Luki Burhansyah, Yadi Janwari, Muhammad Hasanuddin

The Role of Profit and Loss Sharing (PLS) in Establishing Economic Stability

Introduction

The role of profit and loss sharing (pls) in establishing economic stability. Explore how Profit and Loss Sharing (PLS) acts as an Islamic monetary instrument to foster financial and macroeconomic stability, promoting justice, inclusion, and sustainable growth.

Abstract

This study aims to analyze the role of profit and loss sharing (PLS) as a monetary instrument in supporting financial and macroeconomic stability within the framework of the Islamic economic system. Unlike conventional approaches that rely on interest rates, PLS offers a financing alternative based on the principles of justice, partnership, and risk-sharing. Employing a qualitative method through library research, this study examines classical and contemporary literature on Islamic monetary systems using a multidisciplinary approach, including theological, Islamic legal (fiqh al-muamalat), and macroeconomic perspectives. The findings reveal that PLS can enhance resource allocation efficiency, reduce speculative practices, and strengthen the link between the financial and real sectors. Furthermore, PLS contributes to financial inclusion and the growth of productive sectors, particularly micro, small, and medium-sized enterprises (MSMEs), thereby promoting more resilient and sustainable economic stability. Optimizing the role of PLS in Islamic monetary policy requires adaptive regulatory support, increased institutional capacity of Islamic financial institutions, and the development of innovative PLS-based financial products. These findings are expected to contribute to the advancement of Islamic economic theory and offer policy recommendations to foster an inclusive and equitable path toward economic stability.

Review

This study, "The Role of Profit and Loss Sharing (PLS) in Establishing Economic Stability," offers a compelling analysis of PLS as a pivotal monetary instrument within the Islamic economic system. The authors clearly articulate their objective: to explore how PLS can contribute to financial and macroeconomic stability, contrasting it with conventional interest-based approaches. Employing a qualitative methodology through comprehensive library research, the study benefits from a laudably multidisciplinary approach, integrating theological, Islamic legal (fiqh al-muamalat), and macroeconomic perspectives to provide a holistic understanding of PLS's potential. The abstract highlights several significant contributions of this research. It argues that PLS can substantially enhance resource allocation efficiency, reduce speculative activities, and reinforce the vital connection between the financial and real sectors of the economy. Moreover, the study identifies PLS as a catalyst for financial inclusion and the growth of productive sectors, particularly micro, small, and medium-sized enterprises (MSMEs), thereby fostering more resilient and sustainable economic stability. The policy recommendations—advocating for adaptive regulatory support, increased institutional capacity for Islamic financial institutions, and the development of innovative PLS-based financial products—underscore the practical implications and actionable insights derived from the theoretical analysis. While the study establishes a robust theoretical framework for PLS, the abstract suggests avenues for further exploration or more detailed articulation. Given its foundation in library research, a deeper examination of empirical evidence, case studies, or simulations illustrating the practical implementation challenges and successes of PLS mechanisms in diverse economic contexts would greatly enhance its arguments. Furthermore, while the abstract identifies the need for "adaptive regulatory support" and "innovative PLS-based financial products," a more granular discussion of the specific frameworks, models, or types of innovations envisioned could provide richer policy guidance for its practical application.

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