EXPLAINING PROFIT AND LOSS SHARING MODEL (PLS) AS AN ANTECEDENT TO ISLAMIC ECONOMIC ACTIVITY : A THEORETICAL PERCEPTIVE

Abstract

he study aims to contribute to formulating the methodological framework of the Islamic Economy Model through the formulation of the Profit and Loss Sharing Model (PLS), using the development in the theoretical and mathematical methods of the conventional economics. Including, reformulating the concepts of present value and the marginal efficiency rate of investment, as well as replacing the interest rate by the return rates of sharing. The Model enables the central bank to control the monetary policy, economic activity, and reallocating of economic resources more efficiently than when using the interest rate.