<P> While the original Islamic banking proponents hoped profit - loss sharing (PLS) would be the primary mode of finance replacing interest - based loans, long - term financing with profit - and - loss - sharing mechanisms is "far riskier and costlier" than the long term or medium - term lending of the conventional banks--according to critics such as economist Tarik M. Yousef--and has "declined to almost negligible proportions". </P> <P> A "mudarabah" (also "mudharabah", profit sharing) contract is a kind of partnership in a commercial enterprise where one partner (rabb - ul - mal, also "silent" or "sleeping" partner) provides money, and the other partner (mudarib) provides its expertise and management, (very similar to that of venture capital in conventional finance where the venture capitalist finances the entrepreneur who provides management and labor). </P> <P> Profits generated are shared between the parties according to a pre-agreed ratio--usually either 50% - 50%, or 60% for the mudariband 40% for rabb - ul - mal . If there is a loss, the first partner "rabb - ul - mal" will lose his / her capital, and the other party "mudarib" will lose the time and effort invested in the project . The arrangement reflects the view of Islamic banking proponents that under Islam, the user of capital--labor and management--should not bear all the risk / cost of a failure, and that this sharing of risk will result in a balanced distribution of income and prevent financiers from dominating the economy . </P> <P> Like mudaraba, musharakah is also a profit and loss sharing partnership, but one where investment comes from all the partners, all partners are given the option of participating in the management of the business, and all partners share in losses according to the ratio (pro rata) of their investment . </P>

Explain on the deposit activities and financing activities of islamic banking