The Executive Mechanism of Rastin Profit and Loss Sharing (PLS) Banking

  • Bijan Bidabad Professor, Economics and Chief Islamic Banking Advisor, Bank Melli, Iran
  • Mahmoud Allahyarifard Expert of R&D Department,Bank Melli Iran
Keywords: PLS, Riba, Financial management, Islamic banking

Abstract

Despite the interest of bankers for using Profit and Loss Sharing (PLS)[1] banking for the last decades, it has not prevailed yet executively. The existence of different definitions of Riba, absence of appropriate operational, supervisory, and managing mechanism on PLS are some reasons that haven't allowed this kind of banking to be practiced yet. Here, we are going to introduce a practical method for Profit and Loss Sharing (PLS) banking to overcome these problems. In this bank, the basis for determination of interest rate of loans is real economy return rate. The bank operates as an intermediary, who gets commission fee, collects saving resources and as an attorney or legal representative of the depositor, allocates them to investment projects, and supervises the detailed operation of the contractor. The yields of the investment will transfer to resources owners who are depositors whatever profit or losses.The PLS banking is a banking system with newly defined instruments of Mosharaka and Pazireh that not only stabilizes the financial and economic markets by preventing the banks, loanees /entrepreneurs and design, construction and contractor sectors in the economy from bankruptcy during crisis periods and volatile markets, but also makes the banks as an international firm which perform similar jobs as stock exchange markets for transactions of PLS products certificates through a secondary certificate market on virtual internet space. Depositors will earn more stabilized benefits too.In this designed method, a trustee (Amin) is a unit who supervise the contractor/entrepreneur operations on behalf of the bank for being honesty in carrying out the project, controlling on executive operations along with announced programs, resources allocation manner, and auditing financial statements.PLS banking will use new financial instruments and innovations such as Mosharaka (partnership) Certificates for projects with specific ends and Pazireh (Subscripted) Certificates for endless (productive) projects. Establishing of secondary exchange market for the transaction of certificates, and various insurance services will play important roles for activating and increasing the efficiency of newly established virtual markets.All of the activities in this method will be done on the basis of compiled instructions. The framework and the organization of the PLS banking have been analyzed in forms of required committees, units, and departments tailored for this type of Non-Usury Bank (NubankCo.) definition.

JEL:L86 ,L87 ,G21 ,G24

[1] - This invention has been protected by US patent law under the application number: US 12/588,188

References

Bahrain Monetary Agency Issues New Islamic Banking Regulations, Vol. XLV No 5, 4 February 2002.

Bidabad, Bijan. (2014). New Operational Islamic Banking System, Volume One, Theoretical Foundations, LAP Lambert Academic Publishing, OmniScriptum GmbH & Co. KG, ISBN: 978-3-659-54463-7.

Bidabad, Bijan. (2014). New Operational Islamic Banking System, Volume Two, Applicational Issues, LAP Lambert Academic Publishing, OmniScriptum GmbH & Co. KG, ISBN: 978-3-659-55210-6.

Bidabad, Bijan, Saeed Abdullahi, Mahshid Sherafati. (2016) Enforcement of the Purports of Binding Banking Documents in Rastin Banking – Part I. International Journal of Law and Management, Vol:59, Iss:1.

Bidabad, Bijan, Saeed Abdullahi, Mahshid Sherafati. (2016) Enforcement of the Purports of Binding Banking Documents in Rastin Banking – Part II. International Journal of Law and Management, Vol:59, Iss:2.

