Introduction The Islamic finance system, especially banking, provides an alternative model that differs from the conventional framework. Precisely, Islamic banking is designed in a manner that interest or riba is not charged. However, such riba -free institutions can participate in legitimate mechanisms and modes of trade, including financing through the Profit Loss Sharing (PLS) theoretical approach. This framework requires banks to look for portfolios and instruments that generate high profits while guaranteeing liquidity if they have to record optimal productivity. While Islamic banking theoretical approaches are anticipated to provide a risk-shared approach, various criticisms have been raised. For example, as an industry, Islamic finance, and more specifically Islamic banking, has neglected the Profit and Loss Sharing (PLS) model originally regarded as its main mode of operation by theorists of Islamic economics. This paper confirms that indeed Islamic banking focuses more on sales-based and lease-centered models, as opposed to the recommended PLS. Criticism Justification The available literature on Islamic finance mainly dwells on profit-sharing (Swartz 49). This arrangement entails the establishment of a contract among various parties engaging in transactions with the goal of collectively pulling resources together. Their objective is to invest the resources to generate profits. Losses or profits generated are shared proportionately among the corresponding parties. This approach ensures that no party bears full responsibility or load in case losses are encountered. Echchabi and Azouzi agree with this assertion by noting that almost all models of Islamic financing are based on the musharaka or mudaraba (34). However, Rahman observes that today’s Islamic banks and various investment companies use “mark-ups, leasing, and commissioned manufacturing as the project-financing basis (153). In these approaches, PLS only constitutes a marginal feature in Islamic finance and banking. Islamic banks have recorded success since the adoption of the PLS theoretical model. However, according to Ayub, while an investigation on Islamic finance literature may suggest that such financial organizations use the PLS model as the basis of their success, this position is contested in practice (76). For instance, Masih asserts that irrespective of the extent of success recorded by banks in the Islamic world, such institutions have failed to faithfully utilize the PLS model as the original theoretical foundation of their operations (1456). The case of Pakistan-specialized banks such as the Mudaraba Companies substantiates this argument. According to Ayub, such companies are structured to operate purely based on the mudaraba or mushtaraka (320). However, they have a negligible amount of investment in the form of musharaka or mudaraba . Indeed, the Islamic Development Bank has only deployed PLS models in small isolated projects (Masih 1456). While these arguments justify the criticisms that Islamic banks have failed to utilize the PLS model as the theoretical framework for their operations, various reasons explain such failure. First, contractual agreements based on the PLS encounter agency-related demerits. Investors or entrepreneurs require incentives to motivate them to take investment risks. They anticipa