Mudaraba/Musharaka contracts transform the Islamic banks’ deposits into essentially a fund management product (although currently most regulators recognize these as equivalent to conventional deposit contracts) and this impacts the corresponding asset portfolio. There is a need therefore that Islamic banks acquire assets on a PLS basis as well and eventually move beyond fixed return products, like Murabaha and Ijara.
This pushes an Islamic bank towards universal banking since in order to manage the portfolio profitability; it needs to invest across sectors in businesses based on Shariah principles, like equity and Sukuks in the capital market and trade contracts like commodity Murabaha, Musharaka, Ijara and Takaful. Thirdly, further development of Islamic banking itself depends on concurrent development of Islamic capital market.