Bidabad, Bijan (2018), General Regulatory Framework in Rastin Profit and Loss Sharing Banking (Part I-Operational Context). Journal of Business and Finance in Emerging Markets, JBFEM, [S.l.], v. 1, n. 1, p. 11-26, May. ISSN 2580-5568.
https://doi.org/10.32770/jbfem.vol111-26
http://www.bidabad.com/doc/rastin-regulatory-en-I.pdf

Bidabad, Bijan (2018), General Regulatory Framework in Rastin Profit and Loss Sharing Banking (Part II-Legal Groundwork). Journal of Business and Finance in Emerging Markets, JBFEM, JBFEM, [S.l.], v. 1, n. 2, p. 109-126, Nov. ISSN 2580-5568.
https://doi.org/10.32770/jbfem.vol1109-126
http://www.bidabad.com/doc/rastin-regulatory-en-II.pdf

Bidabad, Bijan (2019), General Regulatory Framework in Rastin Profit and Loss Sharing Banking (Part III-Auxiliary Provisions). Journal of Business and Finance in Emerging Markets, JBFEM, May, Vol 2, No. 1, pp. 51-65. ISSN 2580-5568.
https://doi.org/10.32770/jbfem.vol251-66
http://www.bidabad.com/doc/rastin-regulatory-en-III.pdf

Bijan Bidabad, Mahmoud Allahyarifard. (2019) IT role in fulfillment of Profit & Loss Sharing (PLS) mechanism. Proceeding of the 3rd International Islamic Banking and Finance Conference, The Monash University, KL, Malaysia, 16-17 November, 2005. International Journal of Islamic Banking and Finance Research, 3(2), 44-59.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/274
http://dx.doi.org/10.20193/ijibfr.v3i2.274
http://www.bidabad.com/doc/english-pls-5.pdf
http://www.bidabad.com/doc/pls-it-en.ppt

Bijan Bidabad, (2019) Economic-juristic analysis of usury in consumption and investment loans and contemporary jurisprudence shortages in exploring legislator commandments. Proceeding of the 2nd International Islamic Banking Conference. The Monash University of Malaysia. 9-10 September 2004. Reprinted in: National Interest, Journal of the Center for Strategic Research, Vol. 2, No. 1, winter 2006, pp. 72-90. Tehran, Iran. Republished (revised) in: International Journal of Islamic Business & Management, 3(2), 1-15.
https://www.cribfb.com/journal/index.php/ijibm/article/view/275
http://www.bidabad.com/doc/reba-en.pdf

Bijan Bidabad, (2019) Non-Usury Bank Corporation (NUBankCo), The Solution to Islamic banking, Proceeding of the 3rd International Islamic Banking and Finance Conference, Monash University, KL, Malaysia, 16-17 November, 2005. International Journal of Shari’ah and Corporate Governance Research, 2(1), 53-66.
https://www.cribfb.com/journal/index.php/ijscgr/article/view/276
http://www.bidabad.com/doc/NUBankCo-en.pdf

Bijan Bidabad, Mahmoud Allahyarifard. (2019) Assets and Liabilities Management in Islamic Banking. Proceeding of the 3rd International Conference on Islamic banking and Finance, Risk Management, Regulation and Supervision, Bidakara, Jakarta, Indonesia, 23-26 February, 2010. pp. 396-413. International Journal of Islamic Banking and Finance Research, 3(2), 32-43.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/272
http://www.bidabad.com/doc/alm-english.pdf

Bidabad, Bijan, (2017) Money Laundering Detection System (MLD), A Complementary System of Rastin Banking, Journal of Money Laundering Control, Vol. 20 Issue: 4, pp. 354-366.
https://doi.org/10.1108/JMLC-04-2016-0016
http://www.bidabad.com/doc/mld-paper-en.pdf

Bidabad, Bijan, (2014) Joint Stock Company with Variable Capital (JSCVC), International Journal of Law and Management (IJLMA), Emerald Group Publishing Limited, Vol. 56, Iss: 4, pp.302 – 310.
http://dx.doi.org/10.1108/IJLMA-09-2012-0031
http://www.bidabad.com/doc/vjsc-paper-en.pdf

Bijan Bidabad, (2019) Rastin Certificate Market (RCM), Complementary System of Rastin Banking, 2013. International Journal of Islamic Business & Management, 3(1), 35-43.
https://www.cribfb.com/journal/index.php/ijibm/article/view/260
http://www.bidabad.com/doc/rastin-bank-rcm-en.pdf

