TOPIC 3

ENGLISH SUBJECT
FACULTY OF SHARIA IAIN KEDIRI

A. Reading Comprehension
Principles of Islamic Banking
For millions of Muslims, banks are institutions to be avoided. Islam is a religion which
keeps believers from the teller’s window. Their Islamic beliefs prevent them from dealings
that involve usury or interest (riba). Yet Muslims need banking services for many purposes:
to finance new business ventures, to buy a house, to buy a car, to facilitate capital investment,
to undertake trading activities, and to offer a safe place for saving. It is because Muslims are
not opposed to legitimate profit as Islam encourages people to use money in Islamically
legitimate ventures.
However, in this fast-moving world, more than 1400 years after the Prophet saw. Can
Muslims find room for the principles of their religion? The answer comes with the fact that a
global network of Islamic bank has started to take shape based on the principles of Islamic
finance. Islamic banking is based on the Qur’anic prohibition of charging interest. It has
moved from theoretical concept to embrace more than 100 banks operating in 40 countries
with multi-billion-dollar deposits world-wide. It is also widely regarded as the fastest growing
sector in the middle Eastern financial service market.
The best-known feature of Islamic banking is the prohibition on the interest. The
Qur’an forbids the charging of Riba on money lent. It is important to understand certain
principles of Islam that underpin Islamic finance. The sharia disallows Riba and there is now
general consensus among Muslim economists that riba is not restricted to usury but
encompasses interest as well. The Qur’an is clear about the prohibition of riba, which is
sometimes defined as excessive interest. Muslim scholars have accepted the word riba to
mean any fixed or guaranteed interest payment on cash advances or on deposits. Several
Qur’anic passages expressly admonish the faithful to shun interest.
Islamic finance takes the form of Islamic banking and Islamic insurance, also known
as Takaful. Islamic banking is done in five ways:
1. Mudarabah, a profit-sharing agreement
2. Wadiah, a safe keeping arrangement
3. Musharakah, or a joint venture for a specific business
4. Murabahah, cost plus arrangement where goods are sold with a pre-determined margin
of profit
5. Ijirah, a leasing arrangement
6. Takaful is a form of mutual insurance based on partnership and collective sharing of risk
by a group of individuals.

B. Comprehension Exercise
Complete the following statements by using information in the passage!
1. For millions of Muslims, banks are institutions to be avoided because ________
2. Muslim’s purposes in using bank services are _________
3. In Islam, Muslims are ___________ to take profit.
4. The principles of Islamic finance are laid down in ____________
5. The basic principle of Islamic banking laid down in the Qur’an is __________
6. According to Muslim scholars, riba is _________
7. According to Muslim economist, parts of bank services that can be considered as riba are
_______________
8. The recent growth of Islamic banking is ___________
C. Vocabulary exercise
Fill in the blank in each sentence with the listed words below:

dealings usury profit

interest charging funds
underpin deeds deposit
losses cash loan

1. Banks provide ______ to who needs any fresh money for the business.
2. She made two_______ of 5millions last month.
3. A shariah bank offers an ______ free loan
4. The good progress in Islamic banking ________these developments
5. The capitalist system is based on the ________motive.
6. The government is short of ______so it won’t pay the civil servants next month
7. I suffer ____________ in the business market
8. __________are better than words when people need help.
9. Islamic banking is proud of its reputation for fair ______
10. The state prohibits the _______of school fee to the elementary school students
11. I have no _______ on me. May I pay by cheque!
12. Islam prohibits_______ because it is riba.