In the Name of Allah, Who is the Most Beneficent and Most Merciful

ISLAMIC BANKING
MUHAMMAD TALHA AKHTAR

Introduction
Islam is a complete code of life that provides guidance regarding each aspect of life. Islamic banking was started from 7th Century The first Islamic bank was started in 1973 in Egypt Dubai bank is first fully Islamic bank. Money is a medium of exchange Profit share is distributed instead of interest earned Leads to more ethical society as not to earn interest This concept encourages better resource management

Terms
Shariah Islamic law Riba Interest Hiba profit Murabaha buy , sell Musharaka Partnership time,$ share profit Mudharabah Partnership one $, other effort Ijara Lease Ujrah Payment in exchange for services, benefits and privileges offered to the customers Ta'widh Compensation

Islamic Banking
Islamic banking has been defined as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Islamic Shariah.

Objectives
The primary objectives of Islamic Economic System are as under. Equal Distribution of wealth
Social justice

These objectives can never be achieved in Interest/Riba based economic systems.

DIFFERENCE BETWEEN ISLAIC AND CONVENTIOANL BANKING

Islamic Banking
1) Functions and operations are based on Shariah principles 2) Promote risk-sharing between provider of capital (investor) and user of funds (entrepreneurs) 3) Aim at maximising profit but subject to Shariah restrictions

Conventional Banking

1) Functions and operations are based on fully man made principles 2) Investor is assured of predetermined rate of interest
3) Aim at maximising profit without any restrictions

DIFFERENCE BETWEEN ISLAIC AND CONVENTIOANL BANKING

Islamic Banking
4) Partners, investor and traders, buyer or seller relationship 5) Encourage asset-based financing and based on commodity trading 6) No right of profit if there is no risk involved. The profit and loss sharing depositor may lose money in case of loss.

Conventional Banking
4) Creditor-Debtor relationship 5) Based on money trading. Money is a medium of exchange and not a commodity, its sale and purchase is prohibited in Islam. 6) It is almost risk free banking and depositor has no risk of losing its money because interest is guaranteed.

ISLAMIC BANKING PRODUCTS AND SERVICES

Currently available Islamic Banking Products and services are A. Partnership based modes of financing Musharaka Finance, Mudaraba Finance,
B. Trade based modes of financing

Murabaha Finance, Salam finance

C. Rental based modes of financing

Ijarah Finance, Diminishing Musharaka Finance