Description

This paper examines the reasons for a widening gap between the conventional theory and current practice of Islamic banks. It finds fault at both the ends. ’No risk, no gain’ is inadequate as a general principle for organizing Islamic finance. It is also not always
valid to say that Islam is averse to granting of a time value for money. The overuse of deferred contracts in Islamic finance threatens to violate the juristic principle of sadd aldhara’I i.e. controlling the potential avenues for circumvention of the law. Some structural changes in Islamic financial arrangements are suggested to create a balance in the use of PLS and deferred contracts in Islamic banking.