Bidabad, Bijan, (2013) Rastin Profit and Loss Sharing (PLS) Base System. Journal of Islamic Economics, Banking and Finance, pp. 32-57, Vol. 9 No. 4, Oct-Dec.
http://ibtra.com/pdf/journal/v9_n4_article2.pdf
http://www.bidabad.com/doc/pls-base-en.pdf

Bidabad, Bijan, (2016) Joalah Finance Sharing (JFS). Journal of Islamic Economics, Banking and Finance, Volume-12, No. 1, January-March, pp. 33-48.
http://www.bidabad.com/doc/jfs-paper-en.pdf
http://ibtra.com/pdf/journal/v12_n1_article2.pdf

Bidabad, Bijan, (2014) Mudarebah Financial Sharing (MFS). Journal of Islamic Economics, Banking and Finance, JIEBF, Volume - 10, Number - 1, January - April 2014, pp. 56-68.
http://www.bidabad.com/doc/mfs-paper-en.pdf
http://ibtra.com/pdf/journal/v10_n1_article3.pdf

Bidabad, Bijan, (2019) Installment Financial Sharing (IFS): A Financial Subsystem of Rastin PLS Banking. International Journal of Islamic Banking and Finance Research, 3(1), 28-42.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/267
http://www.bidabad.com/doc/ifs-paper-en.pdf

Bidabad, Bijan, (2014) Rent Financial Sharing (RFS). Journal of Islamic Economics, Banking and Finance, Vol. 10 No. 2, pp.: 38-53, April-June.
http://www.bidabad.com/doc/rfs-paper-en.pdf
http://ibtra.com/pdf/journal/v10_n2_article2.pdf

Bidabad, Bijan, (2019) Bail Financial Sharing (BFS): A Financial Subsystem of Rastin PLS Banking. Bank Melli Iran, Tehran, Iran, 2014. International Journal of Islamic Banking and Finance Research, 3(1), 21-27.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/266
http://www.bidabad.com/doc/bfs-paper-en.pdf

Bidabad, Bijan, (2015) Rastin Personal Security (RPS). Journal of Islamic Economics, Banking and Finance, JIEBF, Volume - 11, Number - 2, April-June, pp. 47-61.
http://www.bidabad.com/doc/rps-paper-en.pdf
http://ibtra.com/pdf/journal/v11_n2_article3.pdf

Bidabad, Bijan, (2015) Rastin Social Takaful (RST). Journal of Islamic Economics, Banking and Finance, JIEBF, Volume - 11, Number - 1, January - March, pp.: 13-23.
http://www.bidabad.com/doc/rst-paper-en.pdf
http://ibtra.com/pdf/journal/v11_n1_article1.pdf

Bidabad, Bijan, (2019) Rastin Crowdfunding (RCF): A Financial Subsystem of Rastin Banking. Bank Melli Iran, Tehran, 2014. International Journal of Islamic Banking and Finance Research, 3(1), 13-20.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/265
http://www.bidabad.com/doc/rcf-paper-en.pdf

Bidabad, Bijan, (2019) Rastin Group Funding (RGF): A Financial Subsystem of Rastin Banking. Bank Melli Iran, Tehran, 2014. International Journal of Islamic Banking and Finance Research, 3(1), 43-48.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/268
http://www.bidabad.com/doc/rgf-paper-en.pdf

Bidabad, Bijan, (2015) Serial Commitments Clearance (SCC) in Rastin Banking. International Journal of Law and Management (IJLMA), Vol. 57, Iss: 6, pp. 600-609.
http://dx.doi.org/10.1108/IJLMA-02-2015-0007
http://www.bidabad.com/doc/scc-paper-en.pdf

Bidabad, Bijan, (2019) Rastin Swap Deposit (RSD): A Financial Account of Rastin Banking. Tehran, 2015. International Journal of Islamic Banking and Finance Research, 3(2), 17-23.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/270
http://www.bidabad.com/doc/rsd-paper-en.pdf

