Profit and Loss Sharing (PLS) as Basis Characteristic of Islamic Banking: An Analysis of Mudharâbah Contract
Abstract
Mudhârabah constitutes one of the products in Islamic banking. It is a cooperation<br />contract between two parties, where one party (rabbul mâl) provides 100% fund and<br />other (mudhârib) provide work. Profit will be shared between two parties according to a<br />pre-determined profit sharing ratio contract known as nisbah. In the case of loss, the<br />capital owner shall bear the monetary loss and manager or entrepreneur shall loose the<br />reward of his effort unless caused by negligence or violation by mudhârib. This is core<br />concept of mudhârabah, which gives fair business cooperation between two parties. This<br />study will explore basis characteristics of mudhârabah in Islamic banking. The findings<br />are that Islamic banking has certain basic characteristics from PLS such as as just<br />system, as tool of efficient allocation of capital, as productive contract that support who<br />have business either micro, middle or macro level, and as medium to reach the objecticve<br />of Islamic economics.
Moraref