Principles of Islamic banking and finance/PIBF201/Variable income Islamic modes of finance/Video signpost
In this video, Dr. Shamim Siddiqui from Hamdan Bin Mohamed Smart University, provides an overview of Islamic modes of finance that can generate variable incomes.
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Video transcript
In last section you learnt about the most commonly used modes of Islamic financial transactions that can generate fixed levels of income. While ijarah or operating lease is non-controversial, there are issues with other fixed income modes of modes of financing with regard to their proximity with interest, in particular with murabaha. Islamic economists and many other Islamic scholars are of the view that the real benefit of Islamic banking could not be realized unless Islamic banks and other financial institutions minimize the use of fixed-income modes of financing and rely more and more on profit and loss sharing modes. They recognize the fact that even with fixed-incomes modes, Islamic banks are relatively more stable because their transactions are mainly asset based and hence less vulnerable to any downside economic trend. In this section you will learn the important risk sharing Islamic modes of finance in some detail. The main such modes are musharakah and mudarabah. You will also learn why their use are relatively insignificant.
