ASSIGNMENT: • Features of Islamic Banking • Islamic system is different from capitalist and socialist ” Subject: ISLAMIC BANKING AND FINANCE SUBMITTED BY; ZAINAB TAUQEER 1398-2017 Semester 7 th BBA SUBMITTED TO; Ma’am HINA FEATURES OF ISLAMIC BANKING: Required fields are marked *. MuslimInc. The concept of profit sharing is a built-in development promoter since it establishes a direct relationship between the bank… As such, a more correct term for Islamic banking … The holding of a share in successful business as a principle of Islamic banking was already applied by merchants at the beginning of Islam.Modern Islamic banking is a new development compared to Western banking with its immediate 400-year-old banking … Islamic Finance is based on the Profit & Loss sharing principle . Islamic Banking for Equitable Distribution of Resources: Another important objective of Islamic banking is to ensure equitable distribution of income and resources among the participating factors: the bank, the depositors and the entrepreneurs. Another future of an Islamic Bank is that all financial transactions should be asset-backed; meaning that “making money out of money” is prohibited. Some of the salient features of this order may be summed up as: 1. However, there are several key principles of Islamic Banking, among which is riba (interest), gharar (uncertainty) and maysir (gambling). Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). An Islamic bank shares its net earnings with its depositors in a way that depends on the size and date-to-maturity of each deposit. ISLAMIC BANKING Hosted by: SBAI Imane BENJILALI Maroua 2. Hence, most argue that, it only becomes capital generating when it is invested in a productive business. However,…, Your email address will not be published. The common features of Allied Islamic Current Accounts are: 1. MAIN POINTS • Definition of Islamic Banking • Islamic … Alternatively, this is a banking system whose operation is based on Islamic principle transactions of which profit and loss sharing (PLS) is a major feature ensuring justice equity in an economy. Islamic Banking for Development: Islamic banking is claimed to be more development- oriented than its conventional counterpart. What is Islamic banking … Theoretical Basis of the Concept of Islamic Banking: Conventional banking is essentially based on debtor-creditor relationship between depositors and the bank in the one hand and between the borrowers and the bank on the interest is considered as the price of credit, reflecting the opportunity cost of money. The common features of Allied Islamic Saving Accounts are: Saving Accounts will be operated based on the mode of Mudaraba with No Minimum balance requirement. Common terms used in Islamic banking … For example, you cannot take a loan for a Wine Shop. This principle is applicable both to labor and capital. Consequently “the depositor, the bank and the borrower all share the risks and rewards of financing a business venture”. - All Rights Reserved, 2015 - 2016. Thus, an Islamic bank is a deposit-taking banking institution whose scope of activities includes all currently known banking activities as indicated in the introduction, which excludes borrowing and lending on the basis of interest. The money is lent out on the basis of interest, more often it happens that it leads to some kind of injustice. The author of the paper describes the structural features of the Islamic banking business in the Kingdom of Saudi Arabia - the number of banks, the size of the banking StudentShare Our website is a unique … 2. Islamic Banking in Nigeria: Problems, Principles & Prospects. The first Islamic principle underlying such kinds of transactions is that “deal not unjustly and ye shall not be dealt with unjustly”. A contract under which an Islamic bank finances equipment, building or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the … Islamic banking is clearly meant for creation of provision for Shariah approved financial transactions. ISLAMIC BANKING CONCEPT, OBJECTIVES & BASIC FEATURES, Islamic banking has been defined in a number of ways. When two or more parties will share the risk following the principles of Islamic banking the burden of the risk will be … College students in USA 3. In the economic transactions, the risk sharing is promoted by the Islamic banking. Several theorists suggest that commercial banking in an interest-free system should be organized on the principle of profit and loss sharing. Islamic banking is an instrument for the development of an Islamic economic order. Islamic funds. Contact us to contribute with your writings. Another important objective of Islamic banking is the optimum allocation resources. Islamic banking or Islamic finance (Arabic: مصرفية إسلامية ‎) or sharia-compliant finance is banking or financing activity that complies with sharia (Islamic law) and its practical application through the development of Islamic economics.Some of the modes of Islamic banking… In other words the…, Both types of institutions (Islamic and Conventional) are providing financing to productive channels for reward. In broad terms, Islam forbids all forms of economic activity, which are morally or socially injurious. The Islamic banking is the banking activity according the Shariah principle and guidance of the Islamic law [3]. This is done through its built-in mechanical arrangement as well as other welfare activities pursued through Zakah fund. Money in Islam is considered a medium of exchange that