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banking is that Islamic teaching says that money itself has no intrinsic value, and forbids people from profiting by lending it, without accepting a level of risk – in other words, interest (known as "riba") cannot be charged. To make money from money is prohibited – wealth can only be generated through legitimate trade and investment. Any gain relating to this trading are shared between the person providing the capital and the person providing the expertise. At Islamic Bank of Britain, we generate all our profit through sharia’a compliant trading and investment activities. We then share the profits with our customers at a pre-agreed ratio. In order to share profits you must hold one of our savings or investment accounts There are two major difference between Islamic Banking and Conventional Banking: 1. Conventional banking practices are concerned with "elimination of risk" where as Islamic banks "bear the risk" when involve in any transaction.
2..some say it can only be considered on gold and silver. is not interest... Like in all religious things. the term refers to operating the business within Islamic law. When Conventional banks involve in transaction with consumer they do not take the liability only get the benefit from consumer in form of interest whereas Islamic banks bear all the liability when involve in transaction with consumer. While the basics of what the business is are the same. there would seem to be . Certainly a problem in modern banking! 10 Islamic Banking Vs Conventional Banking However. what is considered to be interest has different definitions by different Islamic scholars.but paying back the same weight as you borrowed (the same weight of paper money for example).. The main thing that effects this business under that law is that Islam prohibits the charging of interest. Getting out any benefit without bearing its liability is declared Haram in Islam.
islamicfinancenavigator. IT.) www.. FT Listed.uk/MSc-Banking Islamic Finance Navigator World premier Islamic finance directory (Advisors. Presentations.LSBF. Scholarships + Visa Support www.some conflict and differences between followers that may seem strange to outsiders. So basically. each of which strives to adhere to it's understanding of Islamic l Scribd • • Explore Community Upload a Document þÿ Search Books.. • • • • Login Sign Up | Log In þÿ þÿ / 17 Download this Document for Free Ads by Google A New Job in the UAE? You'll Need A Bank Account Use HSBC's International Services www. Business. Banks. Academics.hsbc.. modern Islamic banking may take many forms.org.ae MSc in Banking&Securities Top Financial Masters Degree.com Ads by Google ..
Islamic finance has been gaining momentum on a global scale for the last 30 years. Besides individual financial institutions operating in many countries. In addition. These changes are occurring both in Muslim and in western countries.. IT.islamicfinancenavigator. Banks. Generally. are working in about 75 countries of the world. Islamic law prohibits usury.) www. In particular.com Check 21 Processing Accept Electronic Checks Safest Solution for Your Business www. The instruments used by them.PacNetServices. Islamic financial institutions. and are driven by a global trend amongst Muslims to become more observant of their faith. the collection and payment of interest. today Islamic Banking is sought by Muslims and non-Muslims due to the benefits it offers. It might have been the reason why Islamic Banking emerged. with projected growth of 15% per annum.com Islamic Banking Vs Conventional Banking ISLAMIC BANKING Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia’h) principles and guided by Islamic economics. Islamic Banking Global Scenario Over the last three decades Islamic banking and finance has developed into a full-fledged system and discipline reportedly growing at the rate of 15percent per annum. also commonly called riba.Islamic Finance Navigator World premier Islamic finance directory (Advisors. both on assets and liabilities sides. Today. Many Islamic Banks have sprung up over the last few years.. have 2 . Financial institutions around the globe are trying to keep pace with the growing demand for Sharia’h compliant products and services. or haraam. in one form or the other. Industry size is currently estimated at more than $400 billion. efforts have been underway to implement Islamic banking on a country wide and comprehensive basis in a number of countries. Islamic law also prohibits trading in financial risk (which is seen as a form of gambling). however. Islamic law prohibits investing in businesses that are considered unlawful.
the BMA has pioneered a range of innovations designed to broaden the depth of Islamic financial markets and to provide Islamic institutions with wider opportunities to manage their liquidity. Islamic banks and financial institutions are working parallel with the conventional system. In Malaysia. Bahrain with the largest concentration of Islamic financial institutions in the Middle East region. investment banking. they are also participating in the money and capital market transactions. Although the Islamic financial system has taken a good start in . there are some conceptual differences in interpretation and Shariah position of various contracts like sale and purchase of debt instruments and grant of gifts on savings and financial papers. offshore banking and funds management. Bahrain also hosts the newly created Liquidity Management Centre (LMC) and the International Islamic Financial Market (IIFM) to coordinate the operations of Islamic banks in the world. where Islamic banks operate in the environment in which Bahrain Monetary Agency (BMA) affords equal opportunities and treatment for Islamic banks as for conventional banks. is hosting 26 Islamic financial institutions dealing in diversified activities including commercial banking. The share of Islamic banking operations in Malaysia has grown from a nil in 1983 to above 8 percent of total financial system in 2003. Like other Islamic banks around the world the banks in Sudan have been relying in the past on Murabaha financing. To provide appropriate regulatory set up. In Sudan. the BMA has introduced a comprehensive prudential and reporting framework that is industryspecific to the concept of Islamic banking and finance. It pursues a dual banking system. a system of Islamic banking and finance is in operation at national level.Islamic Banking Vs Conventional Banking developed significantly and therefore. Further. However. They have a plan to enhance this share to 20 percent by the year 2010. Another country that has a visible existence of Islamic banking at comprehensive level is Malaysia where both conventional and Islamic banking systems are working in a competitive environment. the share of Musharaka and Mudaraba operations is on increase and presently constitutes about 40 percent of total bank financing. Bahrain and a few other countries of the Gulf. However.
