Cash Loans Under Islamic Financial System: A Workable Solution

Abstract

Islamic Banking has shown tremendous growth in first decade of twenty first century. In order to avoid interest charging Islamic banks transect business through sale/purchase (Murabaha, Muajjal, Salam, Istisna'a), Leasing (Ijara) and profit and loss sharing (Musharaka, Mudaraba, PTC, TFC, Skuk). Cash loan facility is not available in present framework of Islamic banking. This article has elaborated five options including Time Multiple Counter Loans (TMLC), Normal Rate of Return (NRR), Inflation Based Loan Indexation (IBLI), Overhead charges on loans and educational loans to present a workable solution for cash financing by Islamic banks.

Keywords: TMLC, Islamic banking, Cash financing, Commercial loans, Qarz e Hasna, Loan indexation, Educational loans

JEL Classification: G 15, G 21, Z 12