Profit and loss sharing
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Profit and Loss Sharing refers to Sharia-compliant forms of equity financing such as mudarabah and musharakah. These mechanisms comply with the religious prohibition on interest on loans that most Mus
Structure of simple mudaraba contract
Structure of simple musharaka contract
Murābaḥa
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Murābaḥa was originally a term of fiqh for a sales contract where the buyer and seller agree on the markup or "cost-plus" price for the item being sold. In recent decades it has become a term for a ve
Profit and loss sharing
…a profit-and-loss-sharing basis". Profit and loss sharing is one of two categories of Islamic financing, the other being debt like instruments such as murabaha, istisna'a (a type of forward contract), salam and leasing, which involve the purchase and hire of assets and services on a fixed-return basis. While…
Both a Reverse Murabaha (aka Tawarruq) and conventional loan provide a customer with cash in return for deterred repayment, but while a conventional loan is simpler and involves fewer fees, a tawarruq does not violate sharia law (according to some jurists).