ISLAMIC BANKING

Advantages of Islamic Banking

Advantages of Islamic Banking

Introduction

Islamic Banking is actually a banking activity or a system of banking which is coherent to the laws and principles of Islam or the Islamic Shariah and is steered by the economics of Islam. Particularly, Islam and its laws proscribe the payment and collection of interest which is called usury or according to Islamic terms, Riba. In general, Islam and its principles, forbid doing business in economic risk that is considered to be a type of gambling. Additionally, Islamic principles forbid expending in businesses which are regarded as haraam in Islam which mean illicit or unlawful. Islamic economics has been acquiring impetus on an international level since the past thirty years. Several Islamic banks have evolved and emerged during the past few years. Such variations are happening in Muslim as well as Western countries and are steered by an international trend amongst the Muslims to become even more attentive and vigilant in their beliefs and values. It could have been the ground for the emergence of the Islamic Banking, nevertheless, in today's world; Islamic Banking is required by the non Muslims and the Muslims because of the advantages it imparts (Mervyn & Latifa, 2001).

Currently, the size of the industry is approximated at almost four hundred billion dollars with the estimated growth of fifteen percent each year. Economic establishments all through the world are attempting to be on a par with the increasing demand for the services and products complied with the Shariah of Islam. The prime objective of Islamic banking is to execute activities that are free of interest and are carried out on the basis of the Islamic Shariah and cause a turnover of Halaal or permissible transactions only. The most significant aspect of Islamic banking is the distribution of risk amongst all the investors, the borrowers as well as the bank. Islamic banking emphasizes on freedom as well as fairness as a centrally administered and autonomously supervised system in accordance with the instructions and guidelines of Allah Almighty.

Advantages of Islamic Banking

Despite, the term Islamic denotes the values particularly associated to the Muslims, it is a completely diverse case when it comes to Islamic finance and banking. It is a complicated structure of finance and banking founded on social and moral values that is attuned to the modern day needs of financing and thus, is getting an awe-inspiring rejoinder from the non Muslims and Muslims in a similar way. It is a matter of a couple of months before, when the official newsletter of the Pope, called L'Osservatore Romano, had an article published admiring the moral concepts of Islamic finance and banking and prompting the banks in West to espouse the regulations and principles of Islamic finance and banking to refurbish self-reliance among their clients for the duration of the financial crisis. Various chief educational institutions apart from the Pope have further promoted Islamic finance and banking by pioneering courses on the same theme. Harvard has established its project of Islamic finance quite ...