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Profits realised beyond a ceiling being exempted from sharing in joint equity based facilities of Islamic banks

Sadique, Muhammad Abdurrahman (2018) Profits realised beyond a ceiling being exempted from sharing in joint equity based facilities of Islamic banks. In: 17th Kuala Lumpur International Business, Economics and Law Conference (KLiBEL 17) 2018, 22nd-23rd December 2018, Putrajaya.

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Abstract

Customarily, joint equity ventures embarked on by Islamic banks define the profit shares accruing to the partners as a ratio of the total profit realisable through the venture. This is due to the fundamental principle that profit division should necessarily be based on a stipulated ratio. However, Islamic banks are noted stipulate in some equity partnership contracts that profits realised in excess of an agreed level should accrue to one partner, and will not be subject to division based on the ratio. The paper scrutinises the possibility of limiting the operation of the profit sharing ratio up to a pre-defined ceiling, with reference to accepted sources of Islamic law. It argues that restricting the application of the ratio to a stipulated level of profits defeats the objectives of equity financing. This would enable a partner to claim unlimited profits while the profit share of the other is restricted to a maximum, thus curtailing the free operation the profit sharing mechanism.

Item Type: Conference or Workshop Item (Plenary Papers)
Additional Information: 5640/69216
Uncontrolled Keywords: Profit, ratio, ceiling, Islamic, equity, musharakah, mudarabah, restrict
Subjects: H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP173.25 Islamic law and other disciplines or subjects
K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP490 Furūʻ al-fiqh. Substantive law. Branches of law. > KBP639 Muʻāmalāt
Kulliyyahs/Centres/Divisions/Institutes: Ahmad Ibrahim Kulliyyah of Laws > Department of Islamic Law
Ahmad Ibrahim Kulliyyah of Laws > Department of Legal Practice
Depositing User: Dr Muhammad Abdurrahman Sadique
Date Deposited: 16 Jan 2019 12:49
Last Modified: 16 Jan 2019 12:49
URI: http://irep.iium.edu.my/id/eprint/69216

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