Banking & Finance » Overview

Islamic banking & finance institutions would neither pay interest nor earn interest. Bank-depositor relation would be based on the depositor sharing the profit accruing as a result of the bank's profitable use of the deposits pooled together. On the asset side a number of ways were tried to earn profits including partnerships and profit-sharing (mudaraba) with businessmen. Many Islamic banks entered into business directly, buying and selling commodities, land or real estate. Experimentation soon led to what is currently the predominant form of Islamic finance. In a nutshell, the core idea behind commercial and investment banking, that of financial intermediation, is retained but the ethically repugnant practice of interest on loans is discarded. Within a short period of fifty years, the first half of which was devoted mainly to theory and model building, Islamic banking established itself as an alternative, claiming ethical superiority over conventional banking.

Featured Article

Islamic Banking In The Making
Journal of Islamic Banking and Finance
MIrza Sardar Hussain

Medium And Long Term Finance by Islamic Financial Institutions
- By Al Bagkir Mudawim
Journal of Islamic Banking and Finance, Vol: 3, Issue: 2, Apr. - Jun. 1986, Pgs: 16 - 35.
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Islamic Banking in an Inflationary World
- By Mehran Nakhjavani
Middle East Economy Survey, vol: 25, issue: 13, 1982, pgs: 6-11.
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The Changing Face of Islamic Banking
- By Mansoor Hassan, Richard De Belder
International financial Law Review; London; Nov 1993, Volume 12, Issue 11
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