Financial Sector in Saudi Arabia Differentiating between Conventional Loans and Murabaha Financing - Essay Example

The next section of the paper will be of the theoretical perspective in which the actual meaning of conventional financing and Murabaha financing according to theories will be discussed.

In the next chapter, an intensive review of various literary sources will be presented through which different aspects of Murabaha financing and the current market scenario of Saudi Arabia will be presented. The next chapter will discuss the methodology being used for the research. Further, in the next section, an analysis of the information gathered in the previous section will be presented. The next section of the paper will present several recommendations about the topic on the basis of the research. At last, the paper will conclude in the last section, i.e. conclusion. 

Finance is one of the most important aspects of the business activities of each and every country. Simply, finance stands for the allocation as well as management of available resources. It also includes the process of acquisition or investing activities of a firm. Basically, finance is considered as the blood of the organization which is needed to commence and control various different activities of a firm. In addition to this, the term 'financing' is generally used as the process of raising and acquiring funds from the market, so that various different business and economic activities of an organization as well as a country can be carried out in the most efficient manner.

             For commencing these activities in a most efficient manner, there is a need for a strong and favorable financing structure that is the most compatible with the overall business and economic structure of the country. The selection of a proper and efficient financing system especially related to debt and equity financing generally depends on various different factors such as the amount of fund which is to be borrowed, risk factors included with this borrowing, the objective of borrowing, and at last the total time duration of the loan. In relation to this, the paper is presenting one of the most important methods of financing namely Murabaha financing, which is generally been used in Islamic countries such as Saudi Arabia. The research work is detailing various different aspects of Murabaha financing in the context of the conventional financing system.

1.1 Aims and Objectives of the research

            For conducting the research in the most effective and efficient manner, it is important that the research must be guided towards the right path. For this purpose, there is a need of setting the aims and objectives of the research. Well-defined aims and objectives provide a platform and guidelines to the researcher so that he can know what he is doing, what will be the outcome of his research work, and what he should do to make the research more valuable and meaningful to the readers. In relation to this, the research work is aimed towards finding various aspects of Murahaba financing, which is one of the most important methods for financing, especially in Islamic countries.