Degree

Master of Science in Islamic Banking & Finance

Department

Department of Finance

Faculty/ School

School of Business Studies (SBS)

Date of Submission

Spring 2023

Supervisor

Dr. Irum Saba, Associate Professor & Program Director MS-IBF, Institute of Business Administration, Karachi

Committee Member 1

Dr. Ameenullah Aman

Committee Member 2

Dr. Shabbir Khan

Keywords

Islamic short-term finance, Islamic alternate of Running Finance, Running Musharkah, Wakaltul Istismar, Islamic Banking, Islamic Finance

Abstract

Finance is a natural need of society as traders and any individual needs to fulfil his financial gap between its revenue and expenses. Conventional banking Institutions and Islamic Financial Institution both entities are trying to facilitate the same needs of the customers. Short-Term financing facilities are very important for borrowers to keep their business sustainable. Overdraft facility or Running finance is one of the common products offered by conventional banks for their SME and corporate customer. Islamic banks are not offering any similar product to cater this segment in SME sector, as SME’s requirements may be catered by other suitable products. However, IBIs offer Running Musharkah facility to its corporate customers to facilitate their short-term financing requirements. In this study short-term financing products of Islamic and conventional banking institutions are reviewed to analyze the differences of the practices, products, legislations and consumer experiences between both institutions.

This study is supported with shariah basis from primary and secondary sources both. To cover the practical aspect of the products and services offered, used cases are studied and findings and suggestions are incorporated in the study. There are some opponents of Islamic banking who have mentioned Running Musharkah products in their study and they criticized this short-term Islamic banking product, even some scholars called that product as it is similar to interest-based product having no difference and no added value in this product for Islamic banking customers. In this study those arguments reviewed and analyzed to identify the differences. This study provided the responses of those critiques and explained how Islamic bank’s running musharakh is different from conventional banking and what are the added values customer may get in these products. Running Musharkah and Wakalt ul Istismar products are offered by Islamic banks and IBIs are bearing business risk addition to enterprise risk, without charging any risk premium against risk of business assets. As pricing is similar to conventional running finance which caters enterprise risk charge by adding spread on bench mark.

Document Type

Restricted Access

Submission Type

Thesis

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