reward sharing


Reward sharing activities are well known in the business world, particularly for business relying on trust. Today, the basic concepts of Islamic economics are widely used not only in the banking sector but also in other economic sectors. In Indonesia, the concept of profit and loss sharing (PLS), contract sharing and revenue sharing can be seen as an another model to accelerate growth after cyclic downturns. There are at least three reasons why it is important to examine this concept. First, how it affects lower investment inflows, whether domestic or foreign investment. High corruption, high risk and uncertainty are the most common reasons and influencing factors for investors wanting to invest in Indonesia, although Indonesian governments have been working hard to reduce these handicaps.

Second, there are difficulties for small enterprises in getting funds from formal financial institutions and this contributes to company bankruptcies. As is commonly known, financial institutions require interest fees for credit but many small businesses cannot meet this requirement because they have not enough assets to quarantine their credit.

Third, monetary crises cause many financial institutions to have negative growth problems. However, some studies have found that financial institutions that use reward sharing in their operations were able to avoid financial crises. Some studies of the efficiency of Islamic banks have found that their practices are similar and their efficiencies are on a par with conventional banks. Other studies have found that Islamic banks are efficient in their operations. This affects the business climate; a business that uses reward sharing practices is more likely to remain operational than a business that depends for its capital on conventional banking, which relies on interest payments as its main source of revenue.

It is argued that in reward sharing system the capital owners and businessmen will work to reduce risk, in contrast with those businesses where the risk is taken by one party only, the business. As well, capital placement is not such a burden because the parties are sharing money and the financial management must be more transparent.

In addition, a reward sharing arrangement curbs, to an extent, the tendency to avarice on the part of capital owners and increases the opportunities of reward for capitalists and for entrepreneurs. Therefore, as Islam teaches us, every transaction should consider justice, fairness, transparency, and avoid ushr.

Reward sharing activities are well known in the business world, particularly for business relying on trust. Today, the basic concepts of Islamic economics are widely used not only in the banking sector but also in other economic sectors. In Indonesia, the concept of profit and loss sharing (PLS), contract sharing and revenue sharing can be seen as an another model to accelerate growth after cyclic downturns. There are at least three reasons why it is important to examine this concept. First, how it affects lower investment inflows, whether domestic or foreign investment. High corruption, high risk and uncertainty are the most common reasons and influencing factors for investors wanting to invest in Indonesia, although Indonesian governments have been working hard to reduce these handicaps.

Second, there are difficulties for small enterprises in getting funds from formal financial institutions and this contributes to company bankruptcies. As is commonly known, financial institutions require interest fees for credit but many small businesses cannot meet this requirement because they have not enough assets to quarantine their credit.

Third, monetary crises cause many financial institutions to have negative growth problems. However, some studies have found that financial institutions that use reward sharing in their operations were able to avoid financial crises. Some studies of the efficiency of Islamic banks have found that their practices are similar and their efficiencies are on a par with conventional banks. Other studies have found that Islamic banks are efficient in their operations. This affects the business climate; a business that uses reward sharing practices is more likely to remain operational than a business that depends for its capital on conventional banking, which relies on interest payments as its main source of revenue.

It is argued that in reward sharing system the capital owners and businessmen will work to reduce risk, in contrast with those businesses where the risk is taken by one party only, the business. As well, capital placement is not such a burden because the parties are sharing money and the financial management must be more transparent.

In addition, a reward sharing arrangement curbs, to an extent, the tendency to avarice on the part of capital owners and increases the opportunities of reward for capitalists and for entrepreneurs. Therefore, as Islam teaches us, every transaction should consider justice, fairness, transparency, and avoid ushr.

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~ by ketekbasahminggir on November 13, 2012.

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