Islamic Banking Principles

Islamic banking has the same purpose as conventional banking except that it function in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions).

The basic Halal concepts used in principle of Islamic banking is the sharing of profit and loss and the restriction of riba´ (interest). Theses are the common IslamicIslamic banking are profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).

Islamic financing is also prohibited to Islamically acceptable deals, which exclude those involving alcohol, pork, gambling, etc. Thus ethical investing is the only acceptable form of investment, and moral purchasing is encouraged.

Islamic banks have grown recently in the Muslim world but are a very small share of the global banking system. Micro-lending institutions founded by Muslims, use conventional lending practices, and are popular in some Muslim countries, but some do not consider it to be true Islamic banking.

Islamic banking should be synonymous with full-reserve banking, with banks achieving a 100% reserve ratio.