Authors: Omar Javaid
Addresses: Institute of Business Management (IoBM), Pakistan
Abstract: The idealists in the field of Islamic banking and finance dream of widely practicing musharakah and mudarabah (equity based) contracts in modern banking environment, while the practitioners argue that these modes are impractical due to high risk, information asymmetry and possibility of foul-play. This paper therefore reviews the original socio-cultural order of Islamic-bazaar in Muslim history to understand how such challenges were dealt with. These observations are then compared with the contemporary market scenario. The findings suggest that the agents in Islamic-bazaars were associated to each other as: mentor/apprentice; family-relative; and followed same sufi-order. Such a multidimensional relationship attached huge social costs for cheaters; the court-system nevertheless existed for any violators. The modern banking system lacks such an environment. Conversely, business communities in the Muslim world possessing the necessary conditions may be found where revival of shirkat-ul-aqd contracts with its original spirit can be expected through advocacy and education.
Keywords: musharakah contracts; mudarabah contracts; shirkat-ul-aqd contracts; Ottoman guilds; Islamic Finance; Islamic banking; Islamic history; equity based contracts; Islamic bazaar; Muslims; multidimensional relationships.
International Journal of Pluralism and Economics Education, 2015 Vol.6 No.4, pp.371 - 385
Received: 10 Jan 2015
Accepted: 30 Sep 2015
Published online: 08 Apr 2016 *