|
|
Modern Economy 2026
Evaluation of Musharakah Financing, Standards, Country Cases, Major Obstacles and Solutions
|
Abstract:
Islamic finance products and services directly reflect the real economy. The main reason they are not based on the appreciation of money, however, could be sales (murabahah, salam, istisna), leasing (Ijarah), investment (wakala), partnership methods (musharakah, mudarabah), or other asset-backed instruments (sukuk). Even though sales via leasing-based financing are widely used, partnership methods (musharakah, mudarabah), which are necessary for the real economy and growth, account for only a small share of total financing. This study aims to analyze musharakah (capital partnership) financing with all aspects, regulations, standards, country cases, and why this method is not used as expected. The answers show that there are no specific differences between countries in rules and practices; however, the reasons behind comparatively lower musharakah financing are the same. To channel resources directly into production and investment, possible risks need to be reduced, control mechanisms strengthened, and the human resources empowered.
| [1] | AAOIFI (n.d.a). Musharaka Financing. Financial Accounting Standard No. 4. (pp. 231-255). |
| [2] | AAOIFI (n.d.b). Sharikah (Musharakah) and Modern Corporations. Standard No. 12, (pp. 323-363). |
| [3] | Abdul-Rahman, A., Abdul Latif, R., Muda, R., & Abdullah, M. A. (2014). Failure and Potential of Profit-Loss Sharing Contracts: A Perspective of New Institutional, Economic (NIE) Theory. Pacific-Basin Finance Journal, 28, 136-151. https://doi.org/10.1016/j.pacfin.2014.01.004 |
| [4] | Abedifar, P., Molyneux, P., & Tarazi, A. (2013). Risk in Islamic Banking. Review of Finance, 17, 2035-2096. https://doi.org/10.1093/rof/rfs041 |
| [5] | Alandejani, M., & Asutay, M. (2017). Nonperforming Loans in the GCC Banking Sectors: Does the Islamic Finance Matter? Research in International Business and Finance, 42, 832-854. https://doi.org/10.1016/j.ribaf.2017.07.020 |
| [6] | Ariffin, N. M., Archer, S., & Karim, R. A. A. (2009). Risks in Islamic Banks: Evidence from Empirical Research. Journal of Banking Regulation, 10, 153-163. https://doi.org/10.1057/jbr.2008.27 |
| [7] | Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2013). Islamic vs. Conventional Banking: Business Model, Efficiency and Stability. Journal of Banking & Finance, 37, 433-447. https://doi.org/10.1016/j.jbankfin.2012.09.016 |
| [8] | Dar, H. A., & Presley, J. R. (2000). Lack of Profit Loss Sharing in Islamic Banking: Management and Control Imbalances. International Journal of Islamic Financial Services, 2, 3-18. |
| [9] | Demirtaş, T. (2024a). Evaluation of the Fundamental Differences That Distinguish Participation Banking from Deposit Banks in Turkiye. International Journal of Social Science and Human Research, 7, 7321-7330. https://doi.org/10.47191/ijsshr/v7-i09-68 |
| [10] | Demirtaş, T. (2024b). An Analysis of Development on Global Islamic Banking Products and Services. International Journal of Social Science and Human Research, 7, 7858-7866. https://doi.org/10.47191/ijsshr/v7-i10-67 |
| [11] | IFSB (Islamic Financial Services Board) (2021). IFSB-23, Revised Capital Adequacy Standard for Institutions Offering Islamic Financial Services, Banking Segment. |
| [12] | Khan, M. M., & Bhatti, M. I. (2008). Development in Islamic Banking: A Financial Risk‐allocation Approach. The Journal of Risk Finance, 9, 40-51. https://doi.org/10.1108/15265940810842401 |
| [13] | Khan, M., Siswantoro, D., & Ur Rahman, A. (2020). The Obstacle Factors of Musharakah and Mudharabah Application in Pakistan. Jurnal Akuntansi dan Keuangan Indonesia, 17, Article 5. https://doi.org/10.21002/jaki.2020.11 |
| [14] | Khan, T., & Habib, A. (2001). Risk Management on Analysis of Issues in the Islamic Financial Industry. Islamic Research and Training Institute. Islamic Development Bank. |
| [15] | Louhichi, A., & Boujelbene, Y. (2016). Credit Risk, Managerial Behaviour and Macroeconomic Equilibrium within Dual Banking Systems: Interest-Free vs. Interest-Based Banking Industries. Research in International Business and Finance, 38, 104-121. https://doi.org/10.1016/j.ribaf.2016.03.014 |
| [16] | Misman, F. N. (2012). Financing Structures, Bank Specific Variables and Credit Risk: Malaysian Islamic Banks. Journal of Business and Policy Research, 7. |
| [17] | PBAT (2025). Musharakah Standard, Participation Finance Standard No. 7. 06.23.2025. Turkish Participation Bank Association. |
| [18] | Rahman, A. A., & Nor, S. M. (2016). Challenges of Profit-And-Loss-Sharing Financing in Malaysian Islamic Banking. Malaysian Journal of Society and Space, 12, 39-46. |
| [19] | Rosly, S. A., & Zaini, M. A. M. (2008). Risk‐Return Analysis of Islamic Banks’ Investment Deposits and Shareholders' Fund. Managerial Finance, 34, 695-707. https://doi.org/10.1108/03074350810891010 |
| [20] | Sarker, M. A. A. (2001). Islamic Business Contracts, Agency Problem and the Theory of the Islamic Firm. https://iaif.ir/images/khareji/articles/other/46.pdf |
| [21] | Yustiardhi, A. F., Diniyya, A. A., Faiz, F. A. A., Subri, N. S., & Kurnia, Z. N. (2020). Issues and Challenges of the Application of Mudarabah and Musharakah in Islamic Bank Financing Products. Journal of Islamic Finance, 9, 26-41. https://doi.org/10.31436/jif.v9i2.482 |
