Islamic banking operates under a number of contracts under
.Amongst the widely used concepts in Islamic banking include profit sharing(
), safekeeping (
), joint venture (
), cost plus(
) and leasing (
The Islamic banks and IBS banks must ensure that their operations comply withthe principles of
Each institution is therefore required to set up a
Committee to provide advice on
issues and to ensure that its operationsand activities comply with the
principles. In addition, the ShariahAdvisory Council set up at Bank Negara Malaysia (BNM) is the highest
authority set up to provide advice on the
matters pertaining to Islamicbanking and takaful in Malaysia.
CONCEPTS IN ISLAMIC BANKING
For deposit product or
contract, a bank is the custodian and trustee offunds. A person deposits funds in the bank and the bank guarantees refund ofany part or the whole amount of the deposit when requested by the depositor.The depositor, at the bank's discretion, may be given '
' (gift) as a form ofappreciation for the use of funds by the bank. As a trustee of the items, thecustodian may charge a fee to the customer.
is a profit sharing arrangement or agreement between a capitalprovider and an entrepreneur. The entrepreneur is provided with funds by thecapital provider to undertake a business activity. Any profits made will be sharedbetween the capital provider and the entrepreneur according to the pre-determined profit-sharing ratio. However, losses shall be borne by the capitalprovider.