Implementing the IFSA Investment Account: A Risk-Sharing Banking Model


Recent calls for risk-sharing—as expounded in the 2012 Kuala Lumpur Declaration, the 2014 Jeddah Declaration and the 2014 International Monetary Fund statement—elucidate the present situation of Islamic banking and finance: an acknowledgement that risk sharing is a “salient characteristic” of Islamic financial transactions on the one hand and that it is “not deeply embedded” on the other. The objective of this practical evidence-based research paper is to address this schism between prescription and practice. It recapitulates the principles underpinning risk sharing and the reasons why it is integral to the Shari‘ah and why (as stated in the Declaration) risk transfer and risk shifting violate a Shari‘ah principle.



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