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Challenges and Solutions for Mudarabah as the Prime Investment Tool of Islamic Financing: A Literature Review

Author

Listed:
  • Md Din Islam Miah

    (Putra Business School, Malaysia)

  • Rosalan Ali

    (Putra Business School, Malaysia)

  • Norhanim Mat Sari

    (Putra Business School, Malaysia)

Abstract

Mudarabah is an equity-based, completely Riba-free investment tools for Islamic Banks and financial institutions. Being a risk-sharing financing system, it helps to establish justice in the financial sector as required by the Islamic Shariah objectives for a balanced economic and social development. But in practical situations there are no use of this tool for Islamic financing in the Islamic Banks and financial Institutions in Bangladesh. The study’s main objective is to investigate the challenges for non-performance of Mudarabah financing system in Bangladeshi Islamic Financial Institutions and recommendation of possible solutions. This is a comprehensive literature review of current and related articles of the scholars around the world to find out the possible recommendations. A qualitative methodology is adopted to achieve the objectives of this study by using secondary data. This study explores the reality of less preference for the Mudarabah financing by Islamic Banks and Financial Institutions. The challenges are the moral hazard, agency problem, absence of regulations, issue of Shariah board, financial inclusion. This study recommended for a regulation of Islamic banking, Knowledge development professionals, Central shariah board and Independent Shariah audit and disclosures of shariah audit findings and application of fintech. The recommend solutions and its implementation may enhance the effectiveness and credibility of Mudarabah financing for a shariah compliance of Islamic financing system in Bangladesh.

Suggested Citation

  • Md Din Islam Miah & Rosalan Ali & Norhanim Mat Sari, 2023. "Challenges and Solutions for Mudarabah as the Prime Investment Tool of Islamic Financing: A Literature Review," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(9), pages 2168-2185, September.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:9:p:2168-2185
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    References listed on IDEAS

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