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Islamic Finance - Law and Practice edited by Nethercott, Craig R.; Eisenberg, David M. (22nd March 2012)

6 Musharaka and Mudaraba

Julian Johansen, Atif Hanif

From: Islamic Finance: Law and Practice

Edited By: Craig R.Nethercott, David M. Eisenberg

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 30 May 2020

Subject(s):
Concept of money — Equity — Options — Islamic financial services — Syndicated loans — Private equity fund — Conduct of business regulation — Controlled activities
6.01 Islamic finance is commonly stated to be based on ‘risk participation’, meaning that two or more parties share the risks of a joint venture. This is driven by the view of Shari‘a scholars that money is simply a medium of exchange, and that a return or ‘increase’ (riba) cannot be paid on that medium. In short, a reward may be generated for taking risk in the project, and in an ideal world the risks of profit and loss would be perfectly balanced. Note in this regard that borrower repayment risk is not regarded as true ‘transaction risk’: although the lender...
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