Financing products (equity-based) in Islamic Finance

Financing products: equity-based

Multiple Select

What are equity based contracts under Islamic finance?

• Musharakah

• Kafalah

• Mudarabah

• Hawalah

• Murabahah

Multiple Select

Contracting parties in a Mudarabah contract include

• capital provider (rabb al-mal)

• guarantor

• entrepreneur (mudarib)

• payer

Multiple Choice

How is the profit determined in a Mudarabah venture/contract?

• profit amount determined upfront

• profit sharing ratio determined upfront

• profit percentage based on capital contribution determined upfront

Multiple Choice

In the event of loss, which party is liable in a Mudarabah contract?

• Entrepreneur (Mudarib)

• Capital provider (rabb al-mal)

• Guarantor

Multiple Choice

Which of the following statement is true about the Mudarabah contract?

• In the Mudarabah contract, profit cannot be guaranteed but capital can be guaranteed.

• In the Mudarabah contract, capital cannot be guaranteed but profit can be guaranteed.

• In the Mudarabah contract, both capital and profit cannot be guaranteed.

• In the Mudarabah contract, both capital and profit can be guaranteed.

Multiple Choice

Unrestricted Mudarabah refers to

• where the rabb al-Mal (capital provider) allows the Mudarib (entrepreneur) to administer the fund without restriction on the type of work to be done, location, time, method of payment etc.

• where rabb al-mal (capital provider) restricts the mudarib (entrepreneur) to particular location, types of investment, or any other restriction that is appropriate to rabb al-mal

Multiple Choice

One of the issues in the contemporary application of the Mudarabah contract is the profit equalization reserve (PER). Is PER permissible in Islamic finance?

• Yes, to maintain competitiveness of Islamic financial institutions

• No, because it does not reflect the true profit in every distribution