An Introduction to Islamic Finance: Theory and Practice

Islamic Financial Intermediation and Banking 161

TABLE 8.6 Contractual roles of an IFI and a conventional bank compared

Contractual role of IFIs

Contract Trustee Partnership

Principal/

agent

Link to

conventional

fi nance

Agency/

brokerage

Investment

banking

Conventional/

commercial

banking

Liabilities — funding
sources^

Demand deposits Amana (Trust) ✓

Investment accounts Mudarabah ✓

Special - investment
accounts Mudarabah^ ✓
Musharakah
(Partnership)^ ✓^

Equity — shareholders’
funds

Musharakah

(Partnership)^ ✓^

Assets — application
of funds^

Transaction contracts

Short - term trade
fi nancing

Murabahah ✓

Bay’ al-salam (^) ✓
Bay’ al-muajjil ✓
Medium - term
investments
Ijarah, Istisna’ ✓✓
Mudarabah,
Musharakah^ ✓✓
Long - term
partnerships^
Mudarabah,
Musharakah^ ✓
(^) ✓
Fee - based services
Jo’alah, Kifala, etc. ✓ ✓✓
Source: van Greuning and Iqbal (2007)