.1 Mudarabah

The analysis made by Zubair and Abbas (1987, pp.16-17) Mudaraba is an agreement between the bank and the customer. Here, the bank is recognized as the financing partner and the customer is known as the managing partner. This is a formation of equity contribution. Here, the bank and the client talk about the business plan, and afterward the bank gives the finance to the client. The customer then set up and supervises the business. Besides, guarantee is not necessary because the recovery of the capital depends on the achievement of the business financed. If the business makes profit, the profit must be distributed between the two parties as per their pre-agreed ratio. The agreed profit can either be a proportion of the realized profit or at a fixed/predetermined rate. In case if the business makes a loss, it is the bank which takes up all losses unless the finance user is found in a breach of trust. Mudaraba works also in such a way where the bank is the managing partner and the client is the financing partner. In this case, it is known as investment deposit.

2.5.2 Musharaka

Zubair and Abbas (1987, pp.16) states, Musharaka is considered as a form of equity participation contract where is usually employed to finance long-term investment projects. It is a joint venture between the financial Institution and the enterprise. This mode of financing gives the bank the chance of participating in fund management. The bank puts emphasis on the productivity and viability of the project rather than their credit worthiness. So, it is a great advantage for the fund seekers. Hence, partners contribute both capital and effort and the returns are distributed according to their capital contribution.

2.5.3 Murabaha

As per Mahmour (2000, pp.10), In Murabaha (Cost-plus sales), the buyer knows the price at which the seller obtained the object to be financed, and agrees to pay a premium over that initial price. Murabaha is one of the most common modes of financing in Islamic banking. Here the transaction involves two parties that are the bank and the customer. The customer approaches the bank and the bank identifies the commodity, collect the relevant information. The information includes the price and mark-up. Then the bank purchases the commodity as per requisition of the client and sells him on cost-plus profit. Under this arrangement, the