The paper "Musharaka and Mudaraba in Muslim Banks Financing" is a perfect example of a finance and accounting case study. This report offers a summary overview of the Islamic banking industry. As such the evaluation focuses on its key strategic approaches namely the Musharaka and Mudaraba financing approaches. On one hand, the Musharaka approach, also regarded as a joint venture partnership, allows for-profit and losses sharing under both the restricted and unrestricted categories. On the other hand, it establishes that the Mudaraba approach involves banks financing entire projects while the entrepreneurs offer labour and management skills.
One major merit of both financing approaches is increased societal equality gains. However, a major limitation emerges in the use of a trust as the only business loss hedge in the industry, exposing the banks to great loss risks. 1.0 Introduction The global market is changing with new financial regulations emerging and developing. One of the global financial industry players in the Islamic banking institutions a concept that was legalized in the 1970s for global operation. Since then, as an industry evaluation by the Australian government (2010) argued, the Islamic banks have developed and exponentially grown in the global market not only in the Islamic religion states but also in the non-Islamic religion states across the globe.
Based on this review, it is imperative to evaluate the principles of operation as well as the factors behind the drastic growth and increased influence of the banking system across the globe. This report focuses on two critical aspects in Islamic financing namely Musharaka and Mudaraba respectively. In this regard, it evaluates the principles of operation for each, their implications as well as execution challenges in the current global financial market.
Therefore, it develops a conclusion on the overall rating of the appropriateness and relevance of such principles and practices application.
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