ISSUES OF THE ISLAMIC BANKING CONTRACTS’ IMPLEMENTATION IN CONTEMPORARY BUSINESS CONDITIONS

Abstract

In theory and practice of the Islamic banking there are several types of financial arrangements, but, according to the Sharia experts, the most important Islamic banking contracts are Musharakah and Mudarabah, the profits-loss-share banking contracts. Therefore, the subject of this paper is displaying the elements of mentioned contracts, as well as the possibilities for their application in the modern business environment. The importance of the research is in the use of recognized scientific theories that deal with the problems of equity and debt contracts (such as agency theory of the firm) in the analysis of the applicability of the aforementioned contracts. The main goal of this research is to inform domestic scientific and wider public about the basic products of Islamic banking through a clear, comprehensive and scientifically based critical review of this issue. The scientific contribution of the paper is based on the detection of the reasons why these contracts, although theoretically extremely important, are rarely applied in business practice of Islamic banks, as well as consideration of possible solutions to overcome their shortcomings. In the paper, the following research methods are applied: analysis method, comparative method, historical method, description method, statistical method and empirical method.