This is the second of a series of three books which taken together, are expected to provide a comprehensive banking system that addresses the concerns and needs of Muslims today. The other two titles are, Interest-free Commercial Banking and Commercial Banking in the Presence of Inflation.In that system, time and savings deposits will not bear any interest but the capital will be guaranteed. This is fine if the depositor's main aim is to keep his savings safe. But what if his primary aim is to use this capital to earn an income? Islam prohibits interest earnings. He could engage himself in some trade which Islam permits - on his own or in partnership with others, even as a sleeping partner - but it may not be possible for many for personal reasons or for reasons of the modern day environments. Exploring the possibilities of accommodating such capital holders through a bank is the subject of this book.
Studying the type and size of such capital and their owners' geographical distribution, and the type, size and distribution characteristics of investment opportunities, this book presents a single scheme with several options for bringing capital and entrepreneur together through banks in a mutually beneficial and responsible manner. The scheme can be offered through investment companies as well.
Written lucidly in simple English, it is suitable for reading by professional and academics as well as by the general public.
ISBN 90-802354-2-3, xii+98 pages, 1996.
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For further information or discussions please write or e-mail to the author: abdul99@hetnet.nl
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Table of Contents
PrefaceChapter 1 -- Introduction
Chapter 2 -- Participatory Financing
2.1 -- The basic concepts (Profit and loss sharing, Investment accounts, Credit creation and bank money, Financing with bank money) 2.2 -- The general mechanism (The partners and their shares, A pool of funds and a series of projects, Stocks and shares, Accounts and management) 2.3 -- Application 2.4 -- Some caution (Options) Chapter 3 -- Two Groups and Two Options
3.1 -- Large investors and investment banks 3.2 -- Small investors and commercial banks (Private enterprises, Financing community projects) Chapter 4 -- Promises and Concerns
4.1 -- Intermediaries other than banks (Investment companies, Smaller investment companies, Pure Mudaraba partnerships, Concerns about controls) 4.2 -- Credit expansion and economic development (Collateral, Demand for credit, Cash reserve ratio, Reserves) 4.3 -- Considerations of liquidity 4.4 -- Project size 4.5 -- Education and training 4.6 -- Conclusions Chapter 5 -- Effects of Inflation
5.1 -- Direct effects (Commercial bank schemes, Investment bank schemes) 5.2 -- Indirect effects 5.3 -- Compensation for value erosion of capital 5.4 -- Conclusions Chapter 6 -- Summary and Conclusion
Appendix A -- Mathematical Relationships
A0 -- Some notations and definitions A1 -- Profits A2 -- Profit rates A3 -- Profits in the presence of inflation A4 -- Threshold point A5 -- The case of investment banks A6 -- When profit is calculated net of inflation A7 -- Loss distribution Appendix B -- Explanation of some banking terms and processes
B1 -- Deposits and liabilities; reserve ratio and credit creation; loans and assets B2 -- Money supply; bank money; creation and destruction of bank money B3 -- Reserves Appendix C -- Terms and procedures relating to PF stocks and shares
C1 -- PF Shares C2 -- PF Stocks C3 -- PF Dividends C4 -- PF Projects and the PF “Company” List of variables in Appendix A
Bibliography
Index
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