Bidabad, Bijan, (2019) Rastin Swap Card (RSC): A Financial Instrument of Rastin Banking. Tehran, 2015. International Journal of Islamic Banking and Finance Research, 3(2), 24-31.
https://www.cribfb.com/journal/index.php/ijibfr/article/view/271
http://www.bidabad.com/doc/rsc-paper-en.pdf
http://dx.doi.org/10.20193/ijibfr.v3i2.271

Bidabad, Bijan, Mahmoud Allahyarifard, (2019) Interbank Withdrawal Protocol (IWP), Complementary System of Rastin Banking 2013. International Journal of Islamic Business & Management, 3(1), 30-34.
https://www.cribfb.com/journal/index.php/ijibm/article/view/259
http://www.bidabad.com/doc/iwp-paper-en.pdf

Bidabad, Bijan, (2019) Change Management of Banking System at National Level by Rastin Banking (Knowledge Management, Empowerment, Prune and Graft, and Apprenticeship), presented at the 10th International Conference on Economics and Management, Islamic Azad University, Rasht, Iran, 2017. Review of Behavioral Aspect in Organizations and Society, 2019, 1(1), 11. Review of Behavioral Aspect in Organizations and Society, 1(1), 57-70.
https://doi.org/10.32770/rbaos.vol157-70
http://www.bidabad.com/doc/change-banking-en.pdf
http://www.bidabad.com/doc/change-banking-en.pptx

Bidabad, Bijan, Azarang Amirostovar, Mahshid Sherafati, (2017) Financial Transparency, Corporate Governance and Information Disclosure of the Entrepreneur’s Corporation in Rastin Banking. International Journal of Law and Management (IJLMA), Vol:59, Iss:5, pp.636-651, 2017.
https://doi.org/10.1108/IJLMA-01-2016-0003

Bidabad, Bijan, Mahshid Sherafati, (2016) Operational Ethical Banking in Rastin Banking (Professional Ethics, Audit, Inspection, Control, Monitoring and Preservation). International Journal of Law and Management (IJLMA), Vol: 58, Iss: 4, 2016, pp. 416-443.
http://dx.doi.org/10.1108/IJLMA-07-2015-0037
http://www.bidabad.com/doc/rastin-ethic-banking-en.pdf

Rammal, H. G. (2003) 'Mudaraba in Islamic finance: Entrepreneurs and application', Business Journal For Entrepreneurs, Vol.4, pp.105–112. http://www.westga.edu/~bquest/2004/musharaka.htm

Hussain Gulzar Rammal and Ralf Zurbruegg, "Awareness of Islamic banking products among Muslims: The case of Australia", Journal of Financial Services Marketing (2007) 12, 65–74, Doi:10.1057/palgrave.fsm.4760060, http://www.palgrave-journals.com/fsm/journal/v12/n1/full/4760060a.html#bib24

Humayon A. Dar and John R. Presley (2000), "Lack of Profit Loss Sharing in Islamic Banking: Management and Control Imbalances", Loughborough University,Department of Economics, Economic Research Paper No. 00/24, http://www.lut.ac.uk/departments/ec/Reasearchpapers/2000/00-24/erp00-24.pdf

Chong, B.S., Liu, M.H, 2007, "Islamic Banking: Interest-Free or Interest-Based", http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2007-Vienna/Papers/0019.pdf

Khan, M.S., 1986. Islamic interest-free banking. IMF Staff Papers 33, 1–27

World Bank, 2006. Country brief report: Malaysia.
http://siteresources.worldbank.org/INTEAPHALFYEARLYUPDATE/Resources/550192-1143237132157/malaysia-March06.pdf

