Answer to Question #159277 in Economics for Muhammad Ammar Khan

Question

If you go to an Islamic bank and ask for financing for following purposes, which financial product Islamic bank will most likely to use and why?

 

1.      10 years financing to start a new project

2.     5 years financing to construct a house on your land

3.     3 years financing for a heavy duty generator

4.     6 months financing for IPhone 12

Answer 1

If you go to an Islamic bank and ask for financing, then Islamic bank will most likely to use 10 years financing to start a new project. It is a form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne only by the provider of the capital.

So, the correct answer is 1.