Islamic venture capital: a critical examination

In this article problems regarding murabaha and musharaka arrangements are examined, both when implemented independently and as joint venture financial instruments. These arrangements have led to inequity within Islamic banks, which have focused more on generating capital as opposed to mobilizing resources. The practices of murabaha and musharaka are critiqued from a historical perspective, as well as their present-day use with respect to interest-free financing. Formulas are provided for a model of a profit sharing and venture capital system that incorporates joint murabaha and musharaka contracts.