etc and no interest. roads. The arrangement is seen as a major boost for industry’s integration in the global financial system and should set the pace for commoditytrading environment in Bahrain. The BMA has quite recently signed MoU with the London Metal Exchange (LME) to pool assets to develop and promote Shariah compliant tradable instruments for Islamic banking industry. it does not incur any interest. As such. Added benefits are purchase protection. In May 03. travel accident insurance. BMA has also finalized draft guidelines for issuance of Islamic bonds and securities from Bahrain. Iran also switched over to Usury Free Banking at national 3 Islamic Banking Vs Conventional Banking level in March 1984. However. inter alia.Sudan. Owing to the growing amount of capital availability with Islamic banks. Islamic banks now participate in a wide financing domain stretching from simple Shariah-compliant retail products to highly complex structured finance and large-scale project lending. National Commercial Bank (NCB) of Saudi Arabia has introduced an Advance Card that has all the benefits of a regular credit card. These projects. the refining of Islamic financing techniques and the huge requirement of infrastructure development in Muslim countries there has been a large number of project finance deals particularly in the Middle East region. bridges and other infrastructure projects. Bahrain is the leading centre for Islamic finance in the Middle East region. include power stations. there are some conceptual differences between Islamic banking in Iran and the mainstream movement of Islamic banking and finance. significant problems still remain to be addressed. the Liquidity Management Centre (LMC) launched its debut US$ 250 million Sukuk on behalf of the Government of Bahrain. The establishment of the Prudential Information and Regulatory Framework for Islamic Banks (PIRI) by the BMA in conjunction with AAOIFI has gone a long way towards establishing a legal and regulatory framework to meet the specific risks inherent in Islamic financing structures. Like Sudan. The card does not have a credit line and instead has a prepaid line. no extra fees . water plants.
Bank Negara Malaysia (BNM) has announced to issue new Islamic Bank licences to foreign players. Saudi Government has also endorsed an Islamic-based law to regulate the kingdom's lucrative Takaful sector and opened it for foreign investors. The Financial Sector Master plan maps out the liberalisation of Malaysia's banking and insurance industry in three phases during the next decade. easy to load up and has worldwide acceptance. In United Kingdom. the card is fully Shariah compliant. Technically. This prepaid card facility is especially attractive to women. As a financing technique. from under 10 percent now. The United States of America has appointed Dr. where Standard & Poor's assigned a BBB+ rating to the $600 million Shariacompliant trust certificates (called sukuk) issued by Malaysia Global Sukuk Inc. 4 Islamic Banking Vs Conventional Banking Islamic banks have also built a strong presence in Malaysia. youth. it is a contract of sale in which the seller declares his cost and profit. Mahmoud El Gamal. MODES OF ISLAMIC FINANCE MURABAHA Literally it means a sale on mutually agreed profit. which has been sponsored by Gulf and UK investors. Islamic banks have adopted this as a mode of financing. self employed and small establishment employees who sometimes do not meet the strict requirements of a regular credit card facility.with no conditions. the Financial Services Authority is in final stages of issuing its first ever Islamic banking license to the proposed Islamic Bank of Britain. an eminent economist/expert on Islamic banking to advise the US Treasury and Government departments on Islamic finance in June 2004. it involves a request by the client to the bank to purchase . It lists incentives to develop the Islamic financial sector and enlarge its market share to 20 percent. It is more secure than cash. A dedicated high court has been set up to handle Islamic banking and finance cases.
which are mixed with the funds of the business enterprise and others. IJARAH-WAL-IQTINA A contract under which an Islamic bank provides equipment. All providers of capital are entitled to participate in management.certain goods for him. while the loss is borne by each partner strictly in proportion to respective capital contributions. The profit is distributed among the partners in pre-agreed ratios. In other words. but not necessarily required to do so. which is stipulated in advance. The rentals as well as the purchase price are fixed in such manner that the bank gets back its principal sum along with profit over the period of lease. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. or for the effort or work proposed to be expended. MUSHARAKAH Musharakah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. building or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period. It is an agreement under which the Islamic bank provides funds. Ijarah or leasing is the transfer of usufruct for a consideration which is rent in case of hiring of assets or things and wage in case of hiring of persons. 5 Islamic Banking Vs Conventional Banking IJARAH Ijarah is a contract of a known and proposed usufruct against a specified and lawful return or consideration for the service or return for the benefit proposed to be taken. The bank does that for a definite profit over the cost. MUSAWAMAH Musawamah is a general and regular kind of sale in which price of the . the ownership in the asset would be transferred to the lessee.
commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. 6 Ads by Google Islamic Banking vs.099 Uploaded: 07/05/2009 Category: Research > Business & Economics Tags: islamic concepts conversional modern banking deposits fund charge (More) Rated: (4 Ratings) Download this Document for FreePrintMobileCollectionsReport Document This is a private document. Reads: 27. Conventional Banking This document contain the information about Islamic Banking and Conventional Banking. faqureshi .
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institutional and tax framework is a basic requirement for establishing sound financial institutions and markets . UNRESOLVED FIQH ISSUES Lack of standard financial contracts and products can be a cause of ambiguity and a source of dispute and cost. In addition. Sharia'h compliance is hence a serious matter for an Islamic bank. further development of banking products is hindered. without a common understanding of certain basic foundations. in addition to its compliance with other regulatory requirements. irrespective of its initial financial soundness. It is understandable that Sharia'h noncompliance entails a serious operational risk and can result in withdrawal of funds from and instability of an Islamic bank.• • Branded Reader Desktop Uploader Islamic Banking Issues HUMAN RESOURCE FOR SHARIA'H COMPLIANCE Users of Islamic financial services assign primary importance to Sharia'h compliance of the services they use. LEGAL FRAMEWORK An appropriate legal.
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