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Determination of Profit and Loss Sharing Ratios in Interest-Free Business Finance

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  • Hasan, Zubair

Abstract

This paper discusses how profit and loss sharing ratios will be determined at the micro and micro levels in an interest free system of financing business operating side by side of an interest based conventional financing.It shows that leverage magnification of return on owners' equity is also available under the Islamic financing. It argues that for the bank Islamic finance may be more profitable than conventional financing

Suggested Citation

  • Hasan, Zubair, 1985. "Determination of Profit and Loss Sharing Ratios in Interest-Free Business Finance," MPRA Paper 3013, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3013
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    File URL: https://mpra.ub.uni-muenchen.de/3013/1/MPRA_paper_3013.pdf
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    Citations

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    Cited by:

    1. Zubair Hasan, 2016. "PLS Finance and Monetary Policy: A New Measure Mooted," Journal of Reviews on Global Economics, Lifescience Global, vol. 5, pages 288-297.
    2. Hasan, Zubair, 2008. "Islamic banks:Profit sharing, equity, leverage lure, and credit control," MPRA Paper 30392, University Library of Munich, Germany, revised Oct 2008.
    3. Ali F. Darrat & Abdel-Hameed M. Bashir, 2000. "Modeling Monetary Control in an Interest- Free Economy إدارة النقود في اقتصاد خال من الفائدة," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 12(1), pages 3-19, January.
    4. Zubair Hasan, 2010. "Islamic Banks: Profit Sharing Equity and Credit Control البنوك الإسلامية: ربحية التمويل القائم على الشراكة ومراقبة الائتمان," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 23(1), pages 131-147, January.
    5. repec:dau:papers:123456789/9551 is not listed on IDEAS
    6. Hasan, Zubair, 2009. "Profit sharing ratios in mudaraba contract revisited," MPRA Paper 21843, University Library of Munich, Germany, revised 2010.
    7. Hechem Ajmi & Salina Kassim & Hassanuddeen Abdul Aziz & Walid Mansour, 2019. "A Literature Review of Financial Contracting Theory from the Islamic and Conventional Overviews: Contributions, Gaps, and Perspectives استعراض أدبيات نظرية التعاقد المالي من المنظور الإسلامي والتقليدي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 32(2), pages 25-42, January.
    8. Hasan, Zubair, 1991. "Comments on Mohsin S. Khan and Abbas Mirakhor, The Financial System and Monetary Policy in an Islamic Economy," MPRA Paper 3183, University Library of Munich, Germany.
    9. Hasan, Zubair, 2012. "Incentive-compatible sukukmusharkah for private sector funding: Comment," MPRA Paper 41916, University Library of Munich, Germany.
    10. Hasan, Zubair Hasan, 2014. "The recent turmoil and monetary policy in a dual financial system with Islamic perspective," MPRA Paper 57133, University Library of Munich, Germany.
    11. Kaouther Jouaber & Meryem Mehri, 2012. "A Theory of Profit Sharing Ratio under Adverse Selection: The Case of Islamic Venture Capital," Post-Print hal-01525795, HAL.
    12. Giorgio Gomel & Angelo Cicogna & Domenico De Falco & Marco Valerio Della Penna & Lorenzo Di Bona De Sarzana & Angela Di Maria & Patrizia Di Natale & Alessandra Freni & Sergio Masciantonio & Giacomo Od, 2010. "Islamic finance and conventional financial systems. Market trends, supervisory perspectives and implications for central banking activity," Questioni di Economia e Finanza (Occasional Papers) 73, Bank of Italy, Economic Research and International Relations Area.
    13. Hasan, Zubair, 2016. "PLS finance and monetary policy: a new measure mooted," MPRA Paper 72898, University Library of Munich, Germany, revised Jul 2016.
    14. Shamim Ahmad Siddiqui, 2008. "An Evaluation of Research on Monetary Policy and Stability of the Islamic Economic system تقييم الأبحاث المتعلقة بالسياسة والاستقرار المالي لنظام الاقتصاد الإسلامي," Papers and books based on the proceedings of the Conferences organized by the Islamic Economics Institute, KAAU. 51, King Abdulaziz University, Islamic Economics Institute..
    15. Zubair Hasan, 1991. "Mohsin S. Khan and Abbas Mirakhor: The Financial System and Monetary Policy in an Islamic Economy, Comment: محسن س. خان وعباس ميراخور: النظام المالي والسياسة النقدية في اقتصاد إسلامي ، تعليق: زبير حسن," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 3(1), pages 83-91, January.

    More about this item

    Keywords

    Profit sharing; macro level model; mico model; leverage effects; relative profitability;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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