Islamic Banking System
Explain what Islamic Banking is and its background. What are the key principles of Islamic banking
When we talk about Islamic finance, we are talking about halal banking, this two concepts can not be dissociated from each other, it means you have to comply with rules, ethical principles, according to the way the ethics by witch the Islam has understand the world in general and the field of finance in particular
Thus, there are some basic principles that must be clear from the beginning, without these finances can not be considered or Islamic or halal. These banks are not allowed to invest in industries that sharia considers harmful to the community, related to weapons, alcohol, snuff, pornography or pork market. All considered haram.
Thus dictating the prohibition of interest, called usury, and here we must make a semantic clarification, as understood as the Western banking system, usury is the definition of an improper interest, while usury in Islam is any interest. Speculation is not allowed, money is a means, not an asset , and therefore, to obtain a benefit, the money has to be necessarily linked to work. So that for Islam, economic development is a relationship between capital and labor.
Islamic law forbids institutions from charging interests on loans. How do they make profits when lending money?
The central feature of Islamic banking is that no interest would be charged or paid, and the yield would be in the form of gains from trade in which the money lent or borrowed is invested. For Muslims this system of profit or loss sharing this agrees with the prohibition of interest and assistance in mobilizing funds used for investment and creating new employment opportunities.
Explain the concept of ethical investments under Islamic law. Who is to determine whether an activity is allowed or not?
there are some basic principles that must be clear from the beginning, without these finances can not be considered or Islamic or halal. These banks are not allowed to invest in industries that sharia considers harmful to the community, related to weapons, alcohol, snuff, pornography or pork market. All considered haram.
Based on your research and knowledge about this topic, what is the future of Islamic Banking in terms of global expansion and growth?
The future for these institutions is becoming more promising, the global Islamic banking institutions have grown at a remarkable step from the beginning of the first institution in Malaysia three decades ago. According to a study by the International Monetary Fund the number of Islamic institutions rose from 75 in 1975 to over 300 in 2005, more than 75 countries. The total resources worldwide are estimated at $ 250 billion and growing at about 15 percent per year.
Sources:
- http://www.iguama.com/productos/understanding-islamic-banking-value-proposition-transcends.1905687001
- http://www.mymedina.com/item.php?language_code=4&category_instance_id=35&sub_category_instance_id=146&item_instance_id=4264
- http://www.bankinginfo.com.my/_system/media/downloadables/islamic_banking.pdf
- http://www.islamic-banking.com/
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