IslamicFinance.de

In Pakistan, Mudaraba companies and Mudarabas (Non-Banking Islamic financial institutions (NBIFIs)) attracted the major business groups of the country since the early 80s. The Mudaraba sector recorded rapid growth until 1996, when the fall back of NBIFIs began and the country witnessed a large number of closures and mergers during the next fifteen years. This left many of doubts and questions as to the future, viability and adoptability of Islamic finance. The causes of failure can be categorized into seven M's: management, money, major defaults manipulation, mismatch, moral hazards and monitoring. However, most of the national NBIFIs managed to survive and generate lucrative profits for their investors, which shows that it was not failure of the Islamic financial system rather a failure of the management.