FUND COLLECTION OF PARTICIPATION BANKING AND UTILIZATION METHODS IN ISLAMIC LAW

Abstract

Brokerage operations between those who request fund and who offer fund is mostly done by participation banks in the field of Islamic finance. Those banks basically fulfill two tasks. The first one is to gather the investor‟s savings and the second is to divert savings into investments. It is essential for participation banks to fulfill those tasks in accordance with Islamic principles. Participation banks are supposed to realize the true purpose or provide income security against the risk of theft or accumulation of savings on behalf of the legal entity or fulfill fund-raising function to facilitate commercial transactions. Fund collection procedures are carried out by three different methods such as demand or current account transactions, participation accounts and commercial account transactions. Mostly, the type of partnership called “Money Management” is applied in participation accounts. The fundraising methods of participation banking are commonly classified under three main headings such as partnership, leasing and sales. Partnership-based fund-raising is often carried out by methods called “Money Management” and “Joint Venture”, sales-based method is carried out by transactions called “cost-plus, exemptions, selem and i‟yne” and the renting is carried out by “leasing” method. In the light of the information given, the study will explain the issues regarding how the process is carried out by examining all the methods used by participation banking fund collection and utilization. Thus, the participation banking operations which gained momentum in recent times in our country will be tried to be assessed by comparison with other conventional banks.