A banking system that isA based onA the rules of Islamic jurisprudence ( besides known Sharia ) and guided by Islamic economic sciences is known as Islamic banking. Two basic rules behind Islamic bankingA are the sharing of net income and loss and, significantly, A the prohibition of the aggregation and payment of involvement.
Economic justness requires a feasible economic system supported by an efficient banking system. Interest based banking has proved to be inefficient as it fails to equitably distribute wealth which is necessary for the wellbeing of manking.On the other manus Islamic banking is efficent and ensures just distribution of wealth therefore puting foundation for an rising prices free economic system and socially responsible banking. ( The planetary finance crises, M.Kabir Hassan. )
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Mr.Saqib Omer Saeed says
When people come across such Islamic banking merchandises as Ijarah or rental, they wonder if it ‘s the same that which a conventional bank offers. If we look closely Ijarah Muntahiya ( Islamic Leasing Product ) is really similar to the finance rental provided by a conventional fiscal establishment, except the difference of the insurance cost ( Takaful / Islamic Insurance ) which has to be borne by theA lesseeA in the Islamic manner and it is built in the leases.
Another expostulation is the usage of intrest rates as a benchmarking.
Another expostulation against Islamic Banks is sing their minutess with commercial Bankss including how some commercial Bankss have opened up Islamic banking subdivisions. It makes one admiration whether the money being used in such minutess is free of involvement or non?
Some users of Muslim fiscal services says that Muslim banking is merely a alteration name for conventional banking.Because they charge fee to the loan they give out which is equal to the involvement that other commercial bank charge.That is why Muslim banking appears to run and give the similar type of return that conventional bank does to the people.
Evaluation of expostulations and reserves
Banking is such a sector which non merely regulations the economic system of a community but a state good. The comparing to this consequence makes the research worker more clear and Islamic bookmans more informed about involvement and its applications in the formal banking sector. The formal banking patterns and the involvement prohibitions if put in comparing can steer the bankers to develop a system to some extent free from involvement. Interest has been really extensively applicable in the society it ‘s a new term sing funding by imparting. Financing by imparting takes two forms i ) loans with service charges and two ) Qarz-e-Hasana. The names are popular in Islamic society but the conventions in banking takes the forms which are non usually acceptable to the Islamic society. ( Interest free economic system theoretical account, M.Arif.March,2012 ) .
Doctrine of Islamic banking.
A The doctrine of Islamic banking is derived from Islamic Shariah.According to Islamic Shariah, Islamic banking can non cover in minutess involvingA interest/riba ( an addition created or sought over the principal of a loan or debt ) . A Further, they can non cover in the minutess holding the component of hazardous sale. Furthermore, they can non cover in any dealing, the capable affair of which isA shut-in ( haram in the eyes of Islam ) . Muslim Bankss focus on bring forthing returnsA through investing tools which are Shariah compliant every bit good. Islamic Shariah linksA the addition on capital with its public presentation. Operating within the rules of Shariah, the operations of Islamic banking are based on sharing the hazard which may originate through trading and investing activities utilizing contracts of assorted Islamic manners of finance. ( Burj Bank limited, july 27,2011 ) .
The Islamic banking system is presently distributing fast through many Arab andMuslim states. The success of this new system is indicated by the rapid growing innumber of Bankss, subdivisions, histories, and amounts of money it handles. This enormoussuccess has caused some Western manner commercial Bankss, in Sudan for illustration, toconsider altering to the Islamic banking system. It is besides pulling the attending of thegovernments of some Muslim states to earnestly back uping the system. ( B.A Bashir, Successful development of Islamic bank ) .
Areas of operations
The countries of operatons of Muslim Bankss are as follows
Non fund based minutess
Non fund based dealing are those in which there is no spending of financess or the dealing of financess is non involve.For all practicle intents Islamic bank transact non fund based concern and supply all of its services against approprate fee and charges.Here the confidence is given by the bank if the rule party defaults the bank is apt to pay to beneficiary.
The Islamic bank prepare nest eggs, investing and other fiscal resources and besides take part in supplying equity and financess to entities like joint stock companies working under the Islamic Bankss. Some most normally used manners of funding are
Murahaba ; In a murabaha dealing, the bank finances the purchase of a good or plus by purchasing it on behalf of its client and adding a mark-up before re-selling it to the client on a ‘cost-plus ‘ footing.
Musharakah ; It means a joint endeavor in which all the spouses portion the net income and loss of the joint venture.
Bai’muajjal ; Islamic Bankss have besides been fall backing to buy and resale of belongingss on a deferred payment footing, which is termed Bai ‘ muajjal. It is considered lawful in fiqh ( law ) to bear down a higher monetary value for a good if payments are to be made at a ulterior day of the month.
Renting or ijara ; is besides often practised by Islamic Bankss. Under this manner, the Bankss would purchase the equipment or machinery and rent it out to their clients who may purchase the points finally, in which instance the monthly payments will dwell of two constituents, i.e. , lease for the usage of the equipment and episode towards the purchase monetary value. ( M.Arif, University of Malaya, sep 1988 ) .
3 ) Social activities
The Holay Quran says
“ If you loan to Allah a beautiful loan, He will duplicate it to your recognition ( 64:17 )
The Qur’an calls on all its followings to care for and back up the hapless and destitute peoples. Islamic fiscal establishments are expected to supply particular services to those in demand.
This is non confined to mere charitable contributions but has besides been institutionalised in the industry in the signifier of profit-free loans or Al Quard Al Hasan.
An Islamic bank ‘s concern includes certain societal undertakings, every bit good as charitable contributions. Muslim Bankss provide profit-free loans. For illustration, if an single demands to travel to hospital or wants to travel to university, we give what is called Quard Al Hasan. This Quard Hasan is usually given for a short period of one twelvemonth and the Islamic bank does non bear down anything for that. ( AL Burka bank ) .
Financing under net income and loss sharing system
The profit-and-loss sharing system has its roots in the ancient signifier of funding practiced by Arabs since long before the coming of Islam. After the debut of Islam, this system was permitted to go on and was see right as a finance instrument. For this historical ground, bookmans consider profit-and-loss sharing fiscal instruments to be the most existent and most promising signifier of Islamic contracts ( Ariff, 1982 ) . Mudaraba ( finance trust territory ) and Musharaka ( equity partnership ) are two such fiscal instruments based on the profit-and-loss sharing system, where alternatively of imparting money to an enterpriser at a fixed rate of return, the moneyman portions in the venture ‘s net incomes and losses.In this manner of financing the hazards and losingss are shared by the financer along with the enterpreneur in the ratio of their several capitals while the net incomes are shared in an in agreement ratio. ( The Economist 2001 ) .
Potential of Islamic banking
Islamic universe has a enormous potentials.It has approximately 20 % of the universe population and as much of its land mass.It produces half of the universe ‘s oil and histories for 40 % of universe export of natural material.The constitution of Muslim Bankss is a recent phenomena and in short period of clip, over 100 Muslim Bankss and fiscal instutions have been established in throughout the universe.
To present top quality service to guarantee that service criterion of Islamic banking establishments isat par with conventional banking establishments.
Aggressive selling must be made in order to guarantee that Islamic banking reaches the highest point in quickest possible clip.
The conflicting confusion and uncertainties must be removed from the head of a general client.
Islamic banking regulations should be unvarying worldwide.
Do n’t happen Islam in Islamic Banking. Implement Islam on youself so your economic system to banking shall automatically be Islamic.
The more we emphasize on the Islamization of Islamic banking, the more we will necessitate to hold an Islamic economic system and the more we would desire an Islamic economic system, the more we will hold to be good Muslims in all facets of our society.