• اداره تحقيقات و برنامه‌ريزي بانك ملي ايران«طرح مطالعاتي و كاربردي بانكداري مشاركت در سود و زيان»، 1387-1386.
• الهياري فرد، محمود (1384)، خدمات بانكداري الكترونيك و نيازهاي اجرائي آن در مقايسه تطبيقي هزينه عملياتي خدمات مختلف بانكي، پژوهشكده پولي و بانكي، بانك مركزي ايران.
• بيدآباد، بيژن و عبدالرضا هرسيني، تحليل فقهي- اقتصادي ربا در وامهاي مصرفي و سرمايه‌گذاري و كاستيهاي فقه متداول در كشف احكام شارع. ارائه شده به همايش دوسالانه اقتصاد اسلامي، پژوهشكدة اقتصاد، دانشگاه تربيت مدرس، 1382.
http://www.bidabad.com/doc/reba9.html
• بيدآباد، بيژن و عبدالرضا هرسيني، شركت سهامي بانك غيرربوي و بازبيني ماهيت ربوي و غيرربوي عمليات بانكي متداول. مجموعه مقالات سومين همايش دوسالانة اقتصاد اسلامي «نظرية اقتصاد اسلامي و عملكرد اقتصاد ايران»، 4-3 دي 1382، پژوهشكدة اقتصاد، دانشگاه تربيت مدرس، صفحات 224-193، تهران.
http://www.bidabad.com/doc/sherkat6.htm
• بيدآباد، بيژن و عبدالرضا هرسيني، تحليل فقهي- اقتصادي انواع بيمه و ويژگي‌هاي شيوة حكومت اسلامي. پژوهشكدة پولي و بانكي، بانك مركزي ايران، 1382، تهران. http://www.bidabad.com/doc/bimeh6.html
• بيدآباد، بيژن، نرخ و پاية مالياتي در ماليه اسلام و بناي حكمت در اصول فقه پوياي اماميه، پژوهشكدة پولي و بانكي، بانك مركزي ايران، فروردين 1382. http://www.bidabad.com/doc/nerkh-va-payeh-malyat1.html
• بيدآباد، بيژن و محمود الهياري فرد، بسترهای نرم‌افزاری تجارت و بانکداری الکترونیک در ايران.
http://www.bidabad.com/doc/narm-ebank.html
http://www.bidabad.com/doc/narm-ebank-revised.html
• بيدآباد، بيژن و محمود الهياري فرد، بهاي تمام شده خدمات بانكي در بانكداري مدرن و سنتي (بانك ملي ايران). مجموعه مقالات سومين همايش تجارت الكترونيكي، پيشرفت‌ها، تنگناها، راهبردها، 11-10 خرداد 1384، معاونت برنامه‌ريزي و امور اقتصادي وزارت بازرگاني، صفحات 357-331، تهران.
ويرايش اول http://www.bidabad.com/doc/baha-ebank.html
ويرايش 1383 http://www.bidabad.com/doc/baha-ebank-update.html
ويرايش 1385 http://www.bidabad.com/doc/baha-ebank-update-1385.pdf
• بيدآباد، بيژن و عبدالرضا هرسيني، مباني عرفاني اقتصاد اسلامي، پول، بانك، بيمه و ماليه از ديدگاه حكمت. پژوهشكدة پولي و بانكي، بانك ايران، 1383، تهران. http://www.bidabad.com/doc/eghtesadislami4.pdf
• بيدآباد، بيژن و محمود الهياري فرد، مديريت ريسك عملياتي دستگاههاي خودپرداز. مجموعه مقالات اولين كنفرانس جهاني بانكداري الكترونيك، 25-24 ارديبهشت 1386، تهران.
http://www.bidabad.com/doc/risk_management_in_e_banking.pdf
• بيدآباد، بيژن و محمود الهياري فرد، مديريت دارائي و بدهي (ALM) در بانكداري اسلامي.
http://www.bidabad.com/doc/alm-farsi.pdf
Published
2019-06-08
How to Cite
Bidabad, B., & Allahyarifard, M. (2019). The Executive Mechanism of Rastin Profit and Loss Sharing (PLS) Banking. Indian Journal of Finance and Banking, 3(1), 23-39. https://doi.org/10.46281/ijfb.v3i1.308

Most read articles by the same author(s)

1 2 3 4 5 6 > >>