An Alternative to Markup Based Financing Technique

Abstract

In a scheme of revamping banking system in Pakistan and to bring it into consonance among with Islamic Sharia, the State Bank of Pakistan, in early 1984 introduced Twelve Modes of Financing and among them financing on the basis of Markup had commonly been practiced. The critiques were of the view that it was merely simplification of the accounting procedure and the concept of money borrowing was disguised in buying of goods on credit. For the time being its use could be allowed to abstain from apparent interest based transaction but this should have been improved with the passage of time. But it could not attract the attention of the people at helm of affairs because of either a mala fide intention or lack of knowledge, skill and even since rityon the part of people who could contribute under the official umbrella state authority. Theorists and jurists agreed with fact that this mode was also based on stratagem and pretexts. In this paper various aspects of Markup based financing had been discussed and Trader's Credit Cheque had been suggested as an alternative to the mode of Markup Based Financing.