Which of the following is true about the Islamic banking method the mudarabah?
A)A mudarabah contract is similar to a profit-sharing scheme.
B)Under mudarabah,when an Islamic bank lends money to a business,it charges interest on the loan.
C)It is the most widely used banking method among the world's Islamic banks,primarily because it is the easiest to implement.
D)It has been proven that a mudarabah contract discourages both long-term savings and long-term investment.
E)A mudarabah contract uses a price markup method to make profits.

Question

Quizplus · Accepted Answer

A mudarabah contract is a profit-sharing scheme, where one party (the provider of funds) provides the capital while the other party (the entrepreneur) provides the expertise and management. The profits are then shared according to a pre-agreed ratio, while the losses are borne solely by the provider of funds. Therefore, choice A is the correct option. The other options are incorrect because Islamic banking prohibits charging interest on loans (choice B), there is no evidence to suggest that mudarabah is the easiest banking method to implement (choice C), mudarabah is meant for long-term investment and savings rather than discouraging it (choice D), and a mudarabah contract does not use price markup method to make profits (choice E).

Which of the Following Is True About the Islamic Banking