Existence of capital at the commencement of joint ventures: an analysis of the Shari‘ah position in the context of modern money and banking practices

Sadique, Muhammad Abdurrahman (2009) Existence of capital at the commencement of joint ventures: an analysis of the Shari‘ah position in the context of modern money and banking practices. IIUM Journal of Economics and Management Sciences, 17 (2). pp. 209-230. ISSN 1394-7680

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Abstract

The objective of this study is to verify the Shari'ah position on the existence of capital in joint ventures based on musharakah and mudarabah, and its relevance and implications in the context of joint ventures formed between Islamic banks and clients in the course of financing on equity basis, especially in view of changes that have taken place in the nature and identity of money. The position of Islamic schools of law on the issue is ascertained from major works of Islamic law, and the implications of the Shari'ah requirement examined. The current practice of Islamic banks and the contemporary Shari'ah approaches to the issue are scrutinized; and the change in the nature and identity of money is analyzed to determine whether it is significant in this regard. According to the texts of Islamic law, a joint venture involving monetary capital could be set in motion on the basis of capital that is existent and present, with clear agreement regarding the share of each partner. While gradual release of capital is admissible, prior existence of capital is necessary. Due to credit supplementing real money in a substantial manner, the identity of money in the current fiscal environment appears to have undergone significant change, the nature and influence of which need to be reassessed through a separate study. This is crucial for determining the form in which the existence and presence of capital could be ensured. The emphasis placed in the Shari'ah on existence and presence of capital could indicate a measure for thwarting unwelcome monetary expansion, thus controlling inflation. This study only attempts to verify the Shari'ah position on existence of capital in the context of joint ventures financed by Islamic banks, based on their current practice. Broader research and academic effort is needed to assess the impact of the changed nature of money on related Shari'ah rulings.

Item Type:	Article (Journal)
Additional Information:	5640/4356
Uncontrolled Keywords:	Existence of capital, Partnership capital, Equity financing, Shariah
Subjects:	H Social Sciences > HG Finance > HG1501 Banking H Social Sciences > HG Finance > HG201 Money H Social Sciences > HG Finance > HG201 Money K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP173.25 Islamic law and other disciplines or subjects
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Ahmad Ibrahim Kulliyyah of Laws > Department of Islamic Law
Depositing User:	Dr Muhammad Abdurrahman Sadique
Date Deposited:	15 Oct 2011 12:52
Last Modified:	22 Nov 2011 08:23
URI:	http://irep.iium.edu.my/id/eprint/4356

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