The Shari'ah and its Implications for Islamic Financial Analysis
The differences between Islamic and Christian religions imply different societal rules of business behaviour, which further imply differences in operating financial organisations, as well as in accounting for them and conducting financial analysis. Islam prohibits ribd, speculation and hoarding. Use of the Western DCF concept in project appraisal does not violate the Sharia: it does not involve explicit interest; the concept and notion of time preference involved does not depend on the preference of current over future consumption. It is earlier cash flows that are preferred, not consumption per se. In Islamic societies, required equity and mudaraba yields can be used as rate of discount. The Islamic banks would require a different type of financial reporting to satisfy two sets of auditors, viz normal commercial audit and Shari'a audit. Similarly, for investing in other business, the banks would require much more information than they do now.For economists, bankers and accountants. Based on primary sources. Documented.