Filter by Categories
Accounting
Banking

Islamic Finance




Al-Kharaj bil Daman


A shari’a maxim which bases the entitlement to revenue on corresponding liability for bearing losses (khasara), or the so-called daman. In shari’a, it is impermissible that an individual or institution earns profit without assuming a liability for losses that may arise in association with the earning process. In this sense, the capital provider, in mudaraba or mudaraba-like transactions, is entitled to profit because all operational losses (those not caused by negligence or misconduct on the part of mudarib) will be debited from his the mudaraba capital.

However, a lender (in qard, or interest-free and theoretically risk-free loan) cannot take any compensation or reward from a borrower, as the loaned money is not subject to operational risks (the borrower is obliged to return the loan principal in full at the specified payback time).



ABC
The last three decades have witnessed the modern rebirth of Islamic finance both in terms of literature and practice. Islamic banks and ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*