KING TALAL SCHOOL OF BUSINESS TECHNOLOGY

Islamic Banking
Instructor: Dr. Suleiman Mohammad
Course Number: 34438
Section: 1
Sanad Rousan 20180778
 The difference between economics in ancient time and therefore the
Islamic economic:

What is economics? Economics may be a science that specialize in the assembly, distribution,
and consumption of products also services. It studies how individuals, businesses, governments,
and nations make choices about the way to allocate resources. As economics is defined we'd
like to understand the aims of economics, economics in simple way: aims to ascertain how a
country's resources are wont to meet the requirements of its citizens. Population and labor
productivity and main components of economics because it plays an enormous role in
controlling the economy of the country.
Banks plays an enormous role in economic as there's a transparent relationship between banks
and economy. As a key component of the economic system, banks allocate funds from savers to
borrowers in an efficient manner. They supply specialized financial services, which reduce the
value of obtaining information about both savings and borrowing opportunities. These financial
services help to form the general economy more efficient.
Islamic economics is employed to try to economics using AlShariah AlIslameye, it's otherwise
called Fiqhu al-Muāmalat .It is an ideological economics supported the teachings of Islam.
Islamic economics emphasizes economic transactions in line with the provisions of the Shari’ah
(Quran and Sunnah). It’s all about managing the resources (human, material, financial and
natural) during a line using shariah goals. Banks that return to Islam found three different
business models that permits them to work within al-sharia law and these business models are:
partnership based mode, trade based mode, and rental based mode. Firstly, the partnership
based mode is essentially where the bank cannot collect interest from customers of the banks
but they're allowed to gather profits after selling products. Secondly, the trade based more is
essentially where the bank provides payments beforehand to customers but the products that
the purchasers purchased are delivered during a date after the particular payment. Last but not
least, the rental based more is essentially where the bank purchases assets on behalf of the
purchasers then the asset is leased from the bank to the customer for specific period of your
time. ). In Islamic Finance, banks are forbidden to take a position their money in Haram
domains like the industry, pornography, eroticism, the alcohol and wine industry ( And in fact
drugs), gambling, the hog industry and unlicensed food, armaments (except for states), the
banking system (except the Islamic banking industry).
Islamic economics embeds the subsequent dos and don'ts:
The Dos: The don’ts:
1) Zaka (Taxing of certain assets. 1) Interests (Riba)
2) Mutual corporation (Tawon). 2) Gambling (Maisar)
3) Justice/fairness (Adl).

Principles of Islamic economic system:

• Principle of Right and Wrong: Islamic financial system should principally makes
distinction between what's permitted being lawful (Halal) and what's forbidden being unlawful
(Haram).
• Principles of Uses: Within the bounds of lawful (Halal) and unlawful (Haram).
• Principle of Moderation: Islam unequivocally discourages its followers to cross the
bounds and follow extremes. The Muslims are called by the Qur’an a middle nation.
• Principle of Economic Freedom: Every individual, consistent with Islam, is in charge of
his actions wiped out this world.
• Principle of Justice: Islamic principle of justice operates altogether the essential aspects
of economy like production, distribution, consumption and exchange.

Solutions for a few of the planet problems using Islamic economy

rules:
1) For poverty eradication: we must change our attitude to Zakat. There should be
organization of zakat (charity) consistent with the teachings of Islam to eradicate poverty and
supply assistance for benevolent projects, like homes for the aged, the poor.
2) We should shun all activities resulting in usury, and patronize the Islamic banks for
investment and savings.
 Ancient economic thought refers to the ideas from people before the center Ages. Economics
within the classical age is defined within the modern analysis as an element of ethics and
politics. Financial state within the past were first as A barter system is an old method of
exchange. this technique has been used for hundreds of years and long before money was
invented. People exchanged services and goods for other services and goods reciprocally. the
worth of bartering items are often negotiated with the opposite party. Bartering doesn't involve
money. you'll buy items by exchanging an item you've got but not want or need. Then it
developed to be paper money within the 700 B.C. one among the large difference is that the
bank system between ancient economy and Islamic economy here may be a table to explain
much more:

Conventional Banking Islamic Banking

The functions are fully based on manmade The functions are fully based on the Islamic
principles. sharia principles.

The main goal of conventional banking is to The main goal of conventional banking is to
maximize profits without having any boundaries maximize profits subject to sharia restrictions.

Conventional banking doesn’t deal with zakat. Islamic banking deals with zakat.

The conventional banking can charge additional The Islamic banking cannot charge additional
money in case of defaulters money in case of defaulters. It can only charge
a small amount of money which goes to charity.

The bank can lend money and get it back with Islamic banks participate in the business,
interests (it’s what conventional banking is about) therefore it is considered important to
understand the business of the customers very
well.

The main status of conventional banking is that The main status of Islamic banks in relationship
the main relationship with clients is creditor and with the clients is that they are partners,
debtor. traders, buyers, and sellers.