Sahulat Journal 4, Vol. 3, June 2015, No.1
Dr. Waquar Anwar 1
‘Corporate Finance’ may be understood as the management of finance for corporate bodies. Management of finance encompasses arrangement of funds, maintenance of funds and application of funds. In this article, we shall dwell only upon some aspects of the arrangement of finance.
At the outset, it is necessary to delineate the usage of the word ‘Corporate Finance’ in the article and in common parlance, so that its purpose and contour may be appreciated in proper perspectives.
Corporate bodies would mean organisations that are formed under a statute or those that attract legal obligations. Such an organisation may be a Sole Proprietorship, a Partnership, a Company, an Association of Persons (AOPs), a Body of Individuals (BOIs) or any other organisation with any other name under any legal system. The legal system may not require their prior registration under an act of law but such entities entail legal obligations like payment of tax on income. In other words, organisations which have distinct legal identity may be called corporate entities.
This paper is primarily focused on the finance of a business corporation. Literally, the word ‘corporate’ would cover legal entities of both charitable and business-related establishments. But the connotation ‘Corporate Finance’ relates only to business establishments concerned with production and service related activities.The term finance is a misnomer for the funds required for consumption or contingencies of humanitarian nature.
Another aspect which needs mention here is that in this article the subject is analysed more from the point of view of production/service units than from the aspect of fund providers like banks or other financial institutions. In the last four decades, the overwhelming majority, of literature and research work on Islamic finance, emphasises on the perspective of fund providers. That is why even the funding for consumption needs, like purchase of cars and houses, has been understood as ‘financing’. Obviously, for fund providers this too is business as they earn profit therefrom. A basic reason for this lopsided understanding of Islamic finance is that, these so-called Islamic financing activities have developed within a rentier-economy instead of a production-based economy.
Download Whole Article:CORPORATE FINANCE IN ISLAMIC PERSPECTIVE