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The Functioning and Accounting of Musharakah Financing in Participation Banks and Firms; Problems and Recommendations

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  • Dinc, Yusuf

Abstract

Main income source of participation banks is loans. Participation banks keep the loans they generate in their balance sheet and distribute the income generated by these loans into participation pools and into their equity. The loan processes of participation banks are unique and not evaluated enough for literature. Musharakah financing as a unique financing model of non-interest financial institutions is currently in the foreground. Describing the process of musharakah financing is important to understand the difference between conventional and participation banks. This research evaluates the process of musharakah financing of participation banks for the first time. Accounting of musharakah and the problems are also included in the research. Moreover, with this research, it is included in the results that there is no difference between accounting of normal loans and musharakah financing.

Suggested Citation

  • Dinc, Yusuf, 2017. "The Functioning and Accounting of Musharakah Financing in Participation Banks and Firms; Problems and Recommendations," MPRA Paper 85336, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:85336
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    References listed on IDEAS

    as
    1. Bacha, Obiyathulla I., 1997. "Adapting Mudarabah Financing to Contemporary Realities: A Proposed Financing Structure," MPRA Paper 12732, University Library of Munich, Germany, revised Nov 1996.
    2. Zubair Hasan, 2008. "Credit Creation And Control: An Unresolved Issue In Islamic Banking "توليد" ومراقبة الائتمان: إشكال عالق لدى المصارف الإسلامية," Papers and books based on the proceedings of the Conferences organized by the Islamic Economics Institute, KAAU. 52, King Abdulaziz University, Islamic Economics Institute..
    3. Hasan, Zubair, 2008. "Credit creation and control: an unresolved issue in Islamic banking," MPRA Paper 8130, University Library of Munich, Germany, revised 07 Apr 2008.
    4. Erna Rachmawati & Ekki Syamsulhakim, 2004. "Factors Affecting Mudaraba Deposits in Indonesia," Working Papers in Economics and Development Studies (WoPEDS) 200404, Department of Economics, Padjadjaran University, revised Aug 2004.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Musharakah; accounting; Islamic banking; Islamic finance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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