Participatory Islamic Finance: Ideals, Contemporary Practices, and Innovations

Preface
A Note on Research Methodology
Contents
About the Authors
List of Figures
List of Tables
Part I The Ideals of Participatory Finance
1 Introduction to Participatory Finance
	1.1 Islamic Banking and Finance
	1.2 Participatory vs. Non-Participatory Modes of Islamic Finance
	1.3 Definition and Forms of Participation in Islam
		Shirkat-Ul-Milk (Participation in Ownership)
		Shirkat-Ul-\'Aqd (Participation by Contract)
	1.4 Legality and Origin of Participation
	1.5 Musharakah and Its Terms and Conditions
		Conditions with Respect to Partners
		Conditions with Respect to Capital Contribution
		Conditions with Respect to Management
		Conditions with Respect to Profit and Loss Sharing
		Conditions with Respect to Maturity or Termination of Musharakah
	1.6 Mudarabah and Its Terms and Conditions
		Capital of Mudarabah
		Mixing of Capital
		Management of the Business Affairs
		Distribution of Profit and Losses
		Termination/Maturity of Mudarabah
	1.7 Chapter Summary
	References
2 Maqasid Al Shari’ah and Financial Concern of Human Life
	2.1 Shari’ah and Its Higher Ethical Objectives (Maqasid al Shari’ah)
		The Integrated Framework of Maqasid Al Shariah (Higher Ethical Objectives)
		Maqasid Al Shari’ah and the Economic-Financial Concerns of Human Life
	2.2 Conclusion
	References
3 Linkage Between Maqasid Al Shari’ah and Participatory Finance
	3.1 Aspiration-Oriented Vs Reality-Oriented Schools of Thoughts and the Social Welfare Role of Participatory Finance
	3.2 The Philosophical Underpinning of Participatory Finance in the Light of the Axioms of Islamic Finance
	3.3 The Nexus Between Maqasid Al Shari’ah and Participatory Finance
	3.4 Conclusion and Implications
	3.5 Chapter Summary
	References
4 The Paradox of Idealization in Theory and Marginalization in the Practice
	4.1 Idealization of Participatory Finance in the Islamic Baking Literature
	4.2 Role of Participatory Financing in the Development of Islamic Banking System
	4.3 The Inherent Benefits of Participatory Modes of Finance
		Reduced Constraints to SMEs Financing
		Promoting Stability of the Financial Sector
		Improved Allocative Efficiency
		Promotes Innovation
		Stability of the Banking System
		Effective Distribution of Risks
		Closer Coordination Between the Real and Financial Sectors of Economy
		Higher Return on Investment
		Establishing Long-Term Relationships
	4.4 The Marginalization of Participatory Finance in the Practice of Islamic Financial Institutions
	4.5 Chapter Summary
	References
Part II The Contemporary Practices of Participatory Finance
5 Constraints to Participatory Finance
	5.1 Overview of the Extant Literature
	5.2 The Coherent Constraints Framework
		Uncertainty
		Lower Demand
		Regulatory Constraints
	5.3 Implications of the Constraints Framework
	5.4 Chapter Summary
	References
6 The Applications of Participatory Finance
	6.1 Variants of Participatory Financing in the Major Islamic Banking Industries
		Diminishing Musharakah
		Running Musharakah
	6.2 Domains of Participatory Finance
		Working Capital Financing
		Consumer Financing
		Commodity Operations Financing
		Domestic Trade Financing
		Import Financing
		Mudarabah Based Financing
	6.3 Chapter Summary
	References
7 Assessment and Mitigation of Risks in the Participatory Financing Arrangements
	7.1 Procedures for Assessment and Mitigation of Risks in Running Musharakah
		Mechanism for the Assessment and Selection of Applicants
		Strategies for Risk Mitigation in Running Musharakah
	7.2 Procedures for Assessment and Mitigation of Risks in Diminishing Musharakah
		Procedures for Assessment of Risks in Diminishing Musharakah
		Strategies for Mitigation of Risks in Diminishing Musharakah
	7.3 Chapter Summary
	References
Part III The Adaptations and Innovations in Participatory Finance
8 Experiments with Participatory Financing
	8.1 Iranian Experiments with Participatory Finance
	8.2 Sudanese Experiments with Participatory Financing
	8.3 Pakistani Experiments with Participatory Financing
	8.4 Malaysian Experiments with Participatory Financing
	8.5 Turkiye’s Experiments with Participatory Financing
	8.6 Chapter Summary
	References
9 Adaptation in Participatory Islamic Finance to Constraints and Its Outcomes
	9.1 The Curious Case of Musharakah Spur in Pakistan
	9.2 Detour: Adaptability of the Islamic Banking in Pakistan
	9.3 Constraints, Adaptation, and Outcomes (CAO) Framework of Participatory Islamic Finance
		Constraints to Musharakah Financing
		Adaptation in Musharakah
		Outcomes of Adaptation
	9.4 Chapter Summary
	References
Annexures
Annexure A: Details of the Systematic Literature Review Approach
Sample Selection
Analysis of the Literature
Annexure B: Tentative Payment Schedule with Unequal Monthly Payments
Annexure C: Tentative Payment Schedule with Step-Up Monthly Payments
Index