Philosophic, Development:
Islamic banking, an alternate to interest-based banking, is not banking in the traditional sense of the word. It derives its inspirations and guidance from the religious edicts of Islam and has to conduct its operations strictly in accordance with the directives of Shariah.
It is, therefore, not merely refraining from interest-based transactions (Ahmed, 1985:18) but the objective is to make a positive contribution to the fulfillment of socio-economic objectives of the society in all spheres, including trade, industry, agriculture, science, technology, employment, benevolent sector and the environment, with special focus on the "human factor".
An Islamic bank is a Financial and social institution which identifies itself with the principles of Shariah, as laid down by the Holy Qur'an and Sunnah, as regards its objectives, principles, practices and operations. An Islamic bank does not normally lend money except the interest-free loan which is termed as Qard-Hasan. Islamic bank is a partner in trade, industry and agriculture for production and development financing. This, therefore, implies that an Islamic bank should also share in the risk with the entrepreneur which is in sharp contrast with interest-based bank. Islamic banking implies zero rate of interest but not zero rate of return as Islamic banks do not deal in money but deal with money.
Islamic banking, an alternate to interest-based banking, is not banking in the traditional sense of the word. It derives its inspirations and guidance from the religious edicts of Islam and has to conduct its operations strictly in accordance with the directives of Shariah.
It is, therefore, not merely refraining from interest-based transactions (Ahmed, 1985:18) but the objective is to make a positive contribution to the fulfillment of socio-economic objectives of the society in all spheres, including trade, industry, agriculture, science, technology, employment, benevolent sector and the environment, with special focus on the "human factor".
An Islamic bank is a Financial and social institution which identifies itself with the principles of Shariah, as laid down by the Holy Qur'an and Sunnah, as regards its objectives, principles, practices and operations. An Islamic bank does not normally lend money except the interest-free loan which is termed as Qard-Hasan. Islamic bank is a partner in trade, industry and agriculture for production and development financing. This, therefore, implies that an Islamic bank should also share in the risk with the entrepreneur which is in sharp contrast with interest-based bank. Islamic banking implies zero rate of interest but not zero rate of return as Islamic banks do not deal in money but deal with money.