Intrinsically irreconcilable: The case against running musharakah as employed by Islamic banks

Abstract

The main objective of the paper is to theoretically as well as empirically analyze the Sharī’ah compliance of running Musharkah (RM) being practiced by Islamic banks. The study employs both theoretical and empirical descriptive analytical approaches. The empirical part of the study uses primary data of 1000 Shariah scholar respondents. The data was collected through questionnaire throughout the four provinces and capital city of Pakistan. The study employs univariate and bivariate analysis. The results reveals that an RM is quite close to running finance. An RM is causing the concentration of wealth in the hands of corporate class who invest less of their capital but get more of profit. It is found that an RM violates obvious principles of Islamic jurisprudence. In RM, fixation of profit at two levels as being practiced is nothing but stratagem to legalize the illegal interest based running finance.

Keywords

• Running Musharakah
• Running Finance
• Overdraft facility