ISLAMIC BANKINGThe main principle of Islamic finance and banking is the sharing of profits and the prohibitions of all forms of interest. Islamic law specifically prohibits usury and the collection and payment of interest (called riba in Islamic discourse). Generally, Islamic law also prohibits trading in financial risk, which is seen as a form of gambling. Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). This article provides valuable information on the Islamic rules for financial transactions and how the Islamic culture conducts their banking dealings.
The following questions have been addressed in this article:What is the difference between Islamic banking and conventional banking?
What is riba and why is it prohibited?
What does Hibah (“gift”) mean in Islamic banking?
What does the term Mudarabah (profit/loss sharing) mean in Islamic banking?
How can a conventional (i.e., interest-based) bank offer an Islamic financial service?