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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.
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Prospects Of An Islamic Banking System At National And International Levels
Thoughts on Islamic Banking: Articles Presented at the 2-Day Seminar on Islamic Banking Held under the Auspices of Islamic Economics Research Bureau,edition: 1, Dacca Bangladesh, Islamic Economics Research Bureau, 1982, pages: 71-72
Muhammad Kayser Hussain
Banks collect money from different sources and then lend it to people on the condition that the money lent is returned with a certain percentage increased in the total. This increase is strictly prohibited in Islam for its obvious abuses. An Islamic bank has, therefore, one difficulty to face... Read More |
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The Permissibility And Potential Of Developing Islamic Derivatives As Financial Instruments
- By Mohammad Hashim Kamali
IIUM Journal Of Economics And Management, Volume 7 Number 2, 1999.
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Towards an Islamic Financial System
- By Dr. M. Umer Chapra
Journal of Islamic Economics, Vol. 1, No. 2, July 1988, pp. 1-30
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The Role of Islamic Banks in Non-Muslim countries
- By Dr. M. Umer Chapra
Journal Institute of Muslim Minority Affairs, Vol 13, No.2, July 1992, pp.295-297.
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Money And Banking In An Islamic Economy
- By Dr M. Umer Chapra
Mohamed Ariff (Ed), Monetary and Fiscal Economics of Islam, International Centre For Research in Islamic Economics, King Abdul Aziz University, Jeddah,pp.145-186.
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Mechanics And Operations Of An Islamic Financial Market
- By Dr M. Umer Chapra
Journal of Islamic Banking And Finance, Vol: 5, No. 3 1988 (SUMMER), 31 - 36
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