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Islamic Banking
Islamic banking refers to a
system of banking or banking
activity that is consistent with
Islamic law (Sharia) principles
and guided by Islamic
economics.
Islamic law prohibits , the
collection and payment of
interest, also commonly called
Riba in Islamic discourse.
Introduction Of Islamic
Banking
Riba or Interest
Riba literally means increase,
addition, expansion or growth. It is
however not every increase or
growth, which is prohibited by Islam.
In shariah, Riba technically refers to
the premium that must be paid
without any consideration.
Types Of Riba
According to jurists of Islam Riba
have two types.
Riba Al-Naseah
Riba Al-Fadl.
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Riba in Quran
In the Holy Quran, Allah (SWT) says in Sura AlBaqarah (2-279):
. And if you repent, yours is your principal
And what ever Riba you give so that it may increase
in the wealth of the people, it does not increase
with Allah. ( Sura Al-Rum 30:39)
And because of their charging Riba while they were
prohibited from it. ( Sura An-Nisa 4:161)
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Riba in Hadith
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money
Bank
Client
money + money (interest)
Conventional
Banking System
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Bank
Goods &
Services
Client
money
Islamic Banking
System
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Conventional Banks
Islamic Banks
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Conventional banks
Islamic Banks
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Sanctity of contracts.
Risk sharing.
No Riba / Interest.
Economic purpose / activity.
Fairness.
No valid subject matter.
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Contracts
Mudarabah
Murabaha
Musawamah
Salam
Istisna
Ijarah
Ijarah wa Iqtina ( Ijarah Muntahiyyah Bitamleek)
Sub Contracts
Wakalah
Kafalah
Rahn
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Principles Governing
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Nature
Current
Qarz
Saving
Mudarabah
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ISLAMIC BANKING AS AN
ALTERNATIVE APPROACH
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