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 and Financial Development
Journal of Islamic Banking & Finance
Sheraz A. J Naoghton and M. Akhtar Tahir

Islamic banking is a departure from traditional banking and represents a change in financial structure and is a feature of the financial development of the country in which it is practised. This corresponds with the accepted definition of financial development as relating, inter alia, to... Read More

Marketing Management in an Islamic Banking Environment: In Search of an Innovative Marketing Concept
- By Dale N. Shook and Salah S. Hassan
Skidmore College, Saratoga Springs, New York, USA
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The Framework and Practice of Islamic Banking
- By Mohsin S. Khan and Abbas Mirakhor
Reprinted from Finance and Development (September 1986). Research Department, International Monetary Fund; Research Department, International Monetary Fund.
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The Role of Islamic Financial Institutions in the Socio-economic Development in Malaysia
- By Muhammad Anwar
International Islamic University Malaysia
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