Document Type : Paper

Author

• Mohammad Amin Salavatian

M.A. Student in Islamic Studies and Financial Management, Imam Sadiq University, Tehran

Abstract

Collaborative banking as a type of Islamic banking model has been a matter of consideration among many Islamic finance theoreticians. This type of banking has faced many challenges in theory and practice for which some solutions have been presented. One theoretical challenge has been the inability to reassure risk-averse investors, whereas this is one of the most important functions of conventional banking. In fact, this function contradicts the nature of collaborative banking; hence a malfunction. This research intends to answer how this malfunction can be corrected in the financial system so that we could benefit from the participation and financial potential of risk-averse investors, with a final presentation of the “solid partnership model”. This model differentiates between reassuring functions on the one hand and the investors’ and investees’ partnership on the other, so that funding institutions will do the function of partnership, and risk-covering instruments will do the function of reassuring. The final achievement of this study is that a combination of partnership institutions and risk-covering instruments can contribute to the model in which participation will be considered as a major Islamic Finance system and at the same time risk-averse investors’ needs will be recognized.

Keywords

• Collaborative Banking
• Conventional Banking
• Solid Partnership Model
• challenges of islamic banking

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