Journal of Finance and Bank Management

PLS - A True Alternative to Interest-Based Banking: Reality or a Myth?
Abid Mahmood, Mufti Aziz Ur Rahman

Abstract
There is a continuing debate on the applicability of Profit & Loss Sharing (PLS) financing by Islamic financial institutions. The proponents of PLS system consider it as the only genuine mode of Islamic finance however its marginalapplicationby the Islamic financial institutions has created many doubts &marked a big question mark on the face of Islamic banking and financial system.Though, PLS remained the most preferable mode of financing amongst the academicians, researchers and scholars but undoubtedly it could not attain the due status amongst the practitioners of Islamic banking system. The empirical studies reveal that the current practices of Islamic Banks are far away from the fundamental conceptual model of interest-freeIslamic banking system.There are a number of reasons relating to the issue of marginal acceptability of PLS base financing by the Islamic banks. This study highlights these critical issues and attempts to conclude logical analysis on the major causes of its marginal use in Islamic banks. The main objective of this paper is an attempt to investigate the need of PLS in the Islamic banking industry and to analyze the attitude of Islamic banks’ practitioners towards three major hindrance factors i.e. Moral Hazard, Operational Difficulties and Government Policies that caused its low level acceptance.

Full Text: PDF     DOI: 10.15640/jfbm.v5n2a3