ABSTRACT
The Islamic financial sector has developed its instruments rapidly since the 1960s, and a Muslim customer can get almost all financial services supplied by the conventional Western type of financial sector through so-called participation banks, which are run, it is said, in compliance with Islamic values and norms. For instance, they collect funds by special methods to finance economic activities, such as interest-free Islamic bonds. However
there are no significant differences compared to normal banking understanding. In other words, you will not see serious differences between an account with interest-bearing banking and an account at a participation bank.
An interesting feature of the so-called Islamic interest-free bonds is the “predetermined” rate of return or “excess” or “profit” called “rental payment.”
A critical question regarding sukuk is
Is the process of collecting funds via Islamic interest-free bonds subject to rental payment at a predetermined rate compliant with Islamic values?
An alternative approach in terms of “earned” vs. “unearned” incomes may change the nature of the analysis and conclusions radically.
