An Overview of Islamic Managerial Finance: Comparative Study with the Conventional Version

Abstract

Financial management from Islamic perspective or Islamic Financial Management (IFM) is a very stimulating topic since it represents a new reality. The philosophy and principles of such a system have been outlined in the holy Quran and the Sunnah of Prophet Muhammad (peace be upon him) more than 1400 years ago. Islamic Financial Management now, is immerging as a new financial system all over the world. Ideas of IFM developed in early 1960s and its practices started in late 1970s. Since the system is effective one from operational an ethical viewpoints, it has been successful in undertaking its components like Islamic financial instruments, institutions and markets. Islamic Financial Management is an all-comprehensive and universal system. In the holy Quran, Allah (SWT) has given the main theme of Islamic Financial Management as “Allah hath permitted trade and forbidden interest” (2:275) that will be ensured through establishment of three instruments/aspects like: Islamic Financial Market, Islamic Financial Institutions and Islamic Financial Instruments. To serve the pursue of the Islamic financial management in Muslim countries a number of Islamic financial institutions and banks have been established with the broad objective of bringing into being a society based on justice, free from exploitation, equity and brotherhood among the people. The attempt is made to develop an overview of Islamic Financial Management through the comparative study between conventional and Islamic financial management.

Keywords: Musharaka, mudaraba, Haqqullah, Haqqul-ebad, Muzara’ah, Musaqah.