Most widely used in Islamic financing are musharakah and mudharabah. Both are the pioneer instruments applied during the early days of Islamic financing. However, due to several constraints new instruments have been introduced such as Salam, Istisna' and murabahah.
Whatever the instruments applied, the financing is always backed with asset. The asset is real asset and needed to generate profit in the transaction. Conventional financing or loan has no asset backed even though the loan is used to purchase an asset.
We will explore all the details in coming articles.
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