The Benefits Of Mudarabah Interbank Investment

702 Words2 Pages
bulb-icon

Recommended: Literature Review of Islamic Banking

In Mudarabah Interbank Investment (MII), the Shariah concept which is applicable is Mudarabah or also knows as Profit sharing. This refers to a form of partnership between the capital contributor or the rabb al-mal and the manager who contributes his or her managerial skills or also known as the mudarib. The profit from the partnership is shared between the rabb al-mal and mudarib following the mutually agreed profit sharing ratio while losses are is the responsibility solely of the capital provider, the rabb al-mal, on condition that the loss is not because of the manager’s carelessness or violation of specified conditions (Bank Islam Malaysia Berhad, "Interbank Investment Account (Mudarabah) (IIA Mudarabah)").

Profit of Mudarabah Interbank Investment is determined by …show more content…

As Mudharabah applies the concept of profit- sharing, the probability of attainment of profits or suffering of losses is resultant from economic activities. The maturity of Mudarabah Interbank Investment in the Islamic Interbank Money Market is possible to be an overnight basis, but yet Mudarabah Interbank Investment, within this short-term period can help contribute to the economic condition. The Islamic Interbank Money Market is destined for managing short-time period liquidity to support activities banks carry out, which is the usage of funds from the excess unit, to fund the shortage units, and to match or equalize the socioeconomic and financial needs between the two units. Mudarabah Interbank Investment, may actually indirectly contribute to economic growth as a part of the entire organization of the Islamic Financial Institutions needs Islamic Interbank Money Market to guarantee the continuousness of their businesses, and Mudarabah Interbank Investment is as a tool for this purpose. (Saiti, Hasan, & Adawiah, Islamic Capital Markets: Volatility, Performance and

Show More
Related

  • Zakat Analysis

    827 Words  | 2 Pages

    It is adequate to note that the financial assets in banks for the rich Arabs, their amount is valued is more than 1190 ...

    Read More

  • The Federal Reserve System

    652 Words  | 2 Pages

    U.S. financial markets assume a vital part in helping the wellbeing and productivity of the economy, businesses, and individuals. There is a solid relationship between the soundness of the economy and budgetary business improvement and monetary development, resulting in the slightest change in financial markets greatly affecting the economy, businesses, and individuals. Financial markets influences the increase in capital, removes the risk of subsidiaries, and liquidity in currency markets. When the monetary markets are doing admirably, "firm-level, industry-level, and cross country considers all propose that the level of money related advancement applies an expansive, positive effect on financial development." (MIT, 2001)

    Read More

  • What is Islamic Finance?

    3003 Words  | 7 Pages

    The modern Islamic Finance industry is young, its timeline begin only a few decades ago. However, islamic finance is involving rapidly and continues to expend to serve a growing population of muslims as well as conventional.

    Read More

  • Musharakah: The Structure Of Sharing In The Islamic Banking

    1391 Words  | 3 Pages

    Musharakah financing are the structure of project financing, syndicated financing, asset financing, working capital financing, contract financing, trade financing and structured products. One of the frequent Musharakah applications in asset financing is Musharakah Mutanaqisah which well known as diminishing partnership. Musharakah Mutanaqisah is a contract of partnership between two parties, where one partner step by step buys the whole parts of the property. The transaction will start with the formation of partnership where the buying and selling of the equity will occur between the two partners. It is necessary that buying and selling should not be stipulated in the partnership contract. Furthermore, the buying and selling agreement must be independent of the partnership contract where it is not allowed that one contract should be entered into as a condition for ultimate the

    Read More

  • Islamic Financing vs the Capital Asset Pricing Model (CAPM)

    2951 Words  | 6 Pages

    The primary objective of this article is to lay down the hypothetical framework, which discusses the Profit and loss sharing based on Islamic principles with the investment of interest free partnership. According to the author, Islamic financing is based on the risk that is beard by the both parties. On the time of investment, whether agents have shortage or surplus of resources, they have to share the returns and risk on the investment they are making. General concepts of Islamic financing instruments like Mudarabah, Musharakah, Murabahah, Al-Salam and Al-Ijara are based on the mechanism of profit and loss sharing (PLS). All of these above mentioned partnerships are based on the agreed upon the subsequent loss or th...

    Read More

  • Macroeconomic Impact on Business Operations

    1602 Words  | 4 Pages

    Money supply is the availability of money in the hands of the public (economy) that can be used to purchase goods, services and securities. In macroeconomics, the price of money is equivalent to the rate of interest. There's an inverse relationship between money supply and interest rates. As money supply increases, interest will decrease. On the other hand, interest will increases as money supply decreases. It is very important to understand that the economy works at market equilibrium. There are several factors affecting money supply; and these contributing factors will be the main focus of this paper. Understanding the basic principle on money supply is imperative to have a good grasp on the macroeconomic impact of money supply on business operations.

    Read More

  • The Pros And Cons Of Musharakah

    525 Words  | 2 Pages

    The term Musharakah comes from Arabic origin of word which literally means sharing. According to Ibn Arfa (1984), Musharakah is defined as: “An agreement between two or more persons to carry out a particular business with the view of sharing profits by joint investment”. Meanwhile, The Mejella (1329) defines it as an “Agreement for association on the condition that the capital and its benefit be common between two or more persons”. Another Muslim jurist, Mohammad Akram Khan (1990) defines a partnership or musharakah as: “A contract between two persons who launch a business of financial enterprise to make profit”. Based on the latest BNM parameter on musharakah contract, the parameter covers capital, management, profit sharing, loss sharing and joint ventures. An article written by Noraziah Che Arshad and Abdul Ghafar Ismail on October 2010 had discussing on several comment on the Musharakah shariah parameter. The discussion of each parameter in focusing on the capital contribution by all partners, management of musharakah venture, profit sharing rights, loss sharing, and partnership ...

    Read More

  • Definition Of The Al Ijarah Thumma Al-Bay (AITAB)

    2117 Words  | 5 Pages

    The Academy has allowed a combined ijarah and sale transactions involving the same subject matter. In addition, a fatwa passed by the International Association of Muslim Scholars has ruled that a valid Islamic hire purchase should consist of an ijarah contract and gift (hibah), which shall follow three conditions. The conditions consist of the period of ijarah must be precisely specified and its rules must be observed during that period, then the amount of periodic payment must be fixed and lastly, transfer of ownership from the owner to the lessee is made effective by way of gift at the end of the ijarah

    Read More

  • Mudarabah Case Study

    1502 Words  | 4 Pages

    There are a number of features or principles which are attributable to the Mudarabah contract. These include nature of contract, capital, profit sharing right and treatment of losses.

    Read More

  • Investment Bank Case Study

    1651 Words  | 4 Pages

    Historical function of the investment banks in Malaysia. Discuss the function of banks as early as in the 50s-60s and make comparison with the 70s & 80s as well as what is new in the year of millennium.

    Read More

  • Board Of Directors Essay

    852 Words  | 2 Pages

    There is some criticism regarding the independency of Shariaa board .One of them is the remuneration that paid to the SSB from the financial institutions or shareholders of the financial institution may raise a conflict of interest and consequently it may affect their independency. This criticism has been confirmed by Banaga et al. (1994), who found out that some Sharia board member may approve a doubtful operation to avoid any pressure that may arise from shareholders and satisfy their needs and accordingly remain active in the board. This action may lead another Islamic financial institution to follow and imitate

    Read More

  • Essay On Mudharabah

    664 Words  | 2 Pages

    Mudharabah have two types. There are mudharabah muthlaqah and mudharabah muqayyadah. Mudharabah muthlaqah means the purpose is to form collaborations between capital owners and managers of capital coverage is very broad and not limited by the specifications of the effort, time and the business district. In the discussion of fiqh scholars forbearers sholih often exemplified by expression if'al ma syi'ta (please do as you please) of the owners of capital to capital manager that gives enormous power. Mudharabah muqayyadah means it is type of the opposite of mudharabah muthlaqah. That is capital constrained by the limitations of governors of effort, time or place of business. The difference between them lies in the restriction of the use of capital in accordance with the will of the owners of capital.

    Read More

  • The Advantages of Islamic Finance and Banking

    1173 Words  | 3 Pages

    As the world has recently passed through the global financial crisis that begun in 2008 in the USA with the banks’ collapsing, analysts are giving different opinions and making new economic hypothesizes about the origin of, as well as the process of different countries escaped from the crisis. Among all these new “theories”, the case of Islamic banks is interesting in terms of its nature and consequences. In my essay, I will try to highlight the basic principles of the Islamic finance, the reasons of the restriction of interest, the most important tools used by Islamic banks in economic activities and brief explanation of them, and finally my view point of the probable future improvement of the Islamic financial system.

    Read More

  • Essay On Islamic Banking

    2135 Words  | 5 Pages

    Our group have been assinged to discuss on the topic above but in Islamic Banking perspectives. Therefore, before going any further, let us clarify definition of the Principles of Islamic Banking and clarify what are the elements involve in the Principles of Islamic Banking. Beside, we will also do some comparison of product or services offered by both banks which are conventional and Islamic banking. Apart from that, we will also clarify the problems or challenge faced by the agency which practices the Islamic banking in their agency.

    Read More

  • Quranic Verses In Islam

    708 Words  | 2 Pages

    Islamic financing system is not manmade system like conventional financing system. This system is fully based on Shariah rules and regulations. These rules and regulations are derived from the Holy Quran and Ahadees. All the transaction, dealing, business types, products features, responsibility etc should be within the limit of Shariah,

    Read More

More about The Benefits Of Mudarabah Interbank Investment

Open Document