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Sharīʿah Compliance of Conventional Participative Financing: A Proposed Way Forward التوافق الشرعي في التمويل التشاركي التقليدي - طريقة مقترحة

Author

Listed:
  • Khalid Rashid

    (Senior Consultant, Shibli Islam Rehan & Co., Islamabad, Pakistan)

Abstract

The purpose of this article is to propose a way forward for Sharīʿah compliance of interest based participative modes of financing. The article discusses profit sharing loans, silent partnership, venture capital and angel investment as candidates for Sharīʿah compliance. The article highlights the limitations encountered in the past for implementing Sharīʿah compliance under mushārakah and muḍārabah modes and suggests that, for successful Sharīʿah compliance, future work must fulfill the requirements of practical implementation. The article proposes an active engagement of entrepreneurs and investors with Sharīʿah experts for developing Sharīʿah compliant participative financing. The article is envisaged to contribute significantly as it provides an alternative approach for developing Sharīʿah compliant participative financing outside the realm of the banking system. تهدف هذه الورقة إلى اقتراح طريقة نحو التوافق الشرعي لأنماط التمويل التشاركية القائمة على الفائدة. وتناقش قروض المشاركة في الأرباح، والشراكة الصامتة، ورأس المال الاستثماري، والاستثمار الأمثل كطرق للتوافق الشرعي. ويسلط المقال الضوء على العقبات التي وقفت أمام تنفيذ الموافقة مع الشريعة في صيغتي المشاركة والمضاربة، وتبين الورقة إلى أنه من أجل تحقيق التوافق مع الشريعة الإسلامية بنجاح؛ يجب أن يفي العمل في المستقبل بمتطلبات التنفيذ. ويقترح المقال مشاركة نشطة من رجال الأعمال والمستثمرين مع فقهاء الشريعة لتطوير التمويل التشاركي المتوافق مع الشريعة الإسلامية. من المتوقع أن تسهم هذه المقالة بشكل كبير في اقتراح طريقة بديلة لتطوير التمويل التشاركي المتوافق مع الشريعة خارج نطاق النظام المصرفي.

Suggested Citation

  • Khalid Rashid, 2020. "Sharīʿah Compliance of Conventional Participative Financing: A Proposed Way Forward التوافق الشرعي في التمويل التشاركي التقليدي - طريقة مقترحة," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 47-64, July.
    • Handle: RePEc:abd:kauiea:v:33:y:2020:i:2:no:3:p:47-64
    DOI: 10.4197/Islec.33-2.3
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    References listed on IDEAS

    as
    1. Cumming, Douglas J. & MacIntosh, Jeffrey G., 2003. "A cross-country comparison of full and partial venture capital exits," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 511-548, March.
    2. Sami Al-Suwailem, 1998. "Venture Capital: A Potential Model of Musharakah رأس المال المخاطر: نموذج محتمل للمشاركة," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 10(1), pages 20-30, January.
    3. Steven N. Kaplan & Per Strömberg, 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 281-315.
    4. Ola Bengtsson, 2011. "Covenants in Venture Capital Contracts," Management Science, INFORMS, vol. 57(11), pages 1926-1943, November.
    5. Masudul Alam Choudhury, 2001. "Islamic venture capital - A critical examination," Journal of Economic Studies, Emerald Group Publishing, vol. 28(1), pages 14-33, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Participative financing; Sharīʿah compliance; Islamic finance; Profit sharing; Angel investors; Silent partnership. التمويل التشاركي، التوافق الشرعي، التمويل الإسلامي، المشاركة في الأرباح، مستثمرو الملاك، الشراكة الصامتة.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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