Islamic Banking

Assalamualikum.
Here , i express my narrow vision on islamic banking..


Actually, what is islamic banking..?

"Islamic banking has been defined as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Islamic Shariah. Interest free banking is a narrow concept denoting a number of banking instruments or operations, which avoid interest. Islamic banking, the more general term is expected not only to avoid interest-based transactions, prohibited in the Islamic Shariah, but also to avoid unethical practices and participate actively in achieving the goals and objectives of an Islamic economy."

Islamic Banking is a part of the economic system and activities of a society that wants total fairness to its members through delivery of social justice, construction and development, employment for all etc. As such Islamic banking may be considered the engine in a vehicle but not the whole vehicle and thus Islamic banking principles extend beyond the fact that its banking activities prohibits interest as we all commonly know. The principal differentiation factor of Islamic banking institutions rests with the fact that they are multi disciplined banking organizations acting as commercial and specialized banking institutions at the same time and that they are not credit provider since they are neither creditors nor debtors, and do not transact in interest give or take. Islamic banks provide finance through a sharia compliant products such as Mudharaba, Musharka, Murabha, Istisna etc, on the principals of risk distribution and partnership in results be it profitable or loss making, hence such a relation with its clients is referred to as trading partnerships with depositors and investors alike, and not a debtor-creditor relationship as with conventional banks.