Mr. Ali decided to set-up his own business of Shoe making. He needs raw materials, building,...

Mr. Ali decided to set-up his own business of Shoe making. He needs raw materials, building, equipment and machinery, and finance to meet up overhead expenses. He wants interest (Riba) free financing. How Islamic Banking can help him in this situation to meet his working capital needs? 1. Take any Islamic Bank working in Pakistan. 2. Explain what Islamic Financing products are available to help Ali? 3. In case, Ali needs long term financing then how Islamic bank can help him?

Expert Solution

1. Bank Islami Pakistan Limited is one of the Islamic bank which is working in Pakistan.

2. Islamic financing products which can help him will be MUDHARABAH and it will be a profit sharing contract in which there will be a contract with the Islamic finance Bank in which Mr Ali will be trying to enter into a contract in which he will be provided with the money but the bank will be sharing in any kind of profit which will be accruing to the business of Mr Ali so it will be helping Mr all in order to maximize his rate of return from the business and returned to the bank's so, bank will be also able to earn and since it is to be known that Islam is not allowing for any kind of interest so it will be a risk sharing contract.

He can also enter into a joint venture along with profit loss sharing like Musharakah contracts.

3. These banks will also offer him with the long term financing and these long term financing will also not charging any kind of interest from him but he will we have to provide either a part of his business and he can also share a part of his profit,

jeff jeffy answered 1 year ago

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