Saturday, October 15, 2011

INDONESIA - ARTICLES - Profit sharing scheme for micro entrepreneur: an ideas sharing (Edy Tri Sujarwadi)

ekonomisyariah.org - Profit sharing financing is one of Islamic financing schemes.  This scheme should be a main scheme in Islamic financing sector, because it represents fairness business scheme, which each partner will share both profit and loss.  But the reality is different.  Most of Islamic financing scheme in Indonesia is not profit sharing (mudharabah/musyarakah)2, but mark up financing (murabahah).  (source)


Murabahah scheme is financing scheme which customer proposes for Islamic Financial Institution to finance an asset, Islamic Financial Institution will buy the asset from supplier at certain price and sell to the customer in higher price (mark-up financing).  Customer will pay the asset at "fixed" price in certain financing period.

Due to my experience, one of the problems of this condition is "adverse collection". If the customer business is a start up company/new entrepreneur, the business risk is rather high and the profit is still low, - because lack of business experience -, the collateral is insufficient. In the situation where he/she has no collateral, the customer prefers profit sharing financing scheme (mudharabah/musyarakah) rather than mark-up financing scheme (murabahah).  This is due to the need of the customer to share its risk.  On the other hand, Islamic Financial Institution will avoid profit sharing scheme and prefer to use mark-up financing, because the business is too risky on their term.  

 Source : http://www.ekonomisyariah.org/download/artikel/PROFIT%20SHARING%20SCHEME%20FOR%20MICRO%20ENTREPRENEUR.pdf  - Oct 14, 2011

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