represents the purchasing power of individuals and has no value on itself. The means, in the case of Islamic banking profitability of projects works as deciding factor as to where the financial resources will go and to what extent. The financial relationship as pointed above is referred to in Islamic jurisprudence as Mudarabah. They include Murabaha, Musawamah, Salam, Istisna’a, and Tawarruq. Islamic banking is claimed to be more development oriented than its conventional counterpart. The institution of interest is thus replaced by a principle of participation in profit and loss. … To offer contemporary financial services in conformity with Islamic Shariah; To contribute towards economic development and prosperity within the principles of Islamic justice; To facilitate efficient allocation of resources; To help achieving stability in the economy. On the liabilities side, it mobilizes funds on the basis of a Mudarabah contract, which I will discuss in detail later. The Bank will utilize all such deposits as the Bank may deem appropriate in approved Shariah compliant modes of financing / investments. In addition, equity holding as well as commodity and asset trading constitute an integral part of Islamic banking operations. 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Interest in completely prohibited in Islamic banking. The mechanism of Profit-Sharing is build-in development promoter since it establishes a direct relationship between the benefit of the bank and the entrepreneurs. Hence, commercial banking in an Islamic framework is not based on debtor-creditor relationship. The distinct characteristics which provide Islamic banking with its main points of departure from the traditional interest-based commercial banking system are: (a) the Islamic banking system is essentially a profit and loss sharing system and not merely an interest-free (Riba) banking system; and (b) investment (loans and advances in conventional sense) under this system of banking must serve simultaneously both the interest of the investor and those of the local community. Six essential differences as below: I. Asset-backed or debt-type instruments (also called contracts of exchange) are sales contracts that allow for the transfer of a commodity for another commodity, the transfer of a commodity for money, or the transfer of money for money. Enter your email address to get our best stories delivered to you directly. The basic mechanism of Islamic banking system is such that financial resources are allocated to projects which are considered to be more profitable. The second principle regarding financial transactions in Islam is that there should not be any reward without risk-taking. PROBLEM Obasanjo, Ex-President of Nigeria. Islamic banking 1. Under the Islamic banking system, all their objectives and operations are based on focal Sharia’a principles. At its head - National Bank of Switzerland (Swiss National Bank - SNB ) , carrying out all functions inherent in the central banks.However, he shares control powers with the Federal Banking Commission and the Swiss Banking … It plays the role of an investment manager for the owners of time deposits, usually called investment deposits. 2. Distinguishing Features of Islamic Banking: An Islamic bank has several distinctive features as compared to its conventional counterpart. However if the banking system is based on Islamic principles, Musharakah can play a very important role. Analysis of Trust Bank Limited Regarding General Banking, Foreign Exchange and Foreign Trade of IBBL. Defining features of Islamic banking system Under the Islamic banking system, all their objectives and operations are based on focal Sharia’a principles. Swiss banking system . “An Islamic bank is a financial institution whose status, rules and procedures expressly state commitment to the principle of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations.” Dr Shawki Ismail Shehta viewing the concept from perspective of an Islamic economy and the prospective role to be played by an Islamic bank therein opines that “It is therefore, natural and, indeed, imperative for an Islamic bank incorporate in its functions and practices commercial investment and social activities, an institution design to promote the civilized mission of an Islamic economy.” Dr. Ziaul Ahmed says, “Islamic banking is essentially a normative concept and could be define conduct of banking in consonance will the ethos of the value system of Islam.”. Wikipedia defines Islamic banking (Arabic: مصرفية إسلامية‎‎) as banking or banking activity that is consistent with the principles of sharia (Islamic law) and its practical application through the development of Islamic economics. That is why Islamic banks are often known as PLS-banks. The Importance of Building Morals in Children, Gulf General Investment Company Seeks Further Restructuring of Its Debts, ArabianChain Launches New Digital Asset Exchange in UAE, Personal Testimony: The Power of Tahajjud and Tawakkul, Embattled Saudi Tycoon’s Vehicles Auction Attracts Thousands, Pondering the Existence of Fruits and Vegetables, Financial Upturn for Saudi Banks Alawwal Bank and Samba Financial Group, Saudi Monetary Authority Signs Groundbreaking Deal with Ripple, Arab Conference Champions Regional Cooperation, Some Common Daily Life Examples of Shirk and How to avoid Them, Understanding Human Rights in Islam: Part 1, Nasdaq Dubai Rolls out Futures for Abu Dhabi and Dubai. 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