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What do you know about Islamic banking

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What do you know about Islamic banking

Islamic banking (or participatory banking) is that types of banking or banking activity which is consist of the principles of Islamic rule (i.e Sharia) and its useful function through the expansion of Islamic finances. Islamic rule or Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba or usury) for advances or loans of money.

Islamic principles are also haraam (forbidden) to invest in business which provides goods or services. In Islamic banking is mandatory to ensure buying and selling. At first Islamic bank make a agreement with the client to make a deals with the client.

Accordingly the bank purchase the goods as per the requirement of the client’s agreement and sell on profit (or agreed ratio). It has various mode of investment. Such as Murabaha,Bei bi thameen ajil, Bei bi salam or bei bi salaf , Musaqa and muzara’a, Mudaraba or muqarada, Ijara, Istisn’a, Sukuk, Musharaka, Qarde hasan, Musharaka etc. The Organisation of Islamic conference (OIC) defined an Islamic Bank as “ a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the prohibition of the receipt and payment of interest on any of its operations.” According to Islami Banking Act 1983 of Malaysia, an Islamic Bank is a “company which carries on Islamic Banking business……. Islamic Banking business means banking business whose aims and operations do not involve any element which is not approved by the religion Islam.” Definition of ‘Islamic Banking’ A banking system that is based on the principles of Islamic law (also known Shariah) and guided by Islamic economics. Two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest. Collecting interest is not permitted under Islamic law. Investopedia explains ‘Islamic Banking’ Here’s an example of how the Islamic banking system uses methods of profit/loss sharing to facilitate financial transactions: for some types of loans, the borrower only needs to pay back the amount owed to the lender, but the borrower can choose to pay the lender a small amount of money to serve as a gratuity. Since this system of banking is grounded in Islamic principles, all the undertakings of the banks follow Islamic morals. Therefore, it could be said that financial transactions within Islamic banking are a culturally distinct form of ethical investing (for example, investments involving alcohol, gambling, pork, etc. are prohibited). The Dubai Islamic Bank has the distinction of being the world’s first full-fledged Islamic bank, formed in 1975.
What you know about Islamic banking
What you know about Islamic banking
What you know about Islamic banking

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