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

The Interest Rate And Islamic Banking
Islamic Economic Studies, Vol 3, Issue 1
H. Shajari & M. Kamalzadeh

1. INTRODUCTION

The rate of interest has been a highly complex and important phenomenon since long. For this reason, it has entered into all economics and related literature. For instance, though not an economist, Aristotle had a view on it and in fact... Read More

Islamic Banking Gaining Strength in Gulf states
- By Abdus Sattar Ghazali
New Horizon -- No. 57; November 1996
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Islamic Modes Of Financing
- By Mukhtar Zaman
Banking and Finance: Islamic Concept -- Karachi, Pakistan 1993
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Efforts To Develop Islamic Financial Systems -- Focus On The Abolition Of Fixed Interest Rates
- By J. Karsten
OPEC Bulletin -- Vol. 13, No. 3; April 1982
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Islamic Banking Raises Interest
- By Josh Martin
Management Review -- Vol. 86 No. 10; November 1997
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Ijtihad In The Develepment Of Islamic Banking
- By Mohammed Ali Elgari
New Horizon -- No. 57, November 1996
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The Equate project: An introduction to Islamic Project Finance

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