The age-old concept of partnership was seen by Muslim jurists from the 8th century Hijra onwards as a sacrosanct commercial arrangement—and, therefore, subjected to a form of fixity which is unparalleled in any other religious tradition. Since the formative period of Islamic law, the limited-liability partnership, or muḍāraba, a specific variation of the over-arching mushāraka partnership, has continued to hold central importance for Muslims. Yet, despite this centrality, it has not been examined with a view to reformulating it for contemporary Islamic banking and finance. This has led to its virtual neglect in modern Islamic banking operations. This article suggests that the revival of the muḍāraba facility requires the overcoming of key disadvantages inherent in its structure and that a restructuring on the basis of the hybrid facility called participating preferred ijāra is one possible way of achieving such an outcome.
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Mohammad O. Farooq, “Partnership, Equity-Financing and Islamic Finance: Whither Profit-Loss Sharing?”, Review of Islamic Economics 11 (2007): 68.
Taqi Usmani, An Introduction to Islamic Finance (The Hague: Kluwer Law International, 2002).
Mahmoud El-Gamal, Islamic Finance: Law, Economics, and Practice (New York: Cambridge University Press, 2006).
Ibid., p. 19.
Ibid., p. 13.
See Andrew Winton, “Limitation of Liability and the Ownership Structure of the Firm”, Journal of Finance 48 (1993): 487-512; Timur Kuran, “The Logic of Financial Westernization in the Middle East”, Journal of Economic Behavior and Organization 56 (2005): 593-615.
See Bernard Jackson, Jewish Law in Legal History and the Modern World (Leiden: Brill, 1980).
Ibid., p. 81.
Ibid., p. 70.
See Siddiqi, supra note 27; M. Umar Chapra, “Why has Islam prohibited interest? Rationale behind the prohibition of interest”, in A.S. Thomas (Ed.), Interest in Islamic Economics: Understanding Ribā (London: Routledge, 2006).
Mohammed Uzair, Interest-Free Banking (Karachi: Royal Book Company, 1978).
Murat Çizakça, A Comparative Evolution of Business Partnerships: The Islamic World and Europe, with Specific References to the Ottoman Archive (New York: E.J. Brill, 1996).
See Hasanuz-Zaman, supra note 29 at 70; Udovitch, supra note 7.
See Timur Kuran, “Why the Middle East is Economically Underdeveloped: Historical Mechanisms of Institutional Stagnation”, Journal of Economic Perspectives 18 (2004): 71-90.
See M. Shahid Ebrahim, “Integrating Islamic and Conventional Project Finance”, Thunderbird International Business Review 41 (1999): 583-609.
See Ronald H. Coase, “The Nature of the Firm”, Economica (4) New Series (16) (1937): 386-405; and Armen A. Alchian, “Uncertainty, Evolution and Economic Theory”, Journal of Political Economy 58 (1950): 211-221.
Merton H. Miller, “Debt and Taxes”, Journal of Finance 32 (1977): 261-275.
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The age-old concept of partnership was seen by Muslim jurists from the 8th century Hijra onwards as a sacrosanct commercial arrangement—and, therefore, subjected to a form of fixity which is unparalleled in any other religious tradition. Since the formative period of Islamic law, the limited-liability partnership, or muḍāraba, a specific variation of the over-arching mushāraka partnership, has continued to hold central importance for Muslims. Yet, despite this centrality, it has not been examined with a view to reformulating it for contemporary Islamic banking and finance. This has led to its virtual neglect in modern Islamic banking operations. This article suggests that the revival of the muḍāraba facility requires the overcoming of key disadvantages inherent in its structure and that a restructuring on the basis of the hybrid facility called participating preferred ijāra is one possible way of achieving such an outcome.
All Time | Past 365 days | Past 30 Days | |
---|---|---|---|
Abstract Views | 355 | 84 | 14 |
Full Text Views | 171 | 4 | 0 |
PDF Views & Downloads | 55 | 12 | 0 |