Provision of Cash to Customers: Can It Be Shari’ah Compliant!

Cash finance revolves around provision of cash to customers instead of goods or services against a return as a result it is impractical 'from Shari'ah perspective, due to lack of ownership element except via Shari'ah compliant investment contracts. The reliance of Islamic banks on controversial cash finance instruments to address the increasing demand of the market have amounted to one third of their total income. These practices are detached from the real market transactions and resemble prohibited Riba which may turn the Islamic finance into severe distress. The analysis of Possible Shari'ah -compliant cash financing alternatives like Musharakah Line-of-Credit and Cash Waqf Fund may respond to all cash demands of individuals, corporate bodies and governments but entails some pitfalls like additional risks or being non-profit-based. This thesis proposes Shari'ah compliant factoring and Employee's service Ijarah cash financing instruments that adhere to the Shari'ah principles and at the same time fulfill individual, corporate and government cash demands and also generate pre-determined return for the cash provider. The proposed instruments have promising economic implications especially for SMEs. The analysis reveals the existence of some legal and technical issues that require further investigation in future studies.