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Islamic modes of doing Business

Jawad ButtRoll num : 092

INTRODUCTION: BUSINESS MODES WHICH ARE ADOPTED ACCORDING TO SHARIA.

PRODUCT TREE

Islamic Modes

Trade Based Modes

Partnership Based Modes

Rental Based Modes

Musharaka(Joint Venture Profit Sharing )Mudaraba( Trustee Profit Sharing)

Murabaha(Cost Plus Profit Sale)Musawama(Bargain sale )Salam(Commodity Sale)Istisna(Sale on Order)

Ijarah ( Leasing )

Musharaka AND MUDARABAH

Characteristics All parties share in the

capital All parties share profits

as well as losses Profits are distributed

as per agreed ratio Loss is borne by the

parties as per capital ratio

Every partner is agent of other

One partner (Rab al Mal) contributes capital and the other (Mudarib) contributes his skills or services to the venture

Venture may for a fixed period or purpose

Both share profit in pre-agreed ratio

Loss is borne by Rab al Mal only, Mudarib loses his services

Characteristics

PARTNERSHIP BASED MODE

MURABAHA AND MUSAWAMAH

Musawamah is a general and regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or Thus, it is different from Murabaha in respect of pricing formula.

Murabaha is particular kind of sale where the seller expressly mentions the cost of the sold commodity he has incurred, and sells it to another person by adding some profit”

TRADE BASED MODE

SALAM AND ISTISNA

Pay 100% amount in Advance.

Product must be quantified, identified and Measured with quality.

Date of delivery, Time, Place must be mentioned clearly in advance.

Not necessary to pay the 100% amount in advance.

Price must be decided on beginning of the contract.

Qualities, features of that product must be clearly identified.

RENTAL BASED MODE

IJARA:- It is also a term used in

Islamic sharia, which means to give something on rent”

REFRENCES http://www.dibpak.com/Articles/Islamic modes Business

Finance. http://financeinterestfree.blogspot.com/2011/03/islamic-

banking-and-mode-of-financing http://en.wikipedia.org/wiki/Islamic_economic_jurisprudence http://www.ibbm.org.my/pdf/FUNDAMENTALS ISLAMIC

BANKING.pdf www.isu.ac.ir/farsi/Academics/economics