811/ http://journalarticle.ukm.my/9811/1/4x.geografia-si-feb16-aisyah-edam.pdf
first_indexed	2023-09-18T19:55:47Z
last_indexed	2023-09-18T19:55:47Z
_version_	1777406519215652864

Challenges of profit-and-loss sharing financing in Malaysian Islamic banking

Similar Items