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 Finance and Banking: The Challenge and Prospects
Review of Islamic Economics, No9, 2000, 57-82
Khurshid Ahmad
Abstract: Throughout history, Muslims have opposed riba (interest).... Read More
Repo Market Crosses Line In The Sand
- By Alison Brooks
International Securities Lending; Third Quarter 1999, London
Read
more
Pre-requisites And Consequences Of Islamisation Of Banking In Pakistan
- By By Jalees Ahmad Faruqui
Banking and Finance: Islamic Concept
Read
more
The 1996 Dubai Islamic Banking & Finance Forum
- By Adeel Y. Siddiqi
New Horizon Issue 58, December 1996
Read
more
ABIL Meets Western Banking Requirements
- By Abdul Rahim Hamdi
Arabia: The Islamic World Review Vol 6 Issue 63 November 1986
Read
more
Islamic Banking Moves East
- By Nicholas dimming-Bruce
Malaysia is in uncharted seas with its first Islamic bank. There are no predictions!
Read
more
