What Is Islamic Banking?
Islamic banking, also known as non-interest banking, is a banking system that is based on the principles of Islamic or Sharia law and guided by Islamic economics. Two fundamental principles of Islamic banking are the sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors. Islamic law prohibits collecting interest or "riba."
KEY TAKEAWAYS
· Islamic banking, also known as non-interest banking, is a system based on the principles of Islamic or Sharia law and guided by Islamic economics
· Islamic banks make a profit through equity participation which requires a borrower to give the bank a share in their profits rather than paying interest.
· Some commercial banks have windows or sections that provide Islamic banking services to customers.
Understanding Islamic Banking
Islamic banking is grounded in Sharia, or Islamic, principles and all bank undertakings follow those Islamic morals. Islamic rules on transactions are called Fiqh al-Muamalat. Typically, financial transactions within Islamic banking are a culturally distinct form of ethical investing. For example, investments involving alcohol, gambling, pork, and other forbidden items is prohibited. There are over 300 Islamic banks in over 51 countries, including the United States.
Principles of Islamic Banking
The principles of Islamic banking follow Sharia law, which is based on the Quran and the Hadith, the recorded sayings, and actions of the Prophet Muhammad. When more information or guidance is necessary, Islamic bankers turn to learned scholars or use independent reasoning based on scholarship and customs. The bankers also ensure their ideas do not deviate from the fundamental principles of the Quran.
Two fundamental principles of Islamic banking are the sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors.
- معلم: Samah HAMMOUNI