Profit Distribution Mechanism in Islamic Banking Sector: Evidence from Pakistan

Authors

  • Dr. Muhammad Anas Rizwan International Islamic University, Islamabad, Pakistan

Abstract

The aim of this study is to examine the issue of Profit distribution mechanism in Islamic banks and determine whether or not Profit distribution mechanism in such banks complies with Shari‘ah standards. It focuses on the profit distribution process in Islamic banks as well as the Fiqh modality of contracts used to solicit deposits at Islamic banks. Further, the aim of this article is to see if Islamic banks are capable of managing profit distributions, and if so, what elements are needed to complement this profit distribution management. This article also aimed to explain the phenomenon of profit distribution management, a voluntary initiative spearheaded by Islamic banks that has no immediate counterparts in conventional banks. The evidence gathered in this investigation suggests that Islamic banks may oversee profit distribution. The profits allocated to ordinary saving accountholders should be considered by scholars and Shari‘ah advisors at banks. This is accomplished by establishing a separate pool from fixed deposits and other rate-sensitive deposits. As a result, we will determine the real profit gained by these deposits; otherwise, profit from these tiers is passed on to higher tiers in order to please rate-sensitive depositors. The current study also find that in an ongoing or operating Mudarabah, the Islamic bank has the authority to make the necessary adjustments by crediting the depositor's account with any surplus profit, if any, and by debiting the account if the actual gain is less than the amount already paid to the depositor on account of profit. In order to do this, the depositor must agree to provide the necessary funds in his account in response to the bank's demand. It shows that, while the current profit distribution mechanism in Islamic banks is in line with general Shari‘ah principles and has been accepted by contemporary jurists, there are some loopholes that need to be filled in order to further improve the profit distribution mechanism in Islamic banks. The purpose of this study is to examine the origins and repercussions of the concept of "divine sovereignty," which was central to the narrative and understanding of certain Islamic movements' political aspirations. The study provides insights on the concept of divine sovereignty, which has been used to justify the militancy of a number of Islamist revivalist groups. The scholar investigates the primary concepts utilized by contemporary radical groups, identifying both theoretical underpinnings and conceptual problems in the literature of these movements in their current context. The study traces the origins and intellectual sources of Islamic fundamentalism, while also exposing new flaws in the intellectual tradition of these extreme movements through an analytical and historical lens, presenting texts from proponents and opponents of the concept of divine sovereignty, as well as tracing the concept's evolution throughout Islamic history.  

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Published

